UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

     (Mark One)

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

For the quarterly period ended December 31, 1998

     ( ) Transition  Report  pursuant to Section 13 or 15 (d) of the  Securities
Exchange Act of 1934

     For   the   transition   period   from   -----------------------------   to
-------------------------------

Commission File Number: 0-23323

               THE BRYAN COLLEGE STATION FINANCIAL HOLDING COMPANY
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
         (State or other jurisdiction of incorporation of organization)

                                   36-4153491
                      (I.R.S. employer identification no.)

               2900 Texas Avenue, Bryan, Texas             77802
     (Address of principal executive offices)           (Zip Code)

                                 (409) 779-2900
               (Registrants telephone number, including area code)

     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 proceeding 12 months (or for such shorter period that the issuer
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                             Yes x           No 
                                ----           ----

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.
                                                  Shares Outstanding
                     Class                     as of February 10, 1999
                --------------                ------------------------- 
                 Common Stock                            389,436


<PAGE>



               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                  Bryan, Texas

                                   FORM 10-QSB

                      Three Months Ended December 31, 1998

                         PART I - FINANCIAL INFORMATION


ITEM 1 - FINANCIAL STATEMENTS                                              Page

     Consolidated Statements of Financial Condition.......................... 3

     Consolidated Statements of Income........................................4

     Consolidated Statements of Changes in Stockholders' Equity...............5

     Consolidated Statements of Cash Flows....................................6

     Notes to Consolidated Financial Statements.............................7-9


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS..........................10-20


                           PART II - OTHER INFORMATION

Other Information............................................................21

Signatures...................................................................22




                                        2

<PAGE>

<TABLE>
<CAPTION>


                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    December 31, 1998 and September 30, 1998
                                   (Unaudited)
                       In thousands, except per share data


                                                 December 31,      September 30,
                                                      1998              1998
                                                 ------------      -------------
<S>                                                 <C>                  <C>


ASSETS
Cash and due from banks                              $     1,584    $     1,435
Interest-bearing deposits 
in other financial institutions                            4,250          3,892
                                                     -----------    -----------
     Total cash and cash equivalents                       5,834          5,327

Securities available for sale                                  -              5
Mortgage-backed securities 
 held-to-maturity (fair value:
 December 1998 - $894; September 1998 - $945)                903            954
Loans held for sale                                          273            328
Loans receivable                                          72,164         71,666
Federal Home Loan Bank stock                                 388            382
Real estate owned and in judgment                            339            282
Premises and equipment                                     1,622          1,636
Accrued interest receivable                                  662            608
Other assets                                               1,775          1,446
                                                     -----------    -----------
                                                     $    83,960    $    82,634
                                                     ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
     Deposits                                        $    75,117    $    73,554
     Advance payments by borrowers 
      for insurance and taxes                                238            863
     Advance from Federal Home Loan Bank                   1,000            800
     Debentures                                            3,629          3,629
     Accrued interest payable and other liabilities        1,098          1,045
                                                     -----------    ----------- 
                                                          81,082         79,891

     Minority Interest                                       873            873

Stockholders' equity
     Common  stock - par value  $.01 per  share;
      authorized  3,000,000  shares, issued 389,436
      at December 31, 1998 and 239,612 shares at
       December 31, 1997                                       4              4
     Additional paid-in capital                            1,849          1,849
     Retained earnings, substantially restricted             152             17
                                                     -----------    -----------
                                                           2,005          1,870
                                                     -----------    -----------

                                                     $    83,960    $    82,634
                                                     ===========    ===========
</TABLE>


                                        3

<PAGE>


<TABLE>
<CAPTION>

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                       In thousands, except per share data


                                                  Three months ended
                                                     December  31,
                                                  1998           1997
                                                  ----           ----
<S>                                              <C>              <C>


Interest income
    Loans                                      $    1,878    $    1,608
    Mortgage-backed securities                         13            17
    Other                                              66            45
                                               ----------    ----------
       Total interest income                        1,957         1,670

Interest expense
    Deposits                                          861           693
    Other borrowings                                  109           116
                                               ----------    ----------
       Total interest expense                         970           809
                                               ----------    ----------


Net interest income                                   987           861

Provision for loan losses                              20            29
                                               ----------    ----------


Net interest income after provision for loan          967           832

Noninterest income
    Service charges                                   198           128
    Net gain on sale of loans and mortgage
      servicing rights                                139            35
    Other                                              63            30
                                               ----------    ----------
       Total noninterest income                       400           193

Noninterest expenses
    Compensation and benefits                         548           404
    Occupancy and equipment expense                   133            90
    Federal insurance premiums                         15             9
    Net (gain)/loss on real estate owned                -             7
    Professional fees                                  55            39
    Data processing                                    62            47
    Other                                             333           235
                                               ----------    ----------
       Total noninterest expenses                   1,146           831
                                               ----------    ----------


Income before income tax expense                      221           194

Income tax expense                                     86            66
                                               ----------    ----------

Net income                                            135           128

Preferred stock dividends                               -           (22)
                                               ----------    ----------
Net income available to shareholders           $      135    $      106
                                               ==========    ==========

Earnings per share:
    Basic and diluted                          $      .32    $     0.17
                                               ==========    ==========
</TABLE>


                                        4

<PAGE>

<TABLE>
<CAPTION>


                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                           December 31, 1998 and 1997
                                   (Unaudited)
                       In thousands, except per share data


                                          Three months ended
                                             December 31,
                                        1998            1997
                                        ----            ----
<S>                                    <C>              <C>


Balance at beginning of period   $        1,870     $       4,834

Net income                                  135               128

Cash dividends paid                           -               (82)
                                 --------------     -------------

Balance at December 31,          $        2,005     $       4,880
                                 ==============     =============

</TABLE>

                                        5

<PAGE>

<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                  In thousands


                                                           Three months ended
                                                               December 31,
                                                          1998           1997
                                                          ----           ----
<S>                                                        <C>            <C>


Cash flows from operating activities
    Net income                                        $       135   $       128
    Adjustments to reconcile net income to net
      cash from operating activities

       Depreciation                                            61            51
       Amortization of premiums and discounts on
          mortgage-backed securities, net                       1             1
       Net change in loans held for sale                      165            75
       Amortization of deferred loan origination fees          12           (23)
       Net gains on sales of
          Mortgage loans                                     (110)          (18)
          Mortgage servicing rights                           (29)          (17)
       Provision for losses on loans
          and real estate owned                                20            29
       Federal Home Loan Bank stock dividend                   (6)          (13)
       Change in
          Accrued interest receivable                         (54)           11
          Other assets                                       (329)           95
          Accrued interest payable and 
          other liabilities                                    51          (129)
                                                      -----------   -----------
              Net cash from operating activities              (83)          190

Cash flows from investing activities
    Net increase in loans receivable                         (583)         (309)
    Principal payments on mortgage-backed securities
      and collateralized mortgage obligations                  52            69
    Proceeds from maturity of securities                        5             -
    Proceeds from sale of mortgage servicing rights            29            17
    Investment in office properties and equipment, net        (47)          (74)
    Investment in real estate owned                            (4)           (3)
    Proceeds from sale of real estate owned                     -             4
                                                      -----------   -----------
      Net cash from investing activities                     (548)         (296)

Cash flows from financing activities
    Net increase in deposits                                1,563         3,526
    Net decrease in advance payments by
      borrowers for insurance and taxes                      (625)         (723)
    Net change in advances from Federal
      Home Loan Bank                                          200        (3,000)
    Dividends paid                                              -           (82)
                                                      -----------   -----------
       Net cash from financing activities                   1,138          (279)
                                                      -----------   -----------

Net change in cash and cash equivalents                       507          (385)

Cash and cash equivalents at beginning of period            5,327         4,431
                                                      -----------   -----------

Cash and cash equivalents at end of period            $     5,834   $     4,046
                                                      ===========   ===========
</TABLE>


                                        6

<PAGE>



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     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-QSB.  Accordingly,
they do not include all the  information  and  footnotes  required by  generally
accepted accounting principles for complete financial statements.

     In  the  opinion  of  management,   the  unaudited  consolidated  financial
statements  contain  all  adjustments   (consisting  only  of  normal  recurring
adjustments)  necessary  to  present  fairly  the  financial  condition  of  The
Bryan-College   Station   Financial   Holding  Company  (the  Company)  and  its
wholly-owned  subsidiary  First Federal  Savings Bank (the Bank), as of December
31, 1998 and  September  30, 1998,  and the results of its  operations  and cash
flows for the three-month periods ended December 31, 1998 and 1997.

NOTE 2 - ALLOWANCE FOR LOAN LOSSES

The summary of changes in the allowance for loan losses is as follows:
<TABLE>
<CAPTION>

                                                    Three months ended
                                                       December  31,
                                                      (In thousands)
                                                    1998          1997
                                                    ----          ----
          <S>                                       <C>           <C>
 

         Balances, beginning of period            $     307    $     273
         Provision charged to operations                 20           29
         Charge-offs                                    (10)          (2)
         Recoveries                                       1            2
                                                  ---------    ---------

             Balances, end of period              $     318    $     302
                                                  =========    =========

</TABLE>

                                        7

<PAGE>

<TABLE>
<CAPTION>

       THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Three months ended December 31, 1998 and 1997
                                   (Unaudited)




NOTE 3 - CAPITAL REQUIREMENTS

     Pursuant  to  federal  regulations,  savings  institutions  must meet three
separate capital  requirements.  The following is a reconciliation of the Bank's
capital under  generally  accepted  accounting  principles  (GAAP) to regulatory
capital at December 31, 1998.

                                            Tangible        Core      Risk based
                                            Capital       Capital       Capital
                                          -----------   ----------    ----------
                                                        (In thousands)
          <S>                               <C>            <C>            <C>


       GAAP capital                       $    5,494    $    5,494    $    5,494

       General valuation allowances                -             -           318
                                          ----------    ----------    ----------

       Regulatory capital                      5,494         5,494         5,812

       Minimum capital requirement             3,324         1,246         5,342
                                          ----------    ----------    ----------

       Excess regulatory capital over
         minimum requirement              $    2,170    $    4,248    $      470
                                          ==========    ==========    ==========
</TABLE>


NOTE 4 - EARNINGS PER COMMON SHARE

     Earnings  per  share is  computed  under the  provisions  of  Statement  of
Financial  Accounting  Standards No. 128 "Earnings Per Share", which was adopted
retroactively  by the Company at the  beginning  of the fourth  quarter of 1998.
Amounts  reported  as  Earnings  Per  Common  Share for the two  quarters  ended
December 31, 1998 and 1998 reflect the earnings available to common stockholders
for  the  year  divided  by  the  weighted   average  number  of  common  shares
outstanding.  Diluted earnings per share shows the dilutive effect of additional
common shares  issuable under stock options.  Earnings per share for the quarter
ended  December 31, 1997 has been restated to reflect the 2.5 exchange  ratio of
Bank stock for  Company  stock that  occurred  on April 1,  1998.  In  addition,
earnings per share for both  periods have been  restated to reflect a 10% common
stock dividend declared in January 1999. The weighted average shares outstanding
used to calculated  earnings per share were 428,380 and 637,974 for the quarters
ended December 31, 1998 and 1997, respectively.






                                        8
<PAGE>

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

General

     The   Bryan-College   Station   Financial  Holding  Company  (the  "Holding
Company"and,  when referred to with its subsidiary,  the "Company"),  a Delaware
corporation,  was formed to act as the unitary thrift holding  company for First
Federal Savings Bank, Bryan,  Texas ("First Federal" or the "Bank") by acquiring
100% of the stock of First Federal through the exchange of approximately  32% of
First Federal common stock for Holding  Company common stock and the purchase of
approximately  68% of First Federal  common stock for cash (the  "Acquisition").
The Company received approval from the Office of Thrift  Supervision (the "OTS")
to acquire all of the common stock of the Bank  outstanding  upon  completion of
the Acquisition.  The Acquisition was completed on April 1, 1998. All references
to the Company,  unless otherwise indicated, at or before April 1, 1998 refer to
the Bank.

     First Federal's major goals are to provide high quality full-service retail
banking  on a  profitable  basis  to its  targeted  "niche"  of  customers,  the
middle-class  population,  through its offices located in Bryan/College  Station
and its loan  production  offices  located in its  expanded  trade area  between
Dallas,  Houston and Austin,  Texas.  First Federal intends to continue to focus
primarily on one-to four-family  residential loans, direct and indirect consumer
lending,  including  automobile loans and home improvement  loans,  construction
loans, and commercial business loans, some of which are partially  guaranteed by
the U.S. Small Business  Association  ("SBA").  In addition,  First Federal also
seeks to  continue  improving  its asset  quality and  minimizing  to the extent
possible,  its vulnerability to changes in interest rates in order to maintain a
reasonable  spread  between its average  yield on loans and  securities  and its
average cost of interest paid on deposits and borrowings.

     First Federal's net interest income has historically been dependent largely
upon the  difference  ("spread")  between the average yield earned  primarily on
loans,  and to a lesser extent  mortgage-backed  securities and other securities
("interest-earning  assets")  and the  average  rate paid on  savings  and other
deposits  and  borrowings  ("interest-bearing  liabilities"),  as  well  as  the
relative  amounts of such  assets and  liabilities.  The  interest  rate  spread
between interest-earning assets and interest-bearing  liabilities is impacted by
several factors,  including  economic and competitive  conditions that influence
interest rates,  loan demand,  deposit flows,  regulatory  developments  and the
types of assets and liabilities on its balance sheet.




                                       9

<PAGE>

     Like all financial  institutions,  First Federal has always been subject to
interest rate risk because its interest-bearing liabilities (primarily deposits)
mature  or  reprice  at  different  times,  or on a  different  basis  than  its
interest-earning  assets (primarily  loans).  First Federal's net income is also
affected  by gains and losses on the sale of loans,  loan  servicing  rights and
investments,  provisions  expensed  for loan and  other  losses  on  repossessed
assets,  service charge fees,  loan servicing  income,  fees for other financial
services  rendered,  operating expenses and income taxes. First Federal believes
that building its earnings from net interest income and noninterest income, such
as the profitable  sale of long-term,  fixed rate loans to the secondary  market
utilizing a  fully-staffed  residential  loan  department  and SBA business loan
staff, along with income from service charges and fees on checking accounts from
its recent transition to full-service retail banking, while continuing to reduce
operating expenses,  can provide a stable foundation for successful  operations.
Noninterest  income can provide an excellent  source of secondary income through
fees charged to customers for services  rendered and the sale of loans,  without
requiring additional capital.

     During the past fiscal year,  management has transitioned  First Federal to
prepare  for  future  growth  and in order to provide  more  convenient  banking
services to its customers,  by (i) upgrading its tellers with more  experienced,
full-time professionals;  (ii) opening a new full-service branch in north Bryan,
adjacent to a key  intersection  between two major  highways,  in the heart of a
large area where many of First  Federal's  targeted middle class customers live,
and an area not presently served by a banking facility;  (iii) doubling the size
of its staff in its expanding Second Chance Auto Lending Program (which requires
up to  $6,000  of  insurance  per loan for  losses  due to the  borrower's  loan
default);  (iv) hiring new management and adding to the staff of its Residential
Lending  Department and providing this department with new and larger offices on
the main east-west artery in College Station;  (v) providing  24-hour  telephone
banking;  (vi) addressing the challenges of the Year 2000 issue,  with much time
and  expense,  and (vii)  increasing  salaries to retain  quality  people on its
staff.  Management  believes  that this  strategy  will enable First  Federal to
enhance  profitability  in the future and meet the needs of its  customers  in a
highly competitive market.

     First Federal's  restructuring and expansion,  as described above, in order
to provide additional full-service banking and convenience to its customers, has
caused an increase in First Federal's  operating  expense levels which,  despite
the  recent  increase  in net  interest  income,  resulted  in  First  Federal's
operating  expenses  exceeding  its net interest  income for the quarter  ending
December 31, 1998.

     Since 1991,  First Federal has relied  primarily on its noninterest  income
for net income.  While First Federal's  noninterest income has been a relatively
steady  source of  income,  it is highly  dependent  upon the  ability  of First
Federal to  originate  loans and realize  profits on the sale of these loans and
related  servicing  rights to the  secondary  market and to increase its service
charge and fee income  from  additional  checking  accounts  resulting  from its
transition to full-service banking.

                                       10
<PAGE>

Financial Condition

     The  Company's  total assets  increased by $1.4 million to $84.0 million at
December  31, 1998 from $82.6  million at  September  30,  1998.  This  increase
consisted  primarily of an increase in cash on hand,  loans receivable and other
assets.

     Net loans receivable  (excluding loans held for sale) increased $498,000 to
$72.2  million at December 31, 1998,  compared to $71.7 million at September 30,
1998.  During the three months ended December 31, 1998,  the Company  originated
$6.4  million of  mortgage  loans,  including  $6.0  million  secured by one- to
four-family  residential loans.  Approximately  $369,000 of these mortgage loans
represented  refinancings of existing loans. In addition, the Company originated
$5.7 million in consumer loans, of which $2.9 million were 2nd chance auto loans
and $2.3 million in commercial business loans.

     Deposits  increased  $1.5  million to $75.1  million at December  31, 1998,
compared  to $73.6  million at  September  30,  1998,  as a result of  increased
marketing of checking  accounts.  Other  liabilities  deceased  $372,000 to $6.0
million at December  31, 1998,  compared to $6.3 million at September  30, 1998,
primarily  as a result of the payment of escrowed  funds in  December,  1998 for
property  taxes  related  to loans  held by the  Bank,  partially  offset  by an
increase in advances from the Federal Home Loan Bank of Dallas.

     Stockholders'  equity in the Company increased  $135,000 to $2.0 million at
December 31, 1998 from $1.9 million at September 30, 1998.

Asset/Liability Management

     The Company's subsidiary,  First Federal, like all financial  institutions,
is  subject  to  interest  rate  risk to the  degree  that its  interest-bearing
liabilities  (deposits) mature or reprice more rapidly, or on a different basis,
than its interest-earning  assets,  (loans), some of which may be longer term or
fixed  interest  rate.  As a continuing  part of its financial  strategy,  First
Federal  continually  considers  methods of  managing  any such  asset/liability
mismatch,  consistent with maintaining  acceptable levels of net interest income
and interest rate risk.

     In order to monitor and manage interest rate  sensitivity and interest rate
spread, First Federal created an Asset/Liability Committee ("ALCO"), composed of
its  President/Chief   Executive  Officer,   Senior  Vice   President/Financial,
Executive Vice President/Chief  Financial Officer, Manager of Operations and one
outside Director. The responsibilities of the ALCO are to assess First Federal's
asset/liability  mix and  recommend  strategies  that will enhance  income while
managing First Federal's vulnerability to changes in interest rates.

                                       11

<PAGE>

     First Federal's  asset/liability  management strategy has two goals. First,
the Bank seeks to build its net interest  income and noninterest  income,  while
adhering to its underwriting  and lending  guidelines.  Second,  and to a lesser
extent,  First Federal seeks to increase the interest  rate  sensitivity  of its
assets and decrease the interest rate  sensitivity  of its  liabilities so as to
reduce First Federal's overall  sensitivity to changes in interest rates.  There
can be no assurance that this strategy will achieve the desired results and will
not result in  substantial  losses in the event of an increase in interest  rate
risk.

     As part of this  strategy,  management  continues  to  emphasize  growth in
noninterest-bearing deposits such as checking accounts or lower interest-bearing
savings  deposits  by  offering  full  service  retail  banking to its  targeted
customer  base. In order to minimize the possible  adverse impact that a rise in
interest  rates may have on net interest  income,  First  Federal has  developed
several strategies to manage its interest rate risk. Primarily, First Federal is
currently selling all newly-originated one- to four-family  residential mortgage
loans which are saleable in the  secondary  market--most  of which are long-term
fixed-rate  loans. In addition,  First Federal currently offers three-year fixed
rate balloon  loans and other  adjustable  rate loans,  and has  implemented  an
active, diversified short-term consumer lending program, giving First Federal an
opportunity to reprice its loans on a more frequent basis.

Net Portfolio Value

     The OTS, First Federal's  primary  regulator has issued a proposed rule for
the  calculation  of an interest  rate risk  component for  institutions  with a
greater  than  "normal"  (i.e.,  greater  than 2%) level of  interest  rate risk
exposure  ("NPV").  The OTS has not yet  implemented  the capital  deduction for
interest  rate  risk.  NPV is  the  difference  between  incoming  and  outgoing
discounted cash flows from assets,  liabilities and off-balance sheet contracts.
This approach  calculates the  difference  between the present value of expected
cash  flows  from  assets  and the  present  value of  expected  cash flows from
liabilities,  as well as cash flows from off-balance sheet contracts.  Under OTS
regulations,  an institution's "normal" level of interest rate risk in the event
of an assumed change in interest rates is a decrease in the institution's NPV in
an amount not  exceeding  2% of the present  value of its assets.  The amount of
that  deduction  is one-half  of the  difference  between (a) the  institution's
actual  calculated  exposure  to a 200 basis  point  interest  rate  increase or
decrease  (whichever  results in the greater pro forma  decrease in NPV) and (b)
its "normal" level of exposure which is 2% of the present value of its assets.

                                       12

<PAGE>

     It has been, and continues to be, an objective of First  Federal's Board of
Directors  and  management  to  manage  interest  rate  risk.   First  Federal's
asset/liability  policy,  established  by  the  Board  of  Directors,   dictates
acceptable  limits on the  amount of change  in NPV  given  certain  changes  in
interest rates. See "-- Asset/Liability Management."

     Presented  below,  as of  September  30,  1998,  is an  analysis  of  First
Federal's interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts in the yield curve, in 100 basis point increments,  up
and down 400 basis points in accordance with OTS regulations.  As illustrated in
the table,  NPV is more  sensitive to rising rates than  declining  rates.  This
occurs principally  because, as rates rise, the market value of fixed-rate loans
declines  due to both the rate  increase  and  slowing  prepayments.  When rates
decline,  First Federal does not  experience a significant  rise in market value
for  these  loans  because  borrowers  prepay  at  relatively  high  rates.  OTS
assumptions are used in calculating the amounts in this table.
<TABLE>
<CAPTION>

                                                             Acceptable Limits
  Change in                                                     Established by
  Interest Rate        Estimated     At September 30, 1998   Board of Directors
 (Basis Points)           NPV        $ Change     % Change        % Change
---------------        ---------     --------     --------  --------------------
                                (Dollars in Thousands)
<S>                       <C>          <C>          <C>            <C>

     +400               $7,937         $ 73              1%             75%
     +300                8,068          204              3             (50)
     +200                8,099          235              3             (30)
     +100                7,998          134              2             (15)
        0                7,864          ---            ---             ---
     -100                7,872            8            ---             (15)
     -200                8,105          241              3             (30)
     -300                8,409          545              7             (50)
     -400                8,703          839             11             (75)
</TABLE>

     Management  reviews the OTS  measurements on a quarterly basis. In addition
to monitoring  selected measures on NPV, management also monitors effects on net
interest income resulting from increases or decreases in rates.  This measure is
used in conjunction with NPV measures to identify  excessive interest rate risk.
In the event of a 400 basis point change in interest rates,

                                       13
<PAGE>

First  Federal would   experience  a  11%  increase  in NPV in a declining  rate
environment and a 1% decrease in a rising rate environment.  As of September 30,
1998, an increase in interest rates of 200 basis points would have resulted in a
3% decrease in the present value of First  Federal's  assets,  while a change in
the interest  rates of negative  200 basis  points  would have  resulted in a 3%
increase in the present value of First Federal's assets.

     In  evaluating  First  Federal's  exposure to interest  rate risk,  certain
shortcomings  inherent  in the method of  analysis  presented  in the  foregoing
tables must be considered.  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.  Further,  in the event of a change in interest rates,  prepayment
and early  withdrawal  levels  would  likely  deviate  significantly  from those
assumed in calculating the table. For example,  projected passbook, money market
and checking  account  maturities may also  materially  change if interest rates
change.  Finally,  the  ability  of many  borrowers  to  service  their debt may
decrease in the event of an interest rate increase.  First Federal considers all
of these factors in monitoring its exposure to interest rate risk.

Non-Performing Assets and Loan Loss Provision

     The provision for loan losses is based on  management's  periodic review of
the Company's loan portfolio which considers,  among other factors,  past actual
loan loss experience, the general prevailing economic conditions, changes in the
size,  composition  and  risks  inherent  in  the  loan  portfolio,  independent
third-party  loan  reviews,  and specific  borrower  considerations  such as the
ability to repay the loan and the estimated value of the underlying  collateral.
In  addition,  various  regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically review the Company's allowance for estimated
loan losses on loans. Such agencies may require the Company to provide additions
to the allowance based upon judgments which differ from those of management.

     The Company  recorded a provision  for loan losses in the amount of $20,000
for the three months  ending  December  31, 1998,  as compared to a $29,000 loan
loss  provision for the three months ending  December 31, 1997.  The increase in
the  provision  for  loan  losses  was  largely  a  result  of  an  increase  in
non-performing  assets.  This  increase was  partially  offset by continued  low
levels of  charge-offs  relative to the allowance for loan losses and the use of
credit-default  insurance  coverage  for certain  automobile  loans to limit the
Company's loan loss exposure.  Total non-performing  assets increased during the
three month  period  ended  December  31, 1998 to $2.1 million or 2.54% of total
assets as compared to $1.2  million or 1.46% of total  assets at  September  30,
1998. Most of this increase in non-performing assets was attributable to several
past-due  residential  mortgage loans, the unpaid principal  balance of which is
less than the appraised value.

                                       14

<PAGE>

Results of Operations

     The  Company's  results of operations  are  primarily  dependent on its net
interest   income  which  is  the   difference   between   interest   income  on
interest-earning  assets and interest expense on  interest-bearing  liabilities.
Interest income is a function of the average balances of interest-earning assets
outstanding  during the period and the  average  yields  earned on such  assets.
Interest  expense  is a  function  of the  average  amount  of  interest-bearing
liabilities  outstanding  during the period and the  average  rates paid on such
liabilities.  The Company also generates noninterest income, such as income from
service charges and fees on checking accounts, loan servicing and other fees and
charges and gains on sales of loans and  servicing  rights.  The  Company's  net
income  is also  affected  by the  level of its  noninterest  expenses,  such as
employee salaries and benefits,  occupancy and equipment  expenses,  and federal
deposit insurance premiums.


Comparison of Three months ended December 31, 1998 to December 31, 1997

     The Company  reported  net income  after  taxes of  $135,000  for the three
months ended December 31, 1998, an increase of $7,000 as compared to $128,000 in
net income  reported for the three months ended  December 31, 1997. The increase
in net income,  as discussed in more detail  below,  resulted  primarily  from a
$287,000  increase in the Company's  interest income and a $207,000  increase in
noninterest  income,  partially  offset by an  $161,000  increase  in expense on
interest on its deposits and interest on its debentures and a $315,000  increase
in noninterest expense.

     Net interest  income  increased  $126,000 to $987,000  for the  three-month
period ended December 31, 1998 from $861,000 for the prior period in 1997.  This
increase  primarily  resulted from increases in the average balance and yield of
the loan  portfolio,  offset  in part by  increases  in the  volume  and cost of
deposits  and  advances.  In  addition,  the  Holding  Company  issued  11  1/2%
debentures  due March  2003  ("Debentures")  in April of 1998,  resulting  in an
increased  volume of notes  payable.  The average yield on loans  increased as a
result of an increase  in the volume of insured  consumer  automobile  loans and
direct consumer loans which yield a higher rate than traditional mortgage loans.
The average balance of loans also increased as a result of a concerted effort to
increase the consumer loan portfolio  through building  relationships  with auto
dealerships and promoting the "Second Chance Auto Loan Program". These increases
were  partially  offset by an  increase in the cost of funds  resulting  from an
increase in the average balance of deposits, increased rates paid on deposits in
order to remain competitive and due to the Debentures. As a result of the above,
for the three months ended  December  31, 1998,  the spread  between the average
yield on interest  earning assets (loans and securities) and the average cost of
funds increased to 5.58% at December 31, 1998 from 4.60% at December 31, 1997.

                                       15

<PAGE>

     Noninterest  income  increased  $207,000 to $400,000  for the three  months
ended  December 31, 1998 from  $193,000 for the three months ended  December 31,
1997.  This increase can be attributed to a $70,000  increase in service charges
on  checking  accounts,  a  $104,000  increase  on net gain on sale of loans and
mortgage  servicing rights and a $33,000 increase in other  noninterest  income.
The increase and the gain on the sale of loans was  attributable  to the sale of
Second Chance Auto Loans.

     Noninterest expense increased $315,000 to $1.1 million for the three months
ended  December 31, 1998 from  $831,000 for the three months ended  December 31,
1997. Compensation and benefits increased $144,000 as a result of an increase in
the  number of  employees  due  primarily  to the  opening  of a new  branch and
increased  expenses  related to the expansion of the mortgage lending and second
chance  automobile  lending  departments.  Occupancy  expense  increased $43,000
primarily  as a result of the  opening  of the new North  Bryan  branch  and the
recently  expanded  mortgage lending offices in College  Station.  Other expense
increased  $98,000,  which  consisted  of various  items,  including  $33,000 of
amortization  of debt  issue  costs  and  organizational  costs  related  to the
formation of the Holding  Company and payment of a Bank preferred stock dividend
of $22,000.  Various other expenses have also increased primarily as a result of
the overall growth and increased loan production of the Company.

     Income tax  expense was $86,000 for the three  months  ended  December  31,
1998, as compared to $66,000 for the three months ended  December 31, 1997.  The
period  reflected  a tax rate of 38.9%  and  34.0%  for  December  31,  1998 and
December 31, 1997, respectively.

Liquidity and Capital Resources

     The Company's  primary  sources of funds are deposits,  checking  accounts,
principal  and  interest  payments  on loans and  mortgage  related  securities,
proceeds  from sales of long term,  fixed-rate  residential  mortgage  loans and
other funds  provided from  operations.  Additionally,  the Company has borrowed
funds from the FHLB of Dallas or utilize  particular  sources of funds  based on
need, comparative costs and availability at the time.

     While scheduled loan and mortgage-backed securities repayments,  short-term
investments, and FHLB borrowings are relatively stable sources of funds, deposit
flows  are  unpredictable  and are a  function  of  external  factors  including
competition,  the general level of interest rates,  general economic  conditions
and most  recently,  the  restructuring  occurring  in the  thrift  institutions
industry.

                                       16

<PAGE>

     The Company  maintains  investments in liquid assets based on  management's
assessment of cash needs, expected deposit flows,  availability of advances from
the FHLB,  available yield on liquid assets (both  short-term and long-term) and
the objectives of its asset/liability  management  program.  Several options are
available  to  increase   liquidity,   including   reducing  loan  originations,
increasing  deposit  marketing  activities,  and increasing  borrowings from the
FHLB.

     At December  31, 1998,  the Company had  commitments  to  originate  loans,
including  loans in process,  totaling $2.1  million.  The Company also had $1.6
million of outstanding  unused lines of credit and $73,000 of letters of credit.
The Company considers its liquidity and capital resources to be adequate to meet
its  foreseeable  short and long-term  needs.  The Company expects to be able to
fund or refinance,  on a timely basis,  its material  commitments  and long-term
liabilities. First Federal intends to expand its Second Chance Auto Loan Program
with  additional  select  automobile  dealers  throughout  the  State of  Texas,
retaining a portion of these  loans for its own  portfolio,  and selling  excess
loan  originations in order to maintain capital  compliance and liquidity needs.
The Company also has the ability,  if needed, to borrow up to $28.4 million from
the FHLB of Dallas for liquidity purposes. At December 31, 1998, the Company had
$1.0 million in advances outstanding from the FHLB.

     Federal regulations require insured institutions to maintain minimum levels
of liquid  assets.  As of December 31, 1998,  the minimum  regulatory  liquidity
requirement  was 4% of the sum of First  Federal's  average daily balance of net
withdrawable  deposit  accounts and  borrowing  payable in one year or less.  At
December 31, 1998, First Federal's  regulatory  liquidity ratio was 7.96%. First
Federal uses its capital resources  principally to meet its ongoing  commitments
to fund  maturing  certificates  of  deposits  and  deposit  withdrawals,  repay
borrowings,  fund  existing  and  continuing  loan  commitments,   maintain  its
liquidity and meet operating expenses.

     At December 31, 1998 the Bank had Tier 1 (Core) Capital of $5.5 million, or
6.61% of  total  assets  which  was  $2.2  million  above  the  minimum  capital
requirement of $3.3 million or 4% of total assets.

     At December 31, 1998, the Bank had total risk based capital of $5.8 million
and risk  weighted  assets of $66.8 million or total risk based capital of 8.70%
of risk weighted assets.  This amount was $470,000 above the minimum  regulatory
requirement of $5.3 million, or 8.0% of risk weighted assets.

                                       17


<PAGE>

Year 2000 Issue

     General.  The year 2000  ("Y2K")  issue  confronting  the  Company  and its
suppliers,  customers,  customers'  suppliers  and  competitors  centers  on the
inability of computer systems to recognize the year 2000. Many existing computer
programs  and  systems  originally  were  programmed  with six digit  dates that
provided only two digits to identify the calendar  year in the date field.  With
the impending new  millennium,  these programs and computers will recognize "00"
as the year 1900 rather than the year 2000.

     Financial  institution  regulators recently have increased their focus upon
Y2K compliance issues and have issued guidance  concerning the  responsibilities
of  senior  management  and  directors.   The  Federal  Financial   Institutions
Examination  Council has issued  several  interagency  statements on Y2K project
management awareness.  These statements require financial institutions to, among
other things, examine the Y2K implications of their reliance on vendors and with
respect to the data exchange and the potential  impact of the Y2K issue on their
customers,   suppliers,  and  borrowers.  These  statements  also  require  each
federally  regulated  institution  to survey its exposure,  measure its risk and
prepare a plan to address  the Y2K  issue.  In  addition,  the  federal  banking
regulators have issued safety and soundness guidelines to be followed by insured
depository  institutions,  such as the  Bank,  to assure  resolution  of any Y2K
problems.  The  federal  banking  agencies  have  assessed  that Y2K testing and
certification is a key safety and soundness issue in conjunction with regulatory
exams and thus, that an institution's  failure to address  appropriately the Y2K
issue  could  result  in  supervisory   action,   including   reduction  of  the
institution's  supervisory  ratings,  the denial of applications for approval of
mergers or acquisitions or the imposition of civil money penalties.

     Risks.  Like  most  financial  service  providers,   the  Company  and  its
operations may be significantly  affected by the Y2K issue due to its dependence
on technology and date-sensitive  data. Computer software and hardware and other
equipment,  both within and  outside the  Company's  direct  control,  and third
parties  with  whom  the  Company  electronically  or  operationally  interfaces
(including  without limitation its customers and third party vendors) are likely
to be  affected.  If computer  systems  are not  modified in order to be able to
identify  the  year  2000,  many  computer  applications  could  fail or  create
erroneous  results.  As a result,  many  calculations,  which rely on date field
information such as interest, payment on due dates, and all operating functions,
could generate results which are significantly  misstated, and the Company could
experience an inability to process transactions, prepare statements or engage in
similar normal business activities.  Likewise,  under certain  circumstances,  a
failure to adequately address the Y2K issue could adversely affect the viability
of the  Company's  suppliers  and  creditors  and  the  creditworthiness  of its
borrowers.  Thus, if not adequately  addressed,  the Y2K issue could result in a
significant  adverse  impact  on the  Company's  operations  and,  in turn,  its
financial condition and results of operations.

                                       18

<PAGE>

     State of Readiness. During October 1997, the Company formulated its plan to
address the Y2K issue.  Since that time,  the  Company  has taken the  following
steps:

 o   Established senior management advisory and review responsibilities;
 o   Completed a company-wide inventory of applications and system software;
 o   Built an internal tracking database for applications and system software;
 o   Developed compliance plans and schedules for all lines of business;
 o   Completed a computer network, hardware, and software upgrade;
 o   Completed in-house testing of all systems;
 o   Obtained data processor vendor compliance certification;
 o   Completed data processor vendor testing;
 o   Began awareness and educational activities for employees through existing
     internal communication channels; and
 o   Developed a process to respond to customer inquiries as well as help
     educate customers on the Y2K issue.

     The following paragraphs summarize the phases of the Company's Y2K plan:

     Awareness Phase. The Company formally established a Y2K plan that is headed
by a senior manager,  and a project team was assembled for management of the Y2K
project.  The project  team created a plan of action that  includes  milestones,
budget estimates,  strategies,  and methodologies to track and report the status
of the  project.  Members of the  project  team also  attended  conferences  and
information  sharing  sessions  to gain  more  insight  into the Y2K  issue  and
potential strategies for addressing it. This phase is substantially complete.

     Assessment  Phase.  The Company's  strategies  were further  developed with
respect  to how the  objectives  of the Y2K plan  would be  achieved,  and a Y2K
business risk  assessment  was conducted to quantify the extent of the Company's
Y2K  exposure.  A  corporate  inventory  (which is  periodically  updated as new
technology is acquired and as systems  progress through  subsequent  phases) was
developed  to  identify  and  monitor  Y2K  readiness  for  information  systems
(hardware,  software,  vendors, and utilities) as well as environmental  systems
(security systems, facilities, etc.). Systems were prioritized based on business
impacts and available alternatives. Mission critical systems supplied by vendors
were  researched  to determine  Y2K  readiness.  If Y2K ready  versions were not
available,  the Company began  identifying  functional  replacements  which were
either  upgradable  or Y2K ready,  and a formal  plan was  developed  to repair,
upgrade or replace all mission  critical  systems.  This phase is  substantially
complete.

                                       19

<PAGE>

     The  Company  will begin Y2K  discussions  with its larger  borrowers.  All
credits   greater  than  $50,000  will  be  evaluated  for  Y2K  exposure  by  a
relationship  account officer using a  questionnaire  developed by the Company's
credit administration staff. As part of the current credit approval process, all
new and renewed  loans are  evaluated  for Y2K risk.  During the course of these
evaluations,  Company  personnel will meet  individually with each of its larger
borrowers to discuss and obtain information regarding each borrower's dependence
on information  technology and third party vendors and the nature of steps being
taken by the borrowers to address their own Y2K issues.

     Renovation  Phase.  The  Company's  corporate  inventory  revealed that Y2K
upgrades were available for all vendor supplied  mission critical  systems,  and
all these Y2K ready versions have been delivered and placed into  production and
have entered the validation process.

     Validation  Phase.  The validation phase is designed to test the ability of
hardware and software to accurately process date-sensitive data. The Company has
substantially  completed the validation testing of each mission critical system.
The Company  hired two outside  firms to perform this phase.  These firms tested
independent  of each other  verifying  the other's  validation  of all  systems.
During the validation  testing  process,  no significant  Y2K problems have been
identified relating to any modified or upgraded mission critical systems.

     Implementation  Phase.  The Company's plan calls for placing Y2K ready code
into production  before having actually  completed Y2K validation  testing.  Y2K
ready  modified  or  upgraded  versions  have been  installed  and  placed  into
production with respect to all mission critical systems.

     Company  Resources  Invested.  The  Company's  Y2K  project  team  has been
assigned  the  task  of  ensuring  that  all  systems  across  the  Company  are
identified,  analyzed for Y2K compliance,  corrected if necessary,  tested,  and
have the changes into service by the end of the first  quarter of 1999.  The Y2K
project team members  represent all functional  areas of the Company,  including
branches, data processing, loan administration,  accounting, item processing and
operations,  compliance,  internal audit,  human  resources,  and marketing.  An
assistant  vice  president  who reports  directly  to a member of the  Company's
senior management heads the team. The Company's Board of Directors  oversees the
Y2K plan and provides guidance and resources to, and receives  quarterly updates
from, the Y2K team.

                                       20

<PAGE>

     The Company is expensing all costs  associated with required system changes
as those costs are incurred,  and such costs are being funded through  operating
cash flows. The total cost of the Y2K conversion  project since  commencement in
October 1997 for the Company is  estimated to be $250,000 of which  $117,000 has
been spent as of December  31,  1998.  The Company  does not expect  significant
increases in future data processing costs related to Y2K compliance.

     Contingency   Plans.   During  the  assessment  phase,  the  Company  began
developing  back-up  or  contingency  plans  for  each of its  mission  critical
systems.  Virtually all of the Company's  mission critical systems are dependent
upon third party  vendors or service  providers.  Therefore,  contingency  plans
include  selecting a new vendor or service provider and converting their system.
In the event a current  vendor's system fails during the validation phase and it
is determined that the vendor is unable or unwilling to correct the failure, the
Company  will  convert to a new system from a  preselected  list of  prospective
vendors.  In each case,  realistic  trigger dates have been established to allow
for orderly and  successful  conversions.  For some systems,  contingency  plans
consist of using  spreadsheet  software or  reverting  to manual  systems  until
system problems can be corrected.

     The  majority  of the  Company's  mission  critical  system  falls into the
categories of its core- banking  software and its proof of deposit  system.  The
Company has  received  warranties  from  vendors to the effect that the proof of
deposit and core-banking system is Y2K ready.

New Accounting Pronouncements

     On March 3, 1997, the Financial  Accounting  Standards  Board (FASB) issued
Statement 128, "Earnings Per Share", which is effective for financial statements
beginning  with year end 1997.  Statement  128  simplifies  the  calculation  of
earnings  per share  (EPS) by  replacing  primary  EPS with basic  EPS.  It also
requires  dual  presentation  of basic EPS and  diluted  EPS for  entities  with
complex  capital  structures.  Basic EPS include no dilution  and is computed by
dividing income available to common shareholders by the weighted-average  common
shares  outstanding for the period.  Diluted EPS reflects the potential dilution
of securities that could share in earnings,  such as stock options,  warrants or
other common stock equivalents. Statement 128 has had little impact on the Banks
earnings per share calculations. All prior period EPS data have been restated to
conform with the new presentation.

     Statement   of  Financial   Accounting   Standards   No.  130,   "Reporting
Comprehensive Income," was issued by the Financial Accounting Standards Board in
1977.  This  Statement  established  standards  for  reporting  and  display  of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  It does not address issues of recognition or measurement
for  comprehensive  income and its  components.  Statement  130 is effective for
fiscal years  beginning  after  December 15, 1997.  Since the provisions of this
Statement are disclosure  oriented,  it will have no impact on the operations of
the Bank.

                                       21

<PAGE>

     Statement of Financial  Accounting  Standards No. 131,  "Disclosures  about
Segments of an Enterprise  and Related  Information,"  was issued in 1997 by the
Financial Accounting Standards Board. This Statement  established  standards for
the way that public  business  enterprises  report  information  about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selected  information  about  operating  segments  in interim  financial
reports  issued to  shareholders.  It also  establishes  standards  for  related
disclosures about products and services,  geographic areas, and major customers.
Statements  131 is  effective  for periods  beginning  after  December 15, 1997.
Management does not believe that the provisions of this Statement are applicable
to the Bank,  since  substantially  all of the  Bank's  operations  are  banking
activities.

     Statement  of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities" (SFAS No. 133"), issued in June
1998,  must be  adopted  as of  January  1,  2000.  This  Statement  establishes
accounting and reporting standards for derivative financial  instruments and for
hedging  activities.  Upon adoption of the Statement,  all  derivatives  must be
recognized  at fair value as either  assets or  liabilities  in the statement of
financial  position.  Changes in the fair value of derivatives not designated as
hedging instruments are to be recognized currently in earnings.  Gains or losses
on  derivatives  designated as hedging  instruments  are either to be recognized
currently  in  earnings  or  are  to  be  recognized  as a  component  of  other
comprehensive  income,  depending on the intended use of the derivatives and the
resulting designations. Upon adoption, retroactive application of this Statement
to  financial   statements  of  prior  periods  is  not  permitted.   Management
anticipates  the adoption of SFAS No. 133 will not have a material impact on the
financial condition or operations of the Bank.

Safe Harbor Statement

     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act  of  1934,  as  amended.   The  Company  intends  such
forward-looking  statements  to be  covered  by the safe  harbor  provision  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally identifiable by use of the words believe, expect, intend,  anticipate,
estimate,  project  or similar  expressions.  The  Company's  ability to predict
results or the actual effect of future plans or strategies is inherently

                                       22

<PAGE>

uncertain.  Factors  which  could  have  a   material   adverse   affect  on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in: interest  rates,  general  economic  conditions,
legislative/regulatory  changes,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
the Company's  market area and accounting  principles,  policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and could affect the Company's  financial  performance  and cause the
Company's  actual  results for future  periods to differ  materially  from those
anticipated  or projected.  The Company  wishes to caution  readers not to place
undue reliance on any such  forward-looking  statements,  which speak only as of
the date made.

     The Company does not undertake,  and specifically disclaims any obligation,
to  revise  any   forward-looking   statements  to  reflect  the  occurrence  of
anticipated  or  unanticipated  events or  circumstances  after the date of such
statements.  Further  information  concerning  the  Company  and  its  business,
including   additional  factors  that  could  materially  affect  the  Company's
financial results,  is included in the Company's filings with the Securities and
Exchange Commission.

                                       23


<PAGE>



                           PART II- OTHER INFORMATION


Item 1.           Legal Proceedings

                  None.

Item 2.           Changes in Securities

                  None.

Item 3.           Defaults upon Senior Securities

                  None.

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

                  None.

Item 5.           Other Information

                  None.

Item 6.           Exhibits and Reports on Form 8-K

                  None.












                                       24

<PAGE>


                                   SIGNATURES


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

                                     THE BRYAN COLLEGE STATION FINANCIAL
                                     HOLDING COMPANY



   Date: February 16, 1999           /s/ J. Stanley Stephen
                                     -------------------------------------
                                     J. Stanley Stephen
                                     President and Chief Executive Officer




   Date: February 16, 1999          /s/ William Wantuck
                                    --------------------------------------
                                     William Wantuck
                                     Chief Financial Officer













                                       25