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 March 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
       ------------------------------------------------------------------
                (Registrant's 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 May 18, 1998
  -----------------------                              ------------------
    COMMON STOCK                                           389,436
     



<PAGE>


               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                  BRYAN, TEXAS

                                   FORM 10-QSB

                         SIX MONTHS ENDED MARCH 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....................................................10-19

                           PART II - OTHER INFORMATION

Other Information.............................................................20

Signatures....................................................................21


                                       ii

<PAGE>
                           FIRST FEDERAL SAVINGS BANK
                          BRYAN/COLLEGE STATION, TEXAS
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                      March 31, 1998 and September 30, 1997
                                   (Unaudited)
                       In thousands, except per share data
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
                                                                                      March 31,     September 30,
                                                                                        1998            1997
                                                                                      --------       -------
<S>                                                                                 <C>            <C>        
ASSETS

Cash and due from banks                                                             $       952    $       756
Interest-bearing deposits in other financial institutions                                 2,427          3,675
                                                                                    -----------    -----------
     Total cash and cash equivalents                                                      3,379          4,431

Mortgage-backed securities held-to-maturity (fair value:
  March 1998 - $ 1,037; September 1997 - $1,129)                                          1,047          1,150
Loans held for sale                                                                         146            204
Loans receivable                                                                         66,874         65,033
Federal Home Loan Bank stock                                                                923            896
Real estate owned and in judgment                                                           462            520
Premises and equipment                                                                    1,399          1,117
Accrued interest receivable                                                                 548            537
Other assets                                                                              1,253          1,201
                                                                                    -----------    -----------
                                                                                    $    76,031    $    75,089
                                                                                    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
     Deposits                                                                       $    66,507    $    58,808
     Advance payments by borrowers for insurance and taxes                                  366            862
     Advances from Federal Home Loan Bank                                                 3,700         10,000
     Accrued interest payable and other liabilities                                         513            585
                                                                                    -----------    -----------
                                                                                         71,086         70,255

Stockholders' equity
     Preferred stock - par value $.01 per share;
       authorized 1,000,000 shares, issued 87,263 shares                                      1              1
     Common stock - par value $.01 per share;
      authorized 3,000,000 shares, issued 239,612 shares                                      2              2
     Additional paid-in capital                                                           2,743          2,743
     Retained earnings, substantially restricted                                          2,199          2,088
                                                                                    -----------    -----------
                                                                                          4,945          4,834
                                                                                    -----------    -----------
                                                                                    $    76,031    $    75,089
                                                                                    ===========    ===========
</TABLE>


                                       3

<PAGE>



                           FIRST FEDERAL SAVINGS BANK
                          BRYAN/COLLEGE STATION, TEXAS
                      CONSOLIDATED STATEMENTS OF INCOME 
            For the three months and six months ended March 31, 1998 and 1997
                                   (Unaudited)
                       In thousands, except per share data


<TABLE>
<CAPTION>

                                                                  Six Months Ended         Three Months Ended
                                                                      March 31,                 March 31,

                                                                1998           1997         1998         1997
                                                                ----           ----         ----         ----
<S>                                                           <C>          <C>          <C>          <C>       
Interest income
    Loans                                                     $    3,217   $    2,513   $    1,609   $    1,288
    Mortgage-backed securities                                        33           38           16           19
    Securities                                                         -            -            -            -
    Other                                                             84           65           39           32
                                                              ----------   ----------   ----------   ----------
       Total interest income                                       3,334        2,616        1,664        1,339

Interest expense
    Deposits                                                       1,412        1,186          719          602
    Other borrowings                                                 183           33           67           26
                                                              ----------   ----------   ----------   ----------
       Total interest expense                                      1,595        1,219          786          628
                                                              ----------   ----------   ----------   ----------


NET INTEREST INCOME                                                1,739        1,397          878          711

Provision for loan losses                                             29            2            -            -
                                                              ----------   ----------   ----------   ----------


NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                1,710        1,395          878          711

Noninterest income
    Service charges                                                  258          315          130          146
    Gain on sale of loans and mortgage servicing rights               79           58           44           11
    Other                                                             62            -           32            -
                                                              ----------   ----------   ----------   ----------
       Total noninterest income                                      399          373          206          157

Noninterest expense
    Compensation and benefits                                        862          641          458          320
    Occupancy and equipment expense                                  185          163           95           81
    Federal insurance premiums                                        18           28            9            8
    Net (gain) loss on real estate owned                              13           (2)           6           (9)
    Professional fees                                                 84           70           45           36
    Data processing                                                   95           85           48           44
    Other                                                            435          336          200          164
                                                              ----------   ----------   ----------   ----------
       Total noninterest expense                                   1,692        1,321          861          644
                                                              ----------   ----------   ----------   ----------


INCOME BEFORE INCOME TAX EXPENSE                                     417          447          223          224

Income tax expense                                                   142          152           76           76
                                                              ----------   ----------   ----------   ----------


NET INCOME                                                           275          295          147          148
Preferred stock dividends                                            (44)         (44)         (22)         (21)
                                                              ----------   ----------   ----------   ----------


NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                   $      231   $      251   $      125   $      127
                                                              ==========   ==========   ==========   ==========

EARNINGS PER SHARE:
    BASIC                                                     $      .96   $      1.05  $      .52   $      .53
                                                              ==========   ===========  ==========   ==========
    DILUTED                                                   $      .94   $      1.03  $      .51   $      .52
                                                              ==========   ===========  ==========   ==========
</TABLE>


                                       4

<PAGE>



                           FIRST FEDERAL SAVINGS BANK
                          BRYAN/COLLEGE STATION, TEXAS
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             March 31, 1998 and 1997
                                   (Unaudited)
                       In thousands, except per share data


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------

                                                               Six Months Ended           Three Months Ended
                                                                   March 31,                   March 31,
                                                             1998          1997           1998          1997
                                                             ----          ----           ----          ----
<S>                                                       <C>           <C>           <C>           <C>       
Balance at beginning of period                            $   4,834     $    4,316    $    4,880    $    4,440

Net income                                                      275            295           147           148

Cash dividends paid                                            (164)           (44)          (82)          (21)
                                                          ---------     ----------    ----------    ----------

Balance at end of period                                  $   4,945     $    4,567    $    4,945    $    4,567
                                                          =========     ==========    ==========    ==========

</TABLE>



                                       5

<PAGE>


                           FIRST FEDERAL SAVINGS BANK
                          BRYAN/COLLEGE STATION, TEXAS
                    CONSOLIDATED STATEMENTS OF CASH FLOWS 
           For the three and six months ended March 31, 1998 and 1997
                                   (Unaudited)
                                  In thousands


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                  Six Months Ended         Three Months Ended
                                                                      March 31,                 March 31,
                                                                 1998          1997         1998         1997
                                                                 ----          ----         ----         ----
<S>                                                            <C>          <C>          <C>           <C>     
CASH FLOWS FROM OPERATING ACTIVITIES

    Net income                                                 $     275    $     295    $     147     $    148
    Adjustments to reconcile net income to net cash
      from operating activities

       Depreciation                                                   97           83           46           41
       Amortization of premiums and discounts on
         investment and mortgage-backed securities, net               (2)           1           (3)           -
       Net change in loans held for sale                              89         (918)          14       (1,042)
       Amortization of deferred loan origination fees                 30            2           53          (11)
       Net (gains) losses on sales of
          Mortgage loans                                             (31)         (28)         (13)          (4)
          Mortgage servicing rights                                  (48)         (30)         (31)          (7)
          Real estate owned                                            1           (2)           1           (2)
       Provision for losses on loans                                  29            2            -            -
       Federal Home Loan Bank stock dividend                         (27)         (24)         (14)         (12)
       Change in
          Accrued interest receivable                                (11)        (149)         (22)        (112)
          Other assets                                               (52)        (149)        (147)         156
          Accrued interest payable and other liabilities             (72)        (292)          57         (171)
                                                               ---------    ---------    ---------     --------
              Net cash provided by (used in) operating
                activities                                           278       (1,209)          88       (1,016)

CASH FLOWS FROM INVESTING ACTIVITIES

    Net increase in loans receivable                              (1,847)      (3,559)      (1,538)        (985)
    Maturities of securities                                           -        1,000            -            -
    Principal payments on mortgage-backed securities
      and collateralized mortgage obligations                        105           72           36           30
    Proceeds from sale of mortgage servicing rights                   48           30           31            7
    Investment in office properties and equipment, net              (379)        (187)        (305)        (141)
    Proceeds from sale of foreclosed real estate                      14          149           10          149
    Capital expenditures on foreclosed real estate                   (10)         (57)          (7)         (57)
                                                               ---------    ---------    ----------    --------
       Net cash used in investing activities                      (2,069)      (2,552)      (1,773)        (997)

CASH FLOWS FROM FINANCING ACTIVITIES

    Net increase (decrease) in deposits                            7,699        3,394        4,173        2,095
    Net increase (decrease) in advance payments by
      borrowers for insurance and taxes                             (496)        (469)         227          215
    Net change in Federal Home Loan Bank advances                 (6,300)       2,200       (3,300)         700
    Dividends paid                                                  (164)         (44)         (82)         (21)
                                                               ---------    ---------    ----------    --------
       Net cash provided by financing activities                     739        5,081        1,018        2,989
                                                               ---------    ---------    ---------     --------

Decrease in cash and cash equivalents                             (1,052)       1,320         (667)         976

Cash and cash equivalents at beginning of period                   4,431        2,806        4,046        3,150
                                                               ---------    ---------    ---------     --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $   3,379    $   4,126    $   3,379     $  4,126
                                                               =========    =========    =========     ========
</TABLE>


                                       6

<PAGE>



                           FIRST FEDERAL SAVINGS BANK
                          BRYAN/COLLEGE STATION, TEXAS
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


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 First  Federal  Savings
Bank,  Bryan/College Station, Texas (the Bank) and its wholly-owned  subsidiary,
First Service Corporation of Bryan, as of March 31, 1998 and September 30, 1997,
and the  results  of its  operations  and cash  flows  for the  three-month  and
six-month periods ended March 31, 1998 and 1997.

NOTE 2 - ALLOWANCE FOR LOAN LOSSES

The summary of changes in the allowance for loan losses is as follows:

                                                            Six Months Ended
                                                                March 31,
                                                             (In thousands)
                                                          1998          1997
                                                          ----          ----

         Balances, beginning of period                 $      273    $      247
         Provision charged to operations                       29             2
         Charge-offs                                          (68)           (4)
         Recoveries                                             5             5
                                                       ----------    ----------

              Balances, end of period                  $      239    $      250
                                                       ==========    ==========


NOTE 3 - EARNINGS PER COMMON SHARE

Earnings per share is calculated  under the provisions of Statement of Financial
Accounting  Standards No. 128,  "Earnings  Per Share",  which was adopted by the
Bank in 1997.  The amount  reported as earnings  per common share for the period
reflects  earnings  available  to common  shareholders  divided by the  weighted
average number of common shares outstanding.

                                  (Continued)


                                       7

<PAGE>



NOTE 4 - EARNINGS PER COMMON SHARE (Continued)

A  reconciliation  of the numerator and  denominator  of the earnings per common
share  computation  for the periods  ended March 31, 1998 and 1997 is  presented
below.
<TABLE>
<CAPTION>
                                                              Six Months Ended           Three Months Ended
                                                                  March 31,                   March 31,
                                                            1998           1997           1998          1997
                                                            ----           ----           ----          ----
<S>                                                   <C>             <C>            <C>            <C>         
BASIC EPS COMPUTATION

Net income                                            $        275    $        295   $        147   $        148
Preferred stock dividends                                      (44)            (44)           (22)           (21)
                                                      ------------    ------------   ------------   ------------
    Income available to common shareholders                    231             251            125            127
                                                      ------------    ------------   ------------   ------------

Common shares outstanding                                  239,612         239,612        239,612        239,612
                                                      ------------    ------------   ------------   ------------

Basic EPS                                             $        .96    $      1.05    $        .52   $        .53
                                                      ============    ===========    ============   ============


DILUTED EPS COMPUTATION

Income available to common shareholders               $        231    $        251   $        125   $        127
                                                      ------------    ------------   ------------   ------------

Weighted average common shares                             239,612         239,612        239,612        239,612
Effect of stock options                                      5,538           4,731          5,528          4,731
                                                      ------------    ------------   ------------   ------------
  Total shares                                             245,150         244,343        245,150        244,343

Diluted EPS                                           $        .94    $      1.03    $        .51   $        .52
                                                      ============    ===========    ============   ============
</TABLE>


NOTE 5 - CAPITAL REQUIREMENTS

Pursuant to federal  regulations,  savings  institutions  must meet two separate
capital  requirements.  The  following  is a summary  of the  Bank's  regulatory
requirements at March 31, 1998:

                                                    Core             Risk-Based
                                                   Capital             Capital
                                                   -------             -------
                                                         (In thousands)

    Regulatory capital                           $     4,945         $    5,184
    Minimum capital requirement                        3,048              4,890
                                                 -----------         ----------

    Excess regulatory capital over
      minimum requirement                        $     1,897         $      294
                                                 ===========         ==========

                                  (Continued)


                                       8

<PAGE>



NOTE 6 - RECAPITALIZATION

The  Bryan-College  Station Financial Holding Company (the "Company") was formed
at the direction of First Federal Savings Bank, Bryan, Texas ("First Federal" or
the "Bank"), for the purpose of owning all the outstanding common stock of First
Federal. On April 1, 1998, the Company acquired all of the common stock of First
Federal  through the purchase of 163,828 First  Federal  common shares at $24.07
per share and  exchange  of 75,784  shares of First  Federal  common  shares for
189,460 Company common shares. In addition, on April 1, 1998, the Company issued
200,000  shares of common stock at $10 per share and sold  $3,629,000 in 5-year,
11.5%  subordinated  debentures  (the  "Debentures")  and warrants to purchase a
total of 32,661 shares of Common Stock at an exercise  price of $12.50 per share
(the "Warrants")

The  Company   incurred  costs  of   approximately   $979,000   related  to  the
recapitalization and the debt and stock offerings.




                                       9

<PAGE>


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

GENERAL

     The Bryan-College  Station  Financial Holding Company (the "Company"),  was
formed at the direction of First  Federal  Savings  Bank,  Bryan,  Texas ("First
Federal"  or the "Bank"),  for the purpose of owning all the outstanding  common
stock of First Federal. The Company was incorporated under the laws of the State
of Delaware  and  generally  is  authorized  to engage in any  activity  that is
permitted by the Delaware General Corporation Law. On April 1, 1998, the Company
acquired all of the common stock of First  Federal.  The Company has not engaged
in any material  operations and at March 31, 1998,  had no  significant  assets.
Accordingly,  the following discussion focuses on the financial condition of the
Bank at March 31, 1998 and the  consolidated  results of operations  for the six
months ending March 31, 1998 compared to the same period in 1997.

     First Federal's major goals are to provide high quality full service retail
banking on a profitable basis to its customers  (predominantly  middle class and
blue  collar  individuals)  through its readily  accessible  offices  located in
Bryan, College Station, and its loan production offices located in the middle of
its expanded market area in the growing  triangle  between  Dallas,  Houston and
Austin,  Texas.  The Bank  intends  to  continue  to focus  primarily  on one to
four-family residential lending, direct and indirect consumer lending, including
home improvement loans,  constructions  loans, small to medium-sized  commercial
business  loans,  some of which  are  partially  guaranteed  by the  U.S.  Small
Business Administration and credit default insured indirect automobile loans for
subprime borrowers ("Second Chance Auto Loans"). In addition, First Federal also
seeks to continue to maintain its current level of asset quality and continue to
minimize, to the extent possible, its vulnerability to changes in interest rates
in order to continue to maintain a reasonable  spread  between its average yield
on loans and  securities  and its average cost of interest  paid on deposits and
borrowings.

     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  repossessed  real estate
losses,  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,  without requiring  additional
capital.

     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 


                                       10

<PAGE>


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.

     First Federal's restructuring and expansion to provide full-service banking
and more  convenience to its customers has caused  increases in First  Federal's
operating  expense  levels,  which in past  periods  resulted in First  Federals
operating  expenses  exceeding  its net interest  income.  Although net interest
income now exceeds  noninterest  expense,  since 1991,  First Federal has relied
primarily on its noninterest income for net income.


FINANCIAL CONDITION

     First  Federal's  total assets  increased  by $942,000 to $76.0  million at
March 31, 1998 from $75.1 million at September 30, 1997. This increase consisted
primarily of an increase in loans receivable,  partially offset by a decrease of
cash and cash equivalents.

     Loans  receivable  (excluding  loans  held  for  sale at  month  end to the
secondary  market)  increased  $1.9 million to $66.9  million at March 31, 1998,
compared to $65.0 million at September  30, 1997.  During the three months ended
March 31,  1998,  First  Federal  originated  $6.4  million of  mortgage  loans,
including  $6.2  million  secured  by one- to  four-family  residences  and $6.0
million in  consumer  loans.  Approximately  $211,000  of these  mortgage  loans
represented refinancings of existing First Federal loans.

     Deposits increased $7.7 million from $58.8 million at September 30, 1997 to
$66.5 million at March 31, 1998 as a result of increased marketing of short-term
certificates of deposits--along  with new checking  accounts.  Other liabilities
deceased  $6.8 million from $11.4  million at September 30, 1997 to $4.6 million
at March 31, 1998,  primarily as a result of a $6.3 million decrease in advances
from the Federal Home Loan Bank of Dallas.


ASSET/LIABILITY MANAGEMENT

     First Federal, like all financial institutions, is subject to interest rate
risk to the degree that its interest-bearing  liabilities mature or reprice more
rapidly,  or on a different basis,  than its  interest-earning  assets,  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, Senior Vice President/Financial, Executive Vice President 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.

     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


                                       11

<PAGE>


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  has recently  emphasized  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 Office of Thrift  Supervision  (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.

     Presented  below,  as of  December  31,  1997,  the date of the  latest OTS
report,  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.


                                       12

<PAGE>
<TABLE>
<CAPTION>


       Change in                                                                        Acceptable Limits
      Interest Rate         Estimated                                              Established by Board of
      (Basis Points)            NPV               At December 31, 1997          Directors
      --------------       -----------         ---------------------    ----------------------
                                                            
                                                $ Change   % Change       % Change
                                                 --------   --------       --------
                        (Dollars in Thousands)

<S>                     <C>           <C>         <C>            <C>                       <C>  
                       +400           $6,319      $(1,049)       (14)%                     (75)%
                       +300            6,710         (658)        (9)                      (50)
                       +200            7,045         (324)        (4)                      (30)
                       +100            7,282          (87)        (1)                      (15)
                        ---            7,368          ---        ---                       ---
                       -100            7,357          (11)       ---                       (15)
                       -200            7,539          171          2                       (30)
                       -300            7,901          532          7                       (50)
                       -400            8,324          956         13                       (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,  First Federal would
experience a 13% increase (or $956,000) in NPV in a declining  rate  environment
and a 14%  decrease  (or $1.0  million)  in a  rising  rate  environment.  As of
December 31, 1997, an increase in interest  rates of 200 basis points would have
resulted in a 4% decrease (or $324,000) 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 2% increase in the present value of First  Federal's  assets.
These levels are within the limits acceptable to the Board of Directors.

     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.


                                       13

<PAGE>



NON-PERFORMING ASSETS AND LOAN LOSS PROVISION

     Management  establishes specific reserves for the estimated losses on loans
when it  determines  that  losses  are  anticipated  on  these  loans.  The Bank
calculates  any  allowance  for  possible  loan  losses  based upon its  ongoing
evaluation of pertinent  factors  underlying the types and quality of its loans,
with particular  emphasis on average historical loan losses during the preceding
three  years.  These  factors  include  but are not  limited to the  current and
anticipated  economic  conditions,  including  uncertainties  in the real estate
market,  the level of classified  assets,  historical  loan loss  experience,  a
detailed analysis of individual loans for which full  collectability  may not be
assured,  a  determination  of the existence and fair value of  collateral,  the
ability  of the  borrower  to repay  and the  guarantees  securing  such  loans.
Management,  as a  result  of  this  review  process,  determined  that  no such
provision  was required for the three months  ending March 31, 1998 or March 31,
1997.  The Bank's loan loss  reserve  balance as of March 31, 1998 was  $239,000
compared to the September  30, 1997 loan loss reserve of $273,000,  or 0.36% and
0.42% of total loans, respectively. Total non-performing assets decreased during
the three month period ended March 31, 1998 to $901,000 or 1.19% of total assets
as compared to $1.3  million or 1.71% of total  assets at  September  30,  1997.
Historical actual charge-offs (net of recoveries) from loan losses over the past
three fiscal years have  averaged  only $13,000 on an average loan  portfolio of
$50.9 million.

     The Bank will  continue to monitor and adjust its  allowance  for losses on
loans as the Board of Director's and management's analysis of its loan portfolio
and  economic  conditions  dictate.  In  addition,  regulatory  agencies,  as an
integral  part of their  examination  process,  periodically  review  the Bank's
allowance  for loan  losses.  Such  agencies  may require the Bank to  recognize
additions  to the  allowance  based  upon  their  judgment  of  the  information
available to them at the time of their examination. Therefore, although the Bank
maintains  its allowance for losses on loans at a level which it considers to be
adequate to provide for potential losses, in view of the continued uncertainties
in the economy  generally and the regulatory  uncertainty  pertaining to reserve
levels for the thrift  industry  generally,  there can be no absolute  assurance
that  losses  will not  exceed  the  estimated  amounts  or the Bank will not be
required to make additional substantial additions to its allowance for losses on
loans in the future.

RESULTS OF OPERATIONS

     First  Federal'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.  First Federal 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.  First
Federal'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.


                                       14

<PAGE>



COMPARISON OF SIX MONTHS ENDED MARCH 31, 1998 TO MARCH 31, 1997

     First  Federal  reported  net income  after taxes of  $275,000  for the six
months  ended March 31,  1998,  a decrease of $20,000 as compared to $295,000 in
net income  reported for the six months  ended March 31,  1997.  The decrease in
earnings,  as discussed in more detail below, resulted primarily from a $376,000
increase in the Banks  interest  expense and a $371,000  increase in noninterest
expense,  partially  offset by an increase of $718,000 in interest income and an
increase of $26,000 in noninterest income.

     Net interest  income  increased  $342,000 to $1.7 million for the six month
period ended March 31, 1998 from $1.4 million for the prior period in 1997. This
increase was  attributable  primarily to an increase in interest earned on loans
receivable,  primarily  as a result of an increase in the amount of  outstanding
loans and an increased  interest rate spread,  partially  offset by increases in
rates  paid on the  Bank's  deposit  liabilities  and  Federal  Home  Loan  Bank
advances.  For the six months  ended  March 31,  1998,  the spread  between  the
average yield on interest earning assets and the average cost of funds increased
to 4.82% at March 31, 1998 from 4.51% at March 31, 1997.

     Noninterest  income increased  $26,000 to $399,000 for the six months ended
March 31,  1998 from  $373,000  for the six months  ended March 31,  1997.  This
increase can be  attributed  to a $21,000  increase in net gain on sale of loans
and  mortgage  servicing  rights  and a $62,000  increase  in other  noninterest
income,  as a result of  recognizing  excess  auto  dealer  reserves  due to the
repayment of auto loan balances without excess loan losses.  The Bank recorded a
$57,000  decrease  in service  charges on  checking  accounts,  as a result of a
change  in policy to more  accurately  reflect  the  collectibility  of  service
charges on a current basis.

     Noninterest  expense increased  $371,000 to $1.7 million for the six months
ended March 31, 1998 from $1.3  million for the six months ended March 31, 1997.
This increase can primarily be attributed to a $221,000 increase in compensation
and benefits expense due to additional  staffing for the expanding consumer loan
department, including the Second Chance Auto Loan Program and a $99,000 increase
in other noninterest expense,  primarily office supplies,  postage and telephone
expenses.  This was partially  offset by a $10,000  decrease in federal  deposit
insurance premiums.

     The Bank is currently in the process of conducting a  comprehensive  review
of its  computer  systems to identify  the systems that could be affected by the
"Year 2000"  potential  issue.  The Year 2000  potential  issue is the result of
computer  programs being written using two digits rather than four to define the
applicable  year. Any of the Bank's  programs that have time sensitive  software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failure or miscalculations.  Management  anticipates that
the  enhancements  necessary  to prepare  its  systems for the year 2000 will be
completed in a timely manner.

     The Bank is also  aware of the risks to third  parties,  including  vendors
(and to the extent  appropriate,  depositors  and  borrowers)  and the potential
adverse  impact on the  company  resulting  from  failures  by these  parties to
adequately address these risks. The Bank has been communicating with its outside
data processing  service bureau, as well as other third-party  service providers
(and to the extent  appropriate,  depositors  and  borrowers),  to assess  their
progress in evaluating their systems and  implementing  any corrective  measures
required by them to be  prepared  for the year 2000.  To date,  the Bank has not
been advised by any of its primary vendors that there are any unmitigated  risks
regarding  potential issues related to the Year 2000.  However, no assurance can
be  given  as to  the  adequacy  of any  plans  or to the  timeliness  of  their
implementation.


                                       15

<PAGE>



     The Bank  anticipates  that it may incur  internal  staff  costs as well as
consulting and other expenses related to the  enhancements  necessary to prepare
the  systems  for the Year  2000.  Based on the  Bank's  current  knowledge  and
investigations,  any expense  relating to the Year 2000 potential  issues is not
expected to have a material impact on the Bank's  financial  position or results
of operations.

     Income tax  expense  decreased $ 10,000  from  $142,000  for the six months
ended March 31, 1998 from  $152,000 for the six month ended March 31, 1997.  The
period  reflected a tax rate of 34.1% and 34.0% for March 31, 1998 and March 31,
1997, respectively.


COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO MARCH 31, 1997

     First  Federal  reported  net income  after taxes of $147,000 for the three
months ended March 31, 1998, a decrease of $1,000 as compared to $148,000 in net
income  reported  for the three  months  ended March 31,  1997.  The decrease in
earnings,  as discussed in more detail below, resulted primarily from a $158,000
increase on the Bank's interest  expense and a $217,000  increase in noninterest
expense,  partially  offset by an increase of $325,000 in interest income and an
increase of $49,000 in noninterest income.

     Net  interest  income  increased  $167,000 to $878,000  for the three month
period ended March 31, 1998 from  $711,000  for the prior  period in 1997.  This
increase was  attributable  primarily to an increase in interest earned on loans
receivable  primarily  as a result of an increase  in the amount of  outstanding
loans, and an increase in interest rate spread,  partially offset by an increase
in rates paid on the  Bank's  deposit  liabilities  and  Federal  Home Loan Bank
advances.  For the three  months ended March 31,  1998,  the spread  between the
average yield on interest earning assets and the average cost of funds increased
to 4.82% at March 31, 1998 from 4.51% at March 31, 1997.

     Noninterest income increased $49,000 to $206,000 for the three months ended
March 31, 1998 from  $157,000 for the three  months  ended March 31, 1997.  This
increase can be  attributed  to a $33,000  increase in net gain on sale of loans
and  mortgage  servicing  rights  and a $32,000  increase  in other  noninterest
income,  as a result of  recognizing  excess  auto  dealer  reserves  due to the
repayment of auto loan balances without excess loan losses.. The Bank recorded a
$16,000  decrease  in service  charges on  checking  accounts,  as a result of a
change  in policy to more  accurately  reflect  the  collectibility  of  service
charges on a current basis.

     Noninterest  expense  increased  $217,000 to $861,000  for the three months
ended March 31, 1998 from  $644,000  for the three  months ended March 31, 1997.
This increase can primarily be attributed to a $138,000 increase in compensation
and benefits expense due to additional  staffing for the expanding consumer loan
department, including the Second Chance Auto Loan Program and a $36,000 increase
in other noninterest expense,  primarily office supplies,  postage and telephone
expenses.

     Income tax expense remained unchanged at $76,000 for the three months ended
March 31, 1998 and March 31, 1997. The period  reflected a tax rate of 34.1% and
33.9% for March 31, 1998 and March 31, 1997, respectively.


LIQUIDITY AND CAPITAL RESOURCES

     First Federal's primary sources of funds are savings and checking accounts,
principal  and  interest  payments  on  loans  and  mortgage-backed  securities,
proceeds from sales of loans and other


                                       16

<PAGE>

funds provided from operations.  Additionally,  First Federal borrows funds from
the  FHLB of  Dallas  or  utilizes  other  borrowing  of  funds  based  on need,
comparative costs and availability at the time.

     While  scheduled  loan  and   mortgage-backed   repayments  and  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  and  general   economic
conditions.

     First Federal maintains  investments in liquid assets based on management's
assessment of cash needs,  expected  deposit  flows,  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 origination,  increasing  deposit marketing  activities,
and increasing borrowings.

     Federal regulations require insured institutions to maintain minimum levels
of liquid  assets.  As of March  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
March 31, 1998, First Federal's  regulatory ratio was 4.66%.  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 March  31,  1998,  First  Federal  had  commitments  to
originate  loans  totaling $3.9 million.  First Federal also had $4.9 million of
outstanding  unused lines of credit.  If needed for  liquidity  purposes,  First
Federal was eligible to borrow $22.9  million from the Federal Home Loan Bank of
Dallas at March 31, 1998.  First  Federal  considers  its  liquidity and capital
resources to be adequate to meet its  foreseeable  and  long-term  needs.  First
Federal expects to be able to fund or refinance, on a timely basis, its material
commitments and long-term liabilities.

     At March 31, 1998 the Bank had Tier 1 (Core)  Capital of $4.9  million,  or
6.49% of  total  assets  which  was  $1.9  million  above  the  minimum  capital
requirement of $3.0 million or 4% of total assets.

     At March 31,  1998,  the Bank had total risk based  capital of $5.2 million
and risk  weighted  assets of $61.1 million or total risk based capital of 8.48%
of risk weighted assets.  This amount was $294,000 above the minimum  regulatory
requirement of $4.9 million, or 8.0% of risk weighted assets.

     Net proceeds  received from the Company  initial public  offering of common
stock,   Debentures   and  Warrants   after  cash  payments  to  First  Federals
stockholders  and  expenses  totaled  $694,000.  Management  believes  that loan
repayments  and other  sources of funds will be  adequate  to meet the  Companys
foreseeable liquidity needs.


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,


                                       17

<PAGE>



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.

     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.

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 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


                                       18

<PAGE>



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.





                                       19

<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.



                                       20

<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:  May 18, 1998                    /s/ J. Stanley Stephen
                                       ----------------------
                                       J. Stanley Stephen
                                       President and Chief Executive Officer

Date:  May 18, 1998                    /s/Mary L. Hegar
                                       ----------------
                                       Mary L. Hegar
                                       Chief Financial Officer



                                       21