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, 1999

( )    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.

No                                             Yes        X
   -----------                                     ------------

     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 5, 1999
             ------------------           ------------------
               Common Stock                     428,409


     Transitional Small Business Disclosure Format (check one):

No        X                                    Yes
   -----------                                     ------------
<PAGE>


               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                  BRYAN, TEXAS

                                   FORM 10-QSB

                        THREE MONTHS ENDED MARCH 31, 1999

                         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...................10-23


                           PART II - OTHER INFORMATION

Other Information...........................................................24

Signatures..................................................................26


                                       2



<PAGE>

Item 1.   Financial Statements
<TABLE>
<CAPTION>



                                          THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                                     BRYAN/COLLEGE STATION, TEXAS
                         ----------------------------------------------------------------------------------------------
                                            CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                                March 31, 1999 and September 30, 1998
                                                            (Unaudited)
                                                In thousands, except per share data

                         -----------------------------------------------------------------------------------------------


                                                                                      March 31,     September 30,
                                                                                        1999            1998
                                                                                    -----------     --------------
<S>                                                                                <C>            <C>


ASSETS
Cash and due from banks                                                             $     1,825    $     1,435
Interest-bearing deposits in other financial institutions                                 2,863          3,892
                                                                                    -----------    -----------
     Total cash and cash equivalents                                                      4,688          5,327

Securities available-for-sale                                                                 5              5
Mortgage-backed securities held-to-maturity                                                 852            954
Loans held for sale                                                                         230            328
Loans receivable                                                                         72,358         71,666
Federal Home Loan Bank stock                                                                393            382
Mortgage servicing rights                                                                   298              -
Real estate owned and in judgment                                                           424            282
Premises and equipment                                                                    1,651          1,636
Accrued interest receivable                                                                 626            608
Other assets                                                                              2,099          1,446
                                                                                    -----------    -----------

                                                                                    $    83,624    $    82,634
                                                                                    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
     Deposits                                                                       $    75,711    $    73,554
     Advance payments by borrowers for insurance and taxes                                  413            863
     Advances from Federal Home Loan Bank                                                     -            800
     Debentures                                                                           3,629          3,629
     Accrued interest payable and other liabilities                                         881          1,045
                                                                                    -----------    -----------
                                                                                         80,634         79,891

Minority interest                                                                           873            873

Stockholders' equity
     Common stock - par value $.01 per share;
       authorized 1,500,000 shares in 1999 and
       3,000,000 shares in 1998, issued 389,436 shares                                        4              4
     Additional paid-in capital                                                           1,849          1,849
     Retained earnings, substantially restricted                                            264             17
                                                                                    -----------    -----------
                                                                                          2,117          1,870
                                                                                    -----------    -----------

                                                                                    $    83,624    $    82,634
                                                                                    ===========    ===========

</TABLE>

                                       3

<PAGE>
<TABLE>
<CAPTION>
                                   THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                              BRYAN/COLLEGE STATION, TEXAS
               -------------------------------------------------------------------------------------------------

                                          CONSOLIDATED STATEMENTS OF INCOME For
                           the three months and six months ended March 31, 1999 and 1998
                                                     (Unaudited)
                                        In thousands, except per share data

               --------------------------------------------------------------------------------------------------


                                                                  Six Months Ended         Three Months Ended
                                                                      March 31,                 March 31,
                                                                1999           1998         1999         1998
                                                                ----           ----         ----         ----
<S>                                                         <C>            <C>          <C>          <C>

Interest income
    Loans                                                     $    3,673   $    3,217   $    1,795   $    1,609
    Mortgage-backed securities                                        25           33           12           16
    Other                                                            107           84           41           39
                                                              ----------   ----------   ----------   ----------
       Total interest income                                       3,805        3,334        1,848        1,664

Interest expense
    Deposits                                                       1,624        1,412          763          719
    Other borrowings                                                 217          183          108           67
                                                              ----------   ----------   ----------   ----------
       Total interest expense                                      1,841        1,595          871          786
                                                              ----------   ----------   ----------   ----------

NET INTEREST INCOME                                                1,964        1,739          977          878

Provision for loan losses                                             50           29           30            -
                                                              ----------   ----------   ----------   ----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                1,914        1,710          947          878

Noninterest income
    Service charges                                                  361          258          163          130
    Gain on sale of loans and mortgage servicing rights              351           79          212           44
    Other                                                            215           62          152           32
                                                              ----------   ----------   ----------   ----------
       Total noninterest income                                      927          399          527          206

Noninterest expense
    Compensation and benefits                                      1,143          862          595          458
    Occupancy and equipment expense                                  275          185          142           95
    Federal insurance premiums                                        32           18           17            9
    Net (gain) loss on real estate owned,
       including provision                                           146           13          146            6
    Professional fees                                                136           84           81           45
    Data processing                                                  125           95           63           48
    Office supplies                                                   71           55           37           30
    Telephone                                                         57           32           28           14
    Postage                                                           54           49           22           28
    Other                                                            451          299          213          128
                                                              ----------   ----------   ----------   ----------
       Total noninterest expense                                   2,490        1,692        1,344          861
                                                              ----------   ----------   ----------   ----------

INCOME BEFORE INCOME TAX EXPENSE                                     351          417          130          223

Income tax expense                                                   104          142           18           76
                                                              ----------   ----------   ----------   ----------

NET INCOME                                                           247          275          112          147

Bank preferred stock dividends                                         -          (44)           -          (22)
                                                              ----------   ----------   ----------   ----------

NET INCOME AVAILABLE TO SHAREHOLDERS                          $      247   $      231   $      112   $      125
                                                              ==========   ==========   ==========   ==========
EARNINGS PER SHARE:
    BASIC                                                     $      .63   $       .39  $      .29   $      .21
                                                              ==========   ===========  ==========   ==========
    DILUTED                                                   $      .63   $       .38  $      .29   $      .21
                                                              ==========   ===========  ==========   ==========

</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>

                                   THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                              BRYAN/COLLEGE STATION, TEXAS
                    --------------------------------------------------------------------------------------------
                              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                March 31, 1999 and 1998
                                                     (Unaudited)
                                         In thousands, except per share data

                    --------------------------------------------------------------------------------------------



                                                               Six Months Ended           Three Months Ended
                                                                   March 31,                   March 31,
                                                             1999          1998           1999          1998
                                                             ----          ----           ----          ----
<S>                                                    <C>              <C>          <C>           <C>


Balance at beginning of period                            $   1,870     $    4,834    $    2,005    $    4,880

Net income                                                      247            275           112           147

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


Balance at end of period                                  $   2,117     $    4,945    $    2,117    $    4,945
                                                          =========     ==========    ==========    ==========

</TABLE>


                                       5
<PAGE>
<TABLE>
<CAPTION>


                                        THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                                   BRYAN/COLLEGE STATION, TEXAS
                         ------------------------------------------------------------------------------------------

                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    For the three and six months ended March 31, 1999 and 1998
                                                        (Unaudited)
                                                       In thousands

                         ------------------------------------------------------------------------------------------

                                                                  Six Months Ended         Three Months Ended
                                                                      March 31,                 March 31,
                                                                 1999          1998         1999         1998
                                                                 ----          ----         ----         ----
<S>                                                           <C>          <C>          <C>          <C>

CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                 $     247    $     275    $     112     $    147
    Adjustments to reconcile net income to net cash
      from operating activities
       Depreciation                                                  167           97          106           46
       Amortization of premiums and discounts on
         investment and mortgage-backed securities, net                3           (2)           2           (3)
       Net change in loans held for sale                             378           89          213           14
       Net change in mortgage servicing rights                      (298)           -         (298)           -
       Change in deferred loan origination fees                       32           30           20           53
       Net (gains) losses on sales of
          Mortgage loans                                            (280)         (31)        (170)         (13)
          Mortgage servicing rights                                  (71)         (48)         (42)         (31)
          Real estate owned                                            9            1            9            1
       Provision for losses on loans                                  50           29           30            -
       Federal Home Loan Bank stock dividend                         (11)         (27)          (5)         (14)
       Change in
          Accrued interest receivable                                (18)         (11)          36          (22)
          Other assets                                              (653)         (52)        (324)        (147)
          Accrued interest payable and other liabilities            (164)         (72)        (215)          57
                                                               ----------   ---------    ----------    --------
              Net cash provided by (used in) operating
                activities                                          (609)         278         (526)          88

CASH FLOWS FROM INVESTING ACTIVITIES
    Net increase in loans receivable                              (1,109)      (1,847)        (526)      (1,538)
    Principal payments on mortgage-backed securities
      and collateralized mortgage obligations                         99          105           42           36
    Proceeds from sale of mortgage servicing rights                   71           48           42           31
    Investment in office properties and equipment, net              (182)        (379)        (135)        (305)
    Proceeds from sale of foreclosed real estate                     199           14          199           10
    Capital expenditures on foreclosed real estate                   (15)         (10)         (11)          (7)
                                                               ----------   ---------    ----------    --------
       Net cash used in investing activities                        (937)      (2,069)        (389)      (1,773)

CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in deposits                                       2,157        7,699          594        4,173
    Net increase (decrease) in advance payments by
      borrowers for insurance and taxes                             (450)        (496)         175          227
    Net change in Federal Home Loan Bank advances                   (800)      (6,300)      (1,000)      (3,300)
    Dividends paid                                                     -         (164)           -          (82)
                                                               ---------    ---------    ---------     --------
       Net cash provided by (used in) financing activities           907          739         (231)       1,018
                                                               ---------    ---------    ----------    --------

Decrease in cash and cash equivalents                               (639)      (1,052)      (1,146)        (667)

Cash and cash equivalents at beginning of period                   5,327        4,431        5,834        4,046
                                                               ---------    ---------    ---------     --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $   4,688    $   3,379    $   4,688     $  3,379
                                                               =========    =========    =========     ========

</TABLE>

                                       6
<PAGE>
               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                          BRYAN/COLLEGE STATION, TEXAS
--------------------------------------------------------------------------------


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,  Bryan/College Station, Texas (the "Bank") as of March 31,
1999 and September 30, 1998,  and the results of its  operations  and cash flows
for the three-month and six-month periods ended March 31, 1999 and 1998.

On April 1, 1998,  the Company  issued 200,000 shares of common stock at $10 per
share  and 3,629  debentures at $1,000 per unit. The debentures bear an interest
rate of 11.5% and mature in 2003. Each debenture includes detachable warrants to
purchase 9 shares of Company  common stock at $12.50 per share.  Net proceeds to
the Company  totaled  $1.7 million and $3.2 million for the common stock and the
debentures, respectively.

Concurrent  with the  offerings,  the Company  acquired  75,784 shares of common
stock of the Bank in exchange  for 189,346  shares of Company  common  stock and
purchased  the  remaining  163,828  shares of the Bank's  common  stock for cash
totaling $3.9 million.


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)
                                                          1999          1998
                                                      -----------    ----------

Balances, beginning of period                         $      307    $      273
Provision charged to operations                               50            29
Charge-offs                                                  (17)          (68)
Recoveries                                                     -             5
                                                      ----------    ----------

Balances, end of period                               $      340    $      239
                                                      ==========    ==========


                                       7
<PAGE>
               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                          BRYAN/COLLEGE STATION, TEXAS
--------------------------------------------------------------------------------

NOTE 3 - 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, 1999:
                                                  Core             Risk-Based
                                                 Capital             Capital
                                               ------------        ------------
                                                        (In thousands)

Regulatory capital                              $     5,702         $    6,042
Minimum capital requirement                           3,310              5,377
                                                -----------         ----------
Excess regulatory capital over
 minimum requirement                            $     2,392         $      665
                                                ===========         ==========


               THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                          BRYAN/COLLEGE STATION, TEXAS
--------------------------------------------------------------------------------
NOTE 4 - 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.  Earnings per share for the three
months and six months ended March 31, 1998 have been restated to reflect the 2.5
exchange ratio of Company common stock for Bank common stock.

A  reconciliation  of the numerator and  denominator  of the earnings per common
share  computation  for the periods  ended March 31, 1999 and 1998 is  presented
below.
<TABLE>
<CAPTION>
                                                              Six Months Ended           Three Months Ended
                                                                  March 31,                   March 31,
                                                            1999           1998           1999          1998
                                                            ----           ----           ----          ----
<S>                                                   <C>             <C>          <C>             <C>
BASIC EPS COMPUTATION
Net income                                            $      247    $        275     $     112    $      147
Preferred stock dividends                                      -             (44)            -           (22)
                                                       ----------    ------------    ----------    ----------
   Income available to common shareholders                   247             231           112           125
                                                       ----------    ------------    ----------    ----------
Common shares outstanding                                389,436         599,030       389,436       599,030
                                                       ----------    ------------    ----------    ---------
Basic EPS                                             $      .63    $       .39      $     .29     $     .21
                                                      ===========    ===========     ==========     =========

</TABLE>
                                       8
<PAGE>
<TABLE>
<CAPTION>
                              THE BRYAN-COLLEGE STATION FINANCIAL HOLDING COMPANY
                                         BRYAN/COLLEGE STATION, TEXAS
          --------------------------------------------------------------------------------

NOTE 4 - EARNINGS PER COMMON SHARE (Continued)


<S>                                                 <C>              <C>            <C>            <C>
DILUTED EPS COMPUTATION
Income available to common shareholders               $        247    $        231   $        112   $        125
                                                      ------------    ------------   ------------   ------------

Weighted average common shares                             389,436         599,030        389,436        599,030
Effect of stock options                                          -           5,538              -          5,538
                                                      ------------    ------------   ------------   ------------
  Total shares                                             389,436         604,568        389,436        604,568

Diluted EPS                                           $        .63    $       .38    $        .29   $        .21
                                                      ============    ===========    ============   ============

</TABLE>


                                       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 "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.

     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


                                       10

<PAGE>

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
for  each  loan 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
March 31, 1999.

     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.

FINANCIAL CONDITION

     The  Company's  total assets  increased by $1.0 million to $83.6 million at
March 31, 1999 from $82.6 million at September 30, 1998. This increase consisted
primarily of an increase in loans receivable.

     Net loans receivable  (excluding loans held for sale) increased $692,000 to
$72.4  million at March 31, 1999,  compared to $71.7  million at  September  30,
1998, despite the sale of $3.0 million in loan participations during this same

                                       11

<PAGE>

period of time.  During the three  months  ended  March 31,  1999,  the  Company
originated  $8.5 million of mortgage  loans,  including $7.6 million  secured by
one- to four-family  residential loans. In addition, the Company originated $7.2
million in consumer  loans,  of which $2.6 million were Second Chance Auto loans
and $2.3 million in commercial business loans.

     Deposits  increased  $2.1  million  to $75.7  million  at March  31,  1999,
compared  to $73.6  million at  September  30,  1998,  as a result of  increased
marketing of checking accounts. Other liabilities decreased $1.4 million to $4.9
million at March 31,  1999,  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 and a decrease in advances from
the Federal Home Loan Bank of Dallas.

     Stockholders'  equity in the Company increased  $247,000 to $2.1 million at
March 31,  1999 from $1.9  million at  September  30, 1998 due to the net income
earned.

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, Executive Vice President/CFO, Senior Vice
President/Financial and four outside Directors. 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 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


                                       12
<PAGE>


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.

     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 December 31, 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.

                                       13



<PAGE>



                                                      Acceptable
                                                        Limits
                                                      Established
    Change in                     At December 31,     by Board of
  Interest Rate      Estimated         1998             Directors
  (Basis Points)       NPV       $ Change  % Change     % Change
                     (Dollars in Thousands)

      +400          $8,088          -126      -2%         75%
      +300           8,276            62       1         (50)
      +200           8,370           156       2         (30)
      +100           8,341           127       2         (15)
         0           8,214           ---     ---         ---
      -100           8,160           -54      -1         (15)
      -200           8,297            83       1         (30)
      -300           8,597           534       5         (50)
      -400           8,748           839       7         (75)


     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 7%  increase  in  NPV in a  declining  rate  environment  and a 2%
decrease in a rising rate  environment.  As of December 31, 1998, an increase in
interest  rates of 200 basis points would have  resulted in a 2% increase 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 1% 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.


                                       14


<PAGE>

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 $30,000
for the three  months  ending March 31,  1999.  There was no provision  for loan
losses for the period  ending March 31, 1998.  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 March 31,
1999 to $2.2  million or 2.69% 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 current appraised
value.

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 SIX MONTHS ENDED MARCH 31, 1999 TO MARCH 31, 1998

     The Company  reported net income after taxes of $247,000 for the six months
ended  March 31,  1999,  a decrease  of $28,000 as  compared  to $275,000 in net
income  reported  for the six months  ended  March 31,  1998.  The  decrease  in
earnings,  as discussed in more detail below, resulted primarily from a $246,000
increase in the Company's interest expense,  which included $208,000  additional
interest expense on the Company's  debentures due March 2003 and issued on April
1, 1998 (the "Debentures"), and a  $798,000  increase  in  noninterest  expense,
partially  offset by an increase of $471,000 in interest  income and an increase
of $528,000 in noninterest income.


                                       15
<PAGE>

     Net interest  income  increased  $225,000 to $2.0 million for the six month
period ended March 31, 1999 from $1.6 million for the prior period in 1998. This
increase was  attributable  primarily to an increase in interest earned on loans
receivable,  primarily as a result of an increase in the average  balance of the
loan portfolio  partially offset by increased deposit costs and interest expense
paid on the  Debentures.  For the six months  ended March 31,  1999,  the spread
between the average  yield on interest  earning  assets and the average  cost of
funds increased to 5.87% at March 31, 1999 from 4.82% at March 31, 1998.

     Noninterest  income increased $528,000 to $927,000 for the six months ended
March 31,  1999 from  $399,000  for the six months  ended March 31,  1998.  This
increase can be attributed to a $103,000 increase in service charges on checking
accounts,  a  $272,000  increase  in net  gain  on sale of  loans  and  mortgage
servicing  rights and a  $153,000  increase  in other  noninterest  income.  The
increase in noninterest income was primarily a result of recognizing excess auto
dealer  reserves due to the  repayment of auto loan  balances and the receipt of
after tax casualty loss for hail damage to the Bank's  office  premises and bank
owned vehicles.

     Noninterest  expense increased  $798,000 to $2.5 million for the six months
ended March 31, 1999 from $1.7  million for the six months ended March 31, 1998.
Compensation and benefits  increased  $281,000 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  and  equipment  expense  increased
$90,000  as a result  of the  opening  of the new  North  Bryan  branch  and the
recently expanded  mortgage lending offices in College Station.  Net (gain) loss
on real estate owned,  including provision increased $133,000 due to a provision
of $129,000 for repossessed  assets.  Other expenses increased  $152,000,  which
consisted of various  items,  including  $66,000 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  $44,000.  Various  other
expenses  have also  increased  primarily as a result of the overall  growth and
increased loan production of the Company.

     Income tax expense  decreased $ 38,000 to $104,000 for the six months ended
March 31, 1999 from $142,000 for the six month ended March 31, 1998.  The period
reflected  tax rates of 29.6% and 34.1% for March 31,  1999 and March 31,  1998,
respectively.

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 TO MARCH 31, 1998

     The Company  reported  net income  after  taxes of  $112,000  for the three
months  ended March 31,  1999,  a decrease of $35,000 as compared to $147,000 in
net income  reported for the three months ended March 31, 1998.  The decrease in
net income, as discussed in more detail below, resulted primarily from a $85,000
increase in the Company's  interest  expense on its deposits and interest on its
Debentures and a $483,000  increase in noninterest  expense.  This was partially
offset by an $184,000  increase in  interest  income and a $321,000  increase in
noninterest income.


                                       16

<PAGE>

     Net  interest  income  increased  $99,000 to $977,000  for the  three-month
period ended March 31, 1999 from  $878,000  for the prior  period in 1998.  This
increase  primarily  resulted from increases in the average balance and yield of
the loan portfolio,  offset in part by increases in the average balance and cost
of deposits and advances. In addition, the Holding Company issued the Debentures
in April of 1998,  resulting in increased  borrowing costs. 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  credit-default
insured "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  and payment of interest on the  Company's  Debentures.  The
spread  between  the  average  yield  on  interest  earning  assets  (loans  and
securities)  and the average cost of funds  increased to 5.87% at March 31, 1999
from 4.82% at March 31, 1998.

     Noninterest  income  increased  $321,000 to $527,000  for the three  months
ended March 31, 1999 from  $206,000  for the three  months ended March 31, 1998.
This  increase can be  attributed  to a $33,000  increase in service  charges on
checking accounts, a $168,000 increase on net gain on sale of loans and mortgage
servicing rights, which was primarily attributable to the sale of participations
in Second Chance Auto Loans, and a $120,000  increase as a result of recognizing
excess auto dealer  reserves due to the  repayment of auto loan balances and the
receipt of after tax casualty loss for hail damage to the Bank's office premises
and bank owned vehicles.

     Noninterest expense increased $483,000 to $1.3 million for the three months
ended March 31, 1999 from  $861,000  for the three  months ended March 31, 1998.
Compensation and benefits  increased  $137,000 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 $47,000 primarily as
a result of the opening of the new North Bryan branch and the recently  expanded
mortgage  lending offices in College  Station.  Net (gain) losses in repossessed
assets,  including provision,  increased $140,000 due to a provision of $129,000
for repossessed  assets.  Other expense  increased  $85,000,  which consisted of
various items,  including  $33,000 of  amortization of debenture 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 $18,000 for the three  months  ended March 31, 1999,
as compared to $76,000 for the three  months  ended March 31,  1998.  The period
reflected a tax rate of 13.8% and 34.1% for March 31,  1999 and March 31,  1998,
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 in the past, has
borrowed funds from the FHLB of Dallas or utilized  particular  sources of funds
based on need, comparative costs and availability at the time.


                                       17
<PAGE>

     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.

     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 March  31,  1999,  the  Company  had  commitments  to  originate  loans,
including  loans in process,  totaling $7.9  million.  The Company also had $1.5
million of outstanding  unused lines of credit and $50,000 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 credit-default  insured 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 loan  participations  in order to maintain  capital  compliance  and
liquidity  needs. The Company also has the ability,  if needed,  to borrow up to
$20.3 million from the FHLB of Dallas for liquidity purposes. At March 31, 1999,
the Company had no 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
March 31, 1999,  First Federal's  regulatory  liquidity  ratio was 7.46%.  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, 1999 the Bank had Tier 1 (Core)  Capital of $5.7  million,  or
6.89% of  total  assets  which  was  $2.4  million  above  the  minimum  capital
requirement of $3.3 million or 4% of total assets.

     At March 31,  1999,  the Bank had total risk based  capital of $6.0 million
and risk  weighted  assets of $67.2 million or total risk based capital of 8.99%
of risk weighted assets.  This amount was $665,000 above the minimum  regulatory
requirement of $5.4 million, or 8.0% of risk weighted assets.



                                       18


<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.


                                       19


<PAGE>

     STATE OF READINESS.  In 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.

                                       20



<PAGE>

     The  Company  has begun Y2K  discussions  with its  larger  borrowers.  All
credits  greater  than  $50,000  are  being  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 are meeting 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.  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.

     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  $139,000 has
been  spent as of March  31,  1999.  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  pre-selected  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.


                                       21
<PAGE>

     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

     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.
Statement  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.

     Statement  of  Financial  Accounting  Standards  No. 134,  "Accounting  for
Mortgage-backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise"  ("SFAS No. 134"),  changes the
way companies  involved in mortgage  banking account for certain  securities and
other interests they retain after securitizing mortgage loans that were held for
sale.  SFAS  134  allows  any  retained   mortgage-backed   securities  after  a
securitization of mortgage loans held for sale to be classified based on holding
intent in accordance  with Statement of Financial  Accounting  Standards No. 115
except in cases where the retained  mortgage-backed  security is committed to be
sold  before or  during  the  securitization  process  in which  case it must be
classified as trading.  Previously, all retained mortgage-backed securities were
required to be classified as trading.  SFAS 134 was effective on January 1, 1999
and did not have a significant impact on the Company's financial statements,  as
the Company currently does not securitize loans.

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.

                                       22


<PAGE>

     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

     (a)  On  February  18,  1999  the  Company  held  its  Annual   Meeting  of
          Stockholders.

     (b)  Stockholders voted on the following  matters:

          (i) The election of the following directors of the Company:

                                                       VOTE
            VOTES                   FOR              WITHHELD
            -----                   ---              --------


            Robert H. Conaway       328,463               0
            Ken L. Hayes            326,463           2,000
            George Koenig           326,263           2,200
            Joseph W. Krolczyk      326,333           2,130
            Jack W. Lester, Jr.     327,463           1,000
            Charles Neelley         328,463               0
            Richard L. Peacock      323,756           4,707
            Roland Ruffino          328,363             100
            Gary A. Snoe            328,433              30
            J. Stanley Stephen      327,433           1,030
            Earnest A. Wentrcek     323,756           4,707

          (ii) The  ratification  of the  adoption of the  Company's  1998 Stock
               Option and Incentive Plan:

            VOTES             FOR               AGAINST   ABSTAIN
            -----             ---               -------   -------
                          287,654               33,146      7,663

          (iii) The approval of a proposal  to decrease  the number of shares of
                authorized common stock, par value $.01 per share from 3,000,000
                to  1,500,000 by amending  the Fourth  Article of the  Company's
                Certificate of Incorporation:

                                       24


<PAGE>

                  VOTES         FOR       AGAINST   ABSTAIN
                  -----         ---       -------   -------
                              322,316     1,625       4,522

          (iv) The approval of a proposal  that would limit the voting rights of
               any stockholder who benefically owns in excess of 10% of the then
               outstanding  shares of the Company's common stock from voting any
               shares  held in excess of 10% by amending  the Fourth  Article of
               the Company's Certificate of Incorporation:

                  VOTES        FOR        AGAINST   ABSTAIN
                  -----        ---        -------   -------
                              315,158     11,045      2,260

          (v)  The approval of a proposal requiring that the affirmative vote of
               at least 80% of the shares  entitled  to vote  approve any future
               change to proposal  IV, if approved,  by amending the  Thirteenth
               Article of the Company's Certificate of Incorporation:

                  VOTES        FOR        AGAINST   ABSTAIN
                  -----        ---        -------   -------
                              319,381     17,502      2,230

          (vi) The ratification of the appointment of Crowe,  Chizek and Company
               LLP as  auditors  of the  Company  for  the  fiscal  year  ending
               September 30, 1999:

                  VOTES        FOR        AGAINST   ABSTAIN
                  -----        ---        -------   -------
                              325,190     133         3,140

ITEM 5.    OTHER INFORMATION

      None.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

      (a) The following exhibits are filed herewith:

          1.   Exhibit  3(i):   Certificate   of  Amendment  of  Certificate  of
               Incorporation
          2.   Exhibit 27: Financial Data Schedule


      (b) Reports on Form 8-K:

             No reports on Form 8-K were filed by the Company during the quarter
             ended March 31, 1999.

                                       25

<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 14, 1999                 /s/ J. Stanley Stephen
     ---------------------          --------------------------------------
                                    J. Stanley Stephen
                                    President and Chief Executive Officer
                                    (Duly Authorized Representative)





Date:  May 14, 1999                 /s/ William Wantuck
     ---------------------          ----------------------------------------
                                    William Wantuck
                                    Chief Financial Officer
                                    (Principal Financial Officer)


                                       26