<PAGE>

FORM 10-Q
--------------------------------------------------------------------------------
United States Securities and Exchange Commission
Washington, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended March 31, 1999
Commission File Number 001-13405

ALLIANCE BANCORP OF NEW ENGLAND, INC.

Incorporated in the State of Delaware
IRS Employer Identification Number 06-1495617
Address and Telephone:
         348 Hartford Turnpike, Vernon, Connecticut 06066, (860) 875-2500

Securities registered pursuant to Section 12(b) of the Act: Common Stock -- $.01
par value, which is registered on the American Stock Exchange.

Alliance Bancorp of New England (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the
past 90 days.

As of May 5, 1999, Alliance Bancorp of New England had 2,295,286 shares of
common stock outstanding.
<TABLE>
<CAPTION>

TABLE OF CONTENTS                                                                            Page
<S>           <C>                                                                            <C>
Table         Consolidated Selected Financial Data..............................................2
Part I        Financial Information
Item 1        Financial Statements
                  Consolidated Balance Sheets...................................................3
                  Consolidated Income Statements................................................4
                  Consolidated Statements of Changes in Shareholders' Equity....................5
                  Consolidated Statements of Cash Flows.........................................6
                  Notes to Consolidated Financial Statements....................................7
Item 2        Management's Discussion and Analysis
                  of Financial Condition and Results of Operations.............................10
                  Special Note Regarding Forward-Looking Statements............................10
Item 3        Quantitative and Qualitative Disclosures About Market Risk.......................15
Part II       Other Information................................................................15
Table         Average Balance Sheet and Interest Rates ........................................16
Signatures        .............................................................................17
</TABLE>

                                       1

<PAGE>

                      Alliance Bancorp of New England, Inc.
                Consolidated Selected Financial Data (Unaudited)
<TABLE>
<CAPTION>
                                                                      As of and for the three months ended March 31,
                                                            ------------------------------------------------------------------
                                                                              1999                             1998
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                              <C>   
For the Quarter (in thousands)
Net interest income                                                         $2,386                           $2,088
Provision for loan losses                                                      125                              145
Service charges and fees                                                       421                              247
Net gain on securities                                                         104                              435
Net gain on assets                                                              50                                -
Non-interest expense                                                         1,878                            1,744
Income before income taxes                                                     958                              881
Income tax expense                                                             258                              279
Net income                                                                  $  700                           $  602
------------------------------------------------------------------------------------------------------------------------------

Per Share
Basic earnings                                                              $  .31                           $  .24
Diluted earnings                                                               .30                              .23
Dividends declared                                                             .05                              .03
Book value                                                                    7.25                             7.91
Common stock price:
High                                                                         12.38                            14.24
Low                                                                           9.62                            10.92
Close                                                                         9.75                            14.00
------------------------------------------------------------------------------------------------------------------------------

At Quarter End (in millions)
Total assets                                                                $281.8                           $247.3
Total loans                                                                  182.4                            158.4
Other earning assets                                                          86.0                             78.4
Deposits                                                                     237.9                            220.7
Borrowings                                                                    25.6                              5.7
Shareholders' equity                                                          16.6                             19.7
------------------------------------------------------------------------------------------------------------------------------

Operating Ratios (in percent)
Return on average assets                                                      1.02%                            1.00%
Return on average equity                                                     15.80                            13.13
Equity % total assets (period end)                                            5.91                             7.97
Net interest spread (fully taxable equivalent)                                3.28                             3.26
Net interest margin (fully taxable equivalent)                                3.77                             3.83
Dividend payout ratio                                                        16.40                            13.79
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       2

<PAGE>

                      Alliance Bancorp of New England, Inc.
                     Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
                                                                            March 31,                December 31,
(in thousands except share data)                                                 1999                        1998
-------------------------------------------------------------------------------------------------------------------------------
Assets
     Cash and due from banks                                                 $  7,865                    $  6,760
     Short-term investments                                                     9,479                      13,456
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                         <C>   
         Total cash and cash equivalents                                       17,344                      20,216

     Securities available for sale (at fair value)                             63,356                      58,556

     Securities held to maturity                                               13,176                      15,431

     Residential mortgage loans                                                53,865                      57,555
     Commercial mortgage loans                                                 50,074                      46,724
     Other commercial loans                                                    24,507                      25,105
     Consumer loans                                                            32,908                      32,515
     Government guaranteed loans                                               21,017                      22,827
-------------------------------------------------------------------------------------------------------------------------------
         Total loans                                                          182,371                     184,726
     Less: Allowance for loan losses                                           (3,200)                     (3,060)
-------------------------------------------------------------------------------------------------------------------------------
         Net loans                                                            179,171                     181,666

     Premises and equipment, net                                                4,226                       4,276
     Foreclosed assets, net                                                        80                          80
     Other assets                                                               4,417                       3,356
-------------------------------------------------------------------------------------------------------------------------------
         Total assets                                                        $281,770                    $283,581
-------------------------------------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity                                                              
     Demand deposits                                                         $ 21,426                    $ 25,328
     NOW deposits                                                              25,429                      25,155
     Money market deposits                                                     31,859                      29,585
     Savings deposits                                                          39,371                      37,238
     Time deposits                                                            119,782                     122,679
-------------------------------------------------------------------------------------------------------------------------------
         Total deposits                                                       237,867                     239,985

     Borrowings                                                                25,576                      23,610
     Other liabilities                                                          1,678                       1,790
-------------------------------------------------------------------------------------------------------------------------------
         Total liabilities                                                    265,121                     265,385

     Preferred stock, ( $.01 par value; 100,000 shares                                                                         
         authorized, none issued)                                                   -                           -
     Common stock, ($.01 par value; authorized 4,000,000                                                                       
         shares; issued 2,495,885 in 1999                                                                                      
         and 2,492,552 in 1998; outstanding 2,295,286 in 1999                                                                  
         and 2,291,953 in 1998)                                                    25                          25
     Additional paid-in capital                                                11,330                      11,306
     Retained earnings                                                          9,809                       9,223
     Accumulated other comprehensive income (loss), net                        (1,406)                        751
     Treasury stock (200,599 shares)                                           (3,109)                     (3,109)
-------------------------------------------------------------------------------------------------------------------------------
         Total shareholders' equity                                            16,649                      18,196
-------------------------------------------------------------------------------------------------------------------------------
         Total liabilities and shareholders' equity                         $ 281,770                   $ 283,581
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements
                                        3
<PAGE>

                      Alliance Bancorp of New England, Inc.
                   Consolidated Income Statements (Unaudited)
<TABLE>
<CAPTION>
                                                                                          Three Months Ended
                                                                                              March 31,
                                                                       -------------------------------------------------------
 (in thousands except share data)                                                1999                        1998
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                         <C>   
Interest Income
     Loans                                                                 $    3,543                  $    3,188
     Debt securities                                                              936                         642
     Dividends on equity securities                                               290                         315
     Other earning assets                                                          92                         207
-------------------------------------------------------------------------------------------------------------------------------
         Total interest and dividend income                                     4,861                       4,352
-------------------------------------------------------------------------------------------------------------------------------

Interest Expense
     Deposits                                                                   2,176                       2,205
     Borrowings                                                                   299                          59
-------------------------------------------------------------------------------------------------------------------------------
         Total interest expense                                                 2,475                       2,264
-------------------------------------------------------------------------------------------------------------------------------

Net interest income                                                             2,386                       2,088

Provision For Loan Losses                                                         125                         145
-------------------------------------------------------------------------------------------------------------------------------
     Net interest income after provision for loan losses                        2,261                       1,943

Non-Interest Income
     Service charges and fees                                                     421                         247
     Net gain on securities                                                       104                         435
     Net gain on assets                                                            50                           -
-------------------------------------------------------------------------------------------------------------------------------
         Total non-interest income                                                575                         682

Non-Interest Expense
     Compensation and benefits                                                  1,014                         877
     Occupancy                                                                    180                         154
     Equipment                                                                     69                          75
     Data processing services                                                     167                         144
     Office, FDIC, & Insurance                                                    123                         140
     Problem asset related expense                                                 29                          66
     Other                                                                        296                         288
-------------------------------------------------------------------------------------------------------------------------------
         Total non-interest expense                                             1,878                       1,744
-------------------------------------------------------------------------------------------------------------------------------
     Income before income taxes                                                   958                         881
     Income tax expense                                                           258                         279
-------------------------------------------------------------------------------------------------------------------------------
         Net Income                                                        $      700                  $      602
-------------------------------------------------------------------------------------------------------------------------------

Per Share Data
     Basic earnings per share                                              $      .31                  $      .24
-------------------------------------------------------------------------------------------------------------------------------
     Diluted earnings per share                                            $      .30                  $      .23
-------------------------------------------------------------------------------------------------------------------------------

     Average basic shares outstanding                                       2,294,084                   2,490,775
     Average additional dilutive shares                                        78,542                      89,302
-------------------------------------------------------------------------------------------------------------------------------
     Average diluted shares outstanding                                     2,372,626                   2,580,077
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements
                                       4

<PAGE>

                      Alliance Bancorp of New England, Inc.
     Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Accumulated             
                                                        Additional                          other                      Total
Three Months ended March 31                   Common       paid-In      Retained    comprehensive     Treasury shareholders'
(in thousands except share data)               stock       capital      earnings           income        Stock        equity
-------------------------------------------------------------------------------------------------------------------------------

1998                                                                                                                        
----
<S>                                              <C>         <C>           <C>           <C>                         <C> 
Balance, December 31, 1997                       $16       $11,073        $7,071       $   643                     $18,803
Comprehensive income
     Net income                                                              602                                       602
     Unrealized gain on securities,                                                                                         
     net of reclassification adjustment                                                    153                         153
Dividends declared and paid                                                  (82)                                      (82)
Issuance of shares pursuant                                                                                                 
to exercise of stock options                                   233                                                     233
-------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1998                          $16       $11,306        $7,591       $   796                     $19,709
-------------------------------------------------------------------------------------------------------------------------------


1999                                                                                                                        
----
Balance, December 31, 1998                       $25       $11,306        $9,223       $   751      $ (3,109)      $18,196
Comprehensive income
     Net income                                                              700                                       700
     Unrealized gain on securities,                                                                                         
     net of reclassification adjustment                                                 (2,157)                     (2,157)
Dividends declared and paid                                                 (114)                                     (114)
Issuance of shares pursuant to exercise                                                                                     
of stock options                                                24                                                      24
-------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999                          $25       $11,330        $9,809       $(1,406)     $ (3,109)      $16,649
-------------------------------------------------------------------------------------------------------------------------------



Disclosure of reclassification amount
Three months ended March 31 (in thousands)                                                1999                        1998
-------------------------------------------------------------------------------------------------------------------------------
Unrealized holding gain (loss) arising during                                                                                 
     the period net of income tax expense (benefit)                                                                           
     of ($1,076) and $258, respectively                                                $(2,088)                    $   410
Less reclassification adjustment for                                                                                          
     gains included in net income net of income                                                                               
     tax expense of $35 and $178, respectively                                             (69)                       (257)
-------------------------------------------------------------------------------------------------------------------------------
Net unrealized gains on securities                                                     $(2,157)                    $   153
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements
                                       5

<PAGE>

                      Alliance Bancorp of New England, Inc.
                Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
                                                                                        Three months ended March 31,
                                                                              -------------------------------------------------
(in thousands)                                                                           1999                    1998
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                     <C>  
Operating Activities:
     Net income                                                                       $   700                 $   602
     Adjustments to reconcile net income to                                                                                  
     net cash provided by (used in) operating activities:                                                                    
         Provision for loan losses                                                        125                     145
         Depreciation and amortization                                                    128                     139
         Net investment security gains                                                   (104)                   (435)
         Net asset gains                                                                  (50)                      -
         (Decrease) increase in other liabilities                                        (112)                    343
         Decrease (increase) in loans held for sale                                     3,782                  (1,138)
         (Increase) decrease in other assets                                              (54)                     19
-------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by (used in) operating activities                            4,415                    (325)

Investing Activities:                                                                                                        
     Securities available for sale:
         Proceeds from amortization and maturities                                      1,609                  12,669
         Proceeds from sales of securities                                              2,852                   2,705
         Purchases of securities                                                      (12,570)                (10,122)
     Securities held to maturity:
         Proceeds from amortization and maturities                                      2,255                     618
     Net (increase) decrease in loans                                                  (1,436)                     53
     Increase in foreclosed assets, net                                                     -                    (152)
     Proceeds from the sale of premises and equipment                                     464                       -
     Purchases of premises and equipment                                                 (219)                    (32)
-------------------------------------------------------------------------------------------------------------------------------
         Net cash (used in) provided by investing activities                           (7,045)                  5,739

Financing Activities:                                                                                                        
     Net increase in interest-bearing deposits                                          1,784                     640
     Net decrease in demand deposits                                                   (3,902)                 (1,650)
     Net decrease in FHLB advances                                                        (34)                    (31)
     Net increase in other borrowings                                                   2,000                       -
     Stock options exercised                                                               24                     233
     Cash dividends paid                                                                 (114)                    (82)
-------------------------------------------------------------------------------------------------------------------------------
         Net cash provided by financing activities                                       (242)                   (890)
-------------------------------------------------------------------------------------------------------------------------------
Net Change in cash and cash equivalents                                                (2,872)                  4,524
Cash and cash equivalents at beginning of the period                                   20,216                  21,417
-------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period                                        $17,344                 $25,941
-------------------------------------------------------------------------------------------------------------------------------

Supplemental Information On Cash Payments
     Interest expense                                                                 $ 2,450                 $ 2,247
     Income tax expense                                                                   235                     180

Supplemental Information On Non-cash Transactions
     Net loans transferred to foreclosed assets                                             -                     153
</TABLE>

See accompanying notes to financial statements
                                       6

<PAGE>

Notes to Consolidated Financial Statements (unaudited)


Note 1. Basis of Presentation and Principles of Business and Consolidation


The consolidated financial statements have been prepared and presented in
conformity with generally accepted accounting principles. Unless otherwise
noted, all dollar amounts presented in the financial statements and note tables
are rounded to the nearest thousand dollars, except share data. Certain prior
period amounts have been reclassified to conform with current financial
statement presentation.

Alliance Bancorp of New England, Inc. ("Alliance" or the "Company") uses the
accrual method of accounting for all material items of income and expense. The
Company is required to make certain estimates and assumptions in preparing these
statements. The most significant estimates are those necessary in determining
the allowance for loan losses, the valuation of foreclosed assets, and the
determination of fair values of financial instruments. Factors affecting these
estimates include national economic conditions, the level and trend of interest
rates, local market conditions, and real estate trends and values.

The quarterly financial statements are unaudited. However, in the opinion of
Management, all material adjustments, consisting primarily of normal recurring
accruals, necessary for a fair presentation of the financial statements have
been included. Operating results for any interim period are not necessarily
indicative of results for any other interim period or for the entire year.

Management's Discussion and Analysis of Financial Condition and Results of
Operations accompany these financial statements. These consolidated interim
financial statements and notes should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

The Company is a one bank holding company, chartered in Delaware. Its bank
subsidiary is Tolland Bank ("the Bank"), a Connecticut chartered savings bank
with deposits insured up to applicable limits by the Federal Deposit Insurance
Corporation ("FDIC"). The Bank provides consumer and commercial banking services
from its eight offices located in Tolland County, Connecticut. Tolland Bank
maintains a wholly owned passive investment subsidiary named Tolland Investment
Corporation, and maintains a wholly owned foreclosed asset liquidation
subsidiary named Asset Recovery Systems, Inc. ("ARS"). The consolidated
financial statements include the Company, the Bank, and the Bank's subsidiaries.
All significant intercompany accounts and transactions have been eliminated in
consolidation.

On April 28, 1998, the Company declared a three-for-two common stock split
effected as a 50.0% stock dividend which was paid on May 26, 1998. All per share
information has been retroactively adjusted to reflect this stock dividend for
all periods in the statements.

                                       7

<PAGE>

Note 2.  Securities
<TABLE>
<CAPTION>
                                                            Amortized        Unrealized       Unrealized              Fair
March 31, 1999 (in thousands)                                    Cost             Gains           Losses             Value
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                <C>             <C>               <C>    
Securities available for sale
U.S. Government and agency                                    $13,748            $   20          $   (67)          $13,701
U.S. Agency mortgage-backed                                     1,741                 7              (10)            1,738
Other debt securities                                          31,155                62           (1,100)           30,117
Marketable equity                                              17,564               437           (1,382)           16,619
FHLB stock                                                      1,181                 -                -             1,181
----------------------------------------------------------------------------------------------------------------------------
     Total available for sale                                 $65,389            $  526          $(2,559)          $63,356
----------------------------------------------------------------------------------------------------------------------------
Securities held to maturity
U.S. Government and agency                                    $ 1,957            $   61          $     -           $ 2,018
U.S. Agency mortgage-backed                                    10,167                26              (14)           10,179
Other debt securities                                           1,052                27                -             1,079
----------------------------------------------------------------------------------------------------------------------------
     Total held to maturity                                   $13,176            $  114          $   (14)          $13,276
----------------------------------------------------------------------------------------------------------------------------

                                                            Amortized        Unrealized       Unrealized              Fair
December 31, 1998 (in thousands)                                 Cost             Gains           Losses             Value
----------------------------------------------------------------------------------------------------------------------------
Securities available for sale
U.S. Government and agency                                    $16,694            $   34          $   (82)          $16,646
U.S. Agency mortgage-backed                                     2,312                22               (1)            2,333
Other debt securities                                          19,265               476              (26)           19,715
Marketable equity                                              17,724             1,107             (150)           18,681
FHLBB stock                                                     1,181                 -                -             1,181
----------------------------------------------------------------------------------------------------------------------------
         Total available for sale                             $57,176            $1,639          $  (259)          $58,556
----------------------------------------------------------------------------------------------------------------------------
Securities held to maturity
U.S. Government and agency                                    $ 1,952            $   65          $     -           $ 2,017
U.S. Agency mortgage-backed                                    12,095                22              (28)           12,089
Other debt securities                                           1,384                29                -             1,413
----------------------------------------------------------------------------------------------------------------------------
     Total held to maturity                                   $15,431            $  116          $   (28)          $15,519
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 3.  Nonperforming Loans
<TABLE>
<CAPTION>
                                                                                    March 31,            December 31,
(in thousands)                                                                           1999                    1998
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                     <C> 
Total nonaccruing loans                                                                  $960                    $574
Accruing loans past due 90 days or more                                                     -                       -
Impaired loans:
     Impaired loans - valuation allowance required                                        831                     420
     Impaired loans - no valuation allowance required                                      28                     252
----------------------------------------------------------------------------------------------------------------------------
         Total impaired loans                                                            $859                    $672
     Total valuation allowance on impaired loans                                          289                     110
     Commitments to lend additional funds for impaired loans                                -                       -
</TABLE>
                                       8

<PAGE>



Note 4.  Allowance for Loan Losses
<TABLE>
<CAPTION>
                                                                              Three Months Ended           Year Ended
                                                                                    March 31,               December 31,
(in thousands)                                                                         1999                    1998
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                     <C>   
Beginning balance                                                                      $3,060                  $3,000
Charge-offs                                                                                (9)                   (401)
Recoveries                                                                                 24                     282
Provision for losses                                                                      125                     179
----------------------------------------------------------------------------------------------------------------------------
         Ending balance                                                                $3,200                  $3,060
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note 5.  New Accounting Standards

In June 1998, the FASB issued SFAS 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that
companies record all derivatives as either assets or liabilities on the balance
sheet and measure those instruments at fair value. The manner in which the
companies are to record gains and losses resulting from changes in the values of
those derivatives depends on the use of the derivative and whether it qualifies
for hedge accounting. For qualifying hedges, the recognition of changes in the
value of both the hedge and the hedged item are recorded in earnings in the same
period. Changes in the fair value of derivatives that do not qualify for hedge
accounting are included in earnings in the period of the change. SFAS 133 also
allows a one-time reclassification of held to maturity securities. This
statement is effective for years beginning after June 15, 1999. The Company does
not believe that the adoption of this statement will have a material impact on
its financial position or results of operations.

                                       9

<PAGE>

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

Special Note Regarding Forward-Looking Statements

This report contains certain "forward-looking statements." These forward-looking
statements, which are included in Management's Discussion and Analysis, describe
future plans or strategies and include the Company's expectations of future
financial results. The words "believe," expect," "anticipate," "estimate,"
"project" and similar expressions identify forward-looking statements. The
Company's ability to predict results or the effect of future plans or strategies
or qualitative or quantitative changes based on market risk exposure is
inherently uncertain. Factors which could affect actual results include but are
not limited to changes in general market interest rates, general economic
conditions, legislative/regulatory changes, fluctuations of interest rates,
changes in the quality or composition of the Company's loan and investment
portfolios, deposit flows, competition, demand for financial services in the
Company's markets, and changes in the accounting principles, policies, and
guidelines. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements.

SUMMARY

The Company reported a 16.3% increase in earnings for the first quarter ended
March 31, 1999, with net profit totaling $700 thousand compared to $602 thousand
a year earlier. Quarterly earnings per share increased by 30.4% to $.30 compared
to $.23 a year earlier, on a diluted basis.

The Company has replaced earnings contributed from securities gains in 1998 with
recurring interest and fee income in 1999. As a result of additions to both
loans and investment securities, interest and fee income have increased by
approximately 20%. The Company continues to follow its plan to build its ongoing
earnings stream through growth in earning assets, coupled with higher sales of
products and services to its retail and commercial customers. During the first
quarter, the Company opened its new permanent office in Hebron, and the Company
moved forward with plans to break ground for its new office in South Windsor.
Additionally, the Company has invested in a new office facility at 215 Merrow
Road for its Tolland customers. The Company continues to record strong growth in
new products. Higher earnings have provided the basis for a 20% increase in the
quarterly cash dividend to shareholders.

Net interest income grew during the quarter, increasing by $298 thousand (14.3%)
to $2.386 million, equaling the increase in average earning assets in the first
quarter of 1999 compared to the same period of 1998. This growth included a 21%
increase in average regular loans and a 26% increase in average investment
securities, along with a 50% decrease in average short term investments. The
increase in net interest income largely offset a $331 thousand decrease in gains
on the sale of investment securities, due to a lower volume of securities sold
in the first quarter of 1999.

Service charges and fees increased significantly totaling $421 thousand in the
quarter ended March 31, 1999, increasing 70.4% over the results for 1998. This
improvement included increases in most major categories of service charges and
fees. The largest increase was in secondary market income, reflecting a higher
volume of activity in 1999. Loan related fees also increased due to higher loan
prepayment fees.

Non-interest expense increased by $134 thousand (7.7%) due primarily to higher
staff and occupancy related expenses related to growth and expansion of the
Bank. Total expenses benefited from a decrease in problem asset related
expenses, reflecting the resolution of most major problem assets in 1998. The
effective income tax rate decreased to 26.9% in 1999, from 31.7% in the first
quarter of 1998. This reflected the state income tax impact of the formation of
a passive investment corporation in the most recent quarter, together with the
ongoing federal income tax benefit of the dividends received deduction on
investment securities.

                                       10

<PAGE>

Earnings growth was also reflected in the return on assets, which improved to
1.02%, and the return on shareholders' equity, which improved to 15.80%. While
the net interest spread improved slightly to 3.28%, the net interest margin
decreased to 3.77% due to a higher reliance on interest bearing funds to support
growth in earning assets.

Total assets measured $281.8 million at March 31, 1999. Total regular loans,
excluding government guaranteed loans and residential mortgages held for sale,
were $159.8 million at March 31, 1999, an increase of 2.1% from year-end 1998.
Total deposits were $237.9 million at March 31, 1999, a decrease of 0.9% due to
higher transactions balances held by depositors at year-end 1998.

Shareholders' equity totaled $16.6 million, representing a book value per share
of $7.25. Shareholders' equity decreased from year-end 1998 due to a decrease in
accumulated other comprehensive income, as a result of changes in the market
value of equity securities available for sale. During the most recent quarter,
the Company declared and paid a $0.05 per share cash dividend. A treasury stock
purchase in July, 1998 totaling $3.1 million also affected comparisons to the
first quarter of 1998, including earnings per share and book value per share.
The Company's capital remains in excess of all regulatory requirements.

RESULTS OF OPERATIONS

Net Interest Income: As noted above, net interest income increased by 14.3% due
to growth in loans and securities. Since year-end 1998, loan growth has
primarily been in the commercial portfolio (commercial mortgages and loans),
which grew at a 15.3% annualized rate in the first quarter of 1999. The $3.7
million decrease in residential mortgages was due to an equal decrease in
mortgages held for sale. Growth in investment securities has been in investment
grade corporate bonds, which are classified as available for sale. Total
securities available for sale increased by $4.8 million during the most recent
quarter.

The fully taxable equivalent net interest margin had increased from 3.83% in the
first quarter of 1998, to 4.14% in the fourth quarter of 1998. These results
included the benefit of lower nonaccruing loans as well as collection of
previously nonaccrued interest related to the liquidation of problem loans.
During the first quarter of 1999, the net interest margin declined to 3.77%.
This reflects the effects of lower interest rates, which accelerated prepayments
and contributed to lower yields on funds reinvested, and on new growth in
earning assets. The tax equivalent yield declined in most major categories of
earning assets in the most recent quarter, compared to the fourth quarter of
1998, and the total tax equivalent yield on earning assets decreased from 7.96%
in the fourth quarter of 1998 to 7.52% in the first quarter of 1999.

The yield on interest bearing liabilities decreased in the last two quarters due
to the repricing of time deposits in the lower rate environment, along with
growth in lower cost money market and savings accounts. The lower cost of time
deposits also reflected a shortening in the duration of the portfolio, as
customers preferred to keep maturities shorter in the lower rate environment.
The yield on interest bearing liabilities declined from 4.48% in the first
quarter of 1998 to 4.34% in the fourth quarter of 1998 and to 4.24% in the first
quarter of 1999. The reduction in the cost of funds partially offset the impact
of the decline in earning asset yields on the overall net interest margin.

As a result of the decrease in the net interest margin, total net interest
income declined by 4.1% in the first quarter of 1999, compared to the fourth
quarter of 1998. However, the 4.10% net interest margin in the fourth quarter of
1998 was unusually high. Compared to the third quarter of 1998, net interest
income in the most recent quarter increased by 4.6%, reflecting the general
quarterly trend of net interest income during the past year.

Provision for Loan Losses: The provision is made to maintain the allowance for
loan losses at a level deemed adequate by management. The provision was $125
thousand in the most recent quarter, compared to $145 thousand in the same
quarter of 1998. During the most recent quarter, the allowance was increased
from $3.06 million to $3.20 million due to an increase in the valuation
allowance on impaired loans. Please see the later discussion on the Allowance
for Loan Losses.

                                       11

<PAGE>

Non-Interest Income: First quarter service charge and fee income was $421
thousand, an increase of $174 thousand (70.4%) from the same period of 1998.
This increase included $68 thousand in higher prepayment fees and $70 thousand
in higher secondary market income. The prepayment fees were primarily related to
commercial loan prepayment activity. The secondary market income reflected
higher secondary market sales of residential mortgage loans, including the
effects of the reduction in the loans held for sale noted previously.

During the first quarter of 1999, the Company recorded $104 thousand in net
gains realized on the sale of investment securities, compared to $435 thousand
recorded in the same quarter of 1998. Investment gains reflect an ongoing
process of active investment portfolio management, including realizing the
benefits of improving market valuations. During the most recent quarter, market
valuations decreased, which contributed to the decrease in net gains realized.
Please see the later discussion of comprehensive income. In the first quarter,
the Company also recorded a $50 thousand net gain on the sale of assets.

Non-Interest Expense and Tax Expense: As previously noted, the $134 thousand
(7.7%) increase in non-interest expense was primarily due to a $137 thousand
increase in staff related expense. This reflected staff increases related to
expansion of business activities, along with the effects of higher average
salaries. Occupancy and data processing expense increased due to new offices and
increased business activity. The earlier summary also noted the contribution of
lower problem asset related expense and lower income tax expense. The effect of
the establishment of a passive investment corporation was to eliminate
consolidated state income tax expense, which is expected to be an ongoing
benefit.

Comprehensive Income: Comprehensive income includes changes (after tax) in the
market valuation of investment securities available for sale. Comprehensive
income was ($1.457) million in the most recent quarter, compared to $755
thousand in the same period of 1998. The results for 1999 include a ($2.157)
million reclassification adjustment for net unrealized gains on securities.
Please see the following discussion on investment securities.

FINANCIAL CONDITION

Cash and Cash Equivalents: Short term investments decreased by $4.0 million
during the quarter due to purchases of investment securities available for sale.

Investment Securities: Securities held to maturity (HTM) decreased by $2.3
million due to amortization and maturities. Securities available for sale (AFS)
increased by $4.8 million. Total purchases of AFS securities were $12.6 million,
and total amortization and sales were $4.5 million. Total holding losses for the
period were $3.2 million, or about 5.3% of the fair value of the portfolio as of
year-end 1998. Holding losses on marketable equity securities were $1.8 million
(9.6% of year-end 1998 fair value), and holding losses on debt securities were
$1.4 million (3.6% of year-end 1998 fair value). These changes reflect an
increase in long term interest rates in the most recent quarter, along with
changes in market valuations of utilities stocks. At March 31, 1999, the total
net unrealized loss on AFS securities was $2.0 million (3.1% of amortized cost),
compared to a net unrealized gain of $1.4 million (2.4% of amortized cost) at
year-end 1998.

Total Loans: Total loans decreased by $2.4 million to $182.4 million. As
previously noted, this decrease reflected loan prepayments and a reduction in
residential mortgage loans held for sale, and was partially offset by growth in
commercial mortgage loans and consumer loans. During the quarter, the Company
introduced its new Equity Select home equity line of credit, which allows
borrowers to establish fixed rate amortizing loans within the line to finance
specific purchases. This product is relatively new to the marketplace, and it
offers the convenience of instalment loans combined with the flexibility and tax
benefits associated with home equity lines.

Nonperforming Assets: Nonaccruing loans increased to $960 thousand at March 31,
1999 compared to $574 thousand at year-end 1998. This increase was primarily in
several commercial loans which are under consideration for modifications.
Foreclosed assets remained at $80 thousand. Total nonperforming assets measured
0.37% of total assets at March 31, 1999.

                                       12

<PAGE>

Allowance for Loan Losses: The allowance for loan losses totaled $3.2 million
(1.75% of total loans) at March 31, 1999, compared to $3.060 million (1.66% of
total loans) at year-end 1998. During the most recent quarter, gross charge-offs
were $9 thousand and gross recoveries were $24 thousand. The allowance measured
333% of nonaccruing loans at the end of the quarter. The valuation allowance on
impaired loans increased by $179 thousand to $289 thousand at March 31, 1999 as
a result of the increase in nonaccruing loans.

Deposits and Borrowings: Total deposits decreased by $2.1 million (0.9%) to
$237.9 million during the most recent quarter. This decrease was primarily due
to a $3.9 million decline in demand deposit balances from high levels at
year-end 1998. The Company recorded growth of $2.3 million (7.7%) in money
market deposit balances and $2.1 million (5.7%) in savings account balances
during the quarter. This growth more than offset the $2.9 million (2.4%)
decrease in higher cost time deposit balances during this period. Total interest
bearing deposits increased by $1.8 million during the quarter, due to growth in
the new Hebron office. Borrowings increased by $2.0 million as a result of short
term borrowings outstanding at March 31, 1999.

Interest Rate Sensitivity: The one year interest rate gap increased to a
liability sensitive position of $39 million (15% of earning assets) at March 31,
1999, compared to $22 million in liability sensitivity (8% of earning assets) at
year-end 1998. This $17 million increase in liability sensitivity primarily
reflected the $12.6 million purchase of fixed rate AFS investment securities
with funds partially provided from short term investments, maturities and
prepayments on loans and investments, and growth in money market and savings
deposits. Included in this gap measurement are about $28 million in savings and
NOW account balances which are included as variable within one year but which
have been generally stable for several years. The Company normally targets a one
year gap position which is near breakeven. Liability sensitivity has been
allowed to increase due to customer demand and market related factors, along
with investment opportunities in the first quarter. Core deposit growth in new
offices and promotion of longer term time deposits are expected to mitigate
additional liability sensitivity in future periods.

Liquidity and Cash Flows: As noted above, the Bank's primary use of funds during
the quarter was the purchase of long term fixed rate AFS investment securities,
and its primary sources of funds were the liquidation of short term investments
and growth in money market and savings account balances. Borrowings, time
deposits, and money market accounts are the primary sources of liquidity for
additional balance sheet growth. Short term investments, securities available
for sale, and government guaranteed loan certificates provide additional sources
of liquidity. The Company's primary source of funds is dividends from the Bank
and its primary use of funds is dividends to shareholders.

Capital Resources: During the most recent quarter, shareholders' equity
decreased by $1.5 million to $16.6 million as a result of the accumulated other
comprehensive loss related to the change in fair value of AFS investment
securities. Retained earnings increased by $586 thousand due to the contribution
of net income for the quarter. Total equity measured 5.9% of total assets at
March 31, 1999, compared to 6.4% at year-end 1998. The Tier 1 capital ratio
measured 6.0% and the Risk Based Capital Ratio measured 9.5% at March 31, 1999.
Capital ratios for the Company and Tolland Bank were in excess of all applicable
regulatory requirements at March 31, 1999.

Year 2000 Considerations

All disclosure concerning Year 2000 Considerations should be considered "Year
2000 Readiness Disclosure" pursuant to the Year 2000 Information and Readiness
Disclosure Act. The Year 2000 modification information provided herein should be
read in connection with the Year 2000 Information and Readiness Disclosure Act
which, among other things, mandates that certain Year 2000 readiness disclosures
may not be used in litigation.

The Company has established a Year 2000 project plan to address systems and
facilities changes necessary to properly recognize dates after 1999, has
assigned implementation responsibilities and has established management and
Board reporting processes. All of the Company's significant information
technology systems are provided under contract with major national banking
systems providers who are progressing under their own Year 2000 plans. Most
significant systems changes by those providers have been reported to be
completed.

The Company's plan follows the five step approach required by its regulators:
Awareness, Assessment, Modification, Verification, and Implementation. As of

                                       13

<PAGE>

March 31, 1999, the Company believes that its progress under its plan was
satisfactory in accordance with plan objectives. The Company expects to complete
its plan in accordance with regulatory guidelines. The Company's project also
addresses its other suppliers, customers, and other constituents, as well as
remediation and business resumption contingency plans.

The Company has arranged for temporary consulting help and has purchased
diagnostic software to assist with this project. The costs of the project, which
are not expected to be significant, and the dates in the Company's plans are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those plans.

The primary uncertainty facing the Company is the ability of third party systems
providers to identify and modify software as planned. Specific factors that
might cause material differences from plans include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties. Additional
information about the Company's Year 2000 status at March 31, 1999 was as
follows:

Readiness: The Company's plans include both information technology ("IT") and
non-IT systems. Most of the Company's primary Year 2000 exposures relate to IT
systems, primarily to the vendor of its account processing systems. This is a
large national banking systems vendor. Additionally, this vendor has reported
that it has substantially completed remediation, testing, and implementation
actions for substantially all of the major processing systems which it is
providing to the Company. The Company has substantially completed its own
testing of these systems, and its plan calls for further testing and evaluation
of these systems through the first half of 1999. The Company currently
anticipates that its major IT vendors will comply with federal regulatory
guidelines for Year 2000 readiness.

Costs: The Company has not incurred material costs related to its Year 2000
program. The Company is being charged approximately $25 thousand by its account
processing vendor for testing arrangements, which is being billed over twelve
months through June, 1999. The Company has budgeted further computer and
equipment upgrades totaling up to $200 thousand in 1999, which include
expenditures related to the execution of the Company's Year 2000 program.
Additionally, the Company will evaluate capital expenditures totaling up to
approximately $50 thousand related to general contingency capabilities. Actual
Year 2000 related capital expenditures through March 31, 1999 were about $10
thousand.

Risks: The most significant risk anticipated by the Company is the possibility
of interruptions to its account processing systems. Due to the progress
described above, the Company does not presently foresee any material
interruptions to these systems. The next most significant risk relates to
interruptions in the payment processing systems, which are integrated with the
Company's account processing systems. The Company is working with its payment
processing vendors, the most significant of which are reported to be making
satisfactory progress in complying with federal regulatory guidelines for Year
2000 readiness. These guidelines include the substantial completion of
remediation of mission critical systems and the initiation of testing in 1998
and completion of testing of these systems by June 30, 1999. The Company is also
exposed to various non-IT systematic risks which it cannot fully monitor and
test, including the supply of electric power, telecommunications services, and
postal services.

Contingency Plans: The Company has taken actions to comply with federal
regulatory requirements for Year 2000 contingency planning. The Company has
established a contingency planning committee representing all of its major
functional areas. The Company has established a contingency plan timetable and
developed risk analyses for its high priority business functions; in the first
half of 1999, the Company will be developing contingency timetables and action
plans in accordance with federal regulatory guidelines. The Company has taken
steps to increase its available staffing as necessary to respond to Year 2000
contingencies.

                                       14

<PAGE>

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


See discussion and analysis of quantitative and qualitative disclosures about
market risk provided in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 filed March 29, 1999. There have been no material
changes in reported market risks faced by the Company since the end of 1998.

PART II       OTHER INFORMATION

Item 1.       LEGAL PROCEEDINGS
              The Company is not involved in any material legal proceedings
              other than ordinary routine litigation incidental to its business

Item 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS
              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
              (a) Exhibit index
                  The exhibits listed below are included in this report or are
                  incorporated herein by reference to the identified document
                  previously filed with the Securities and Exchange Commission
                  as set forth parenthetically.
                  27   Financial Data Schedule

              (b) Reports on Form 8-K filed during the quarter ended March 31,
                  1999.

                  The Company did not file any reports on Form 8-K during the
                  quarter ended March 31, 1999.

                                       15

<PAGE>

Average Balance Sheet and Interest Rates - Fully Taxable Equivalent (FTE)
<TABLE>
<CAPTION>
(dollars in thousands)                                 Average Balance                          Rate (FTE Basis)
------------------------------------------------------------------------------------------------------------------------
Quarters ended March 31                               1999           1998                       1999        1998
------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>                            <C>         <C>  
Loans                                             $182,652       $157,134                       7.81%       8.16%
Securities available for sale                       63,498         42,971                       7.35        7.74
Securities held to maturity                         14,336         19,657                       5.51        5.91
Other earning assets                                 7,791         15,203                       5.23        5.82
------------------------------------------------------------------------------------------------------------------------
     Total earning assets                          268,277        234,965                       7.52        7.74
Other assets                                        10,076          9,599
------------------------------------------------------------------------------------------------------------------------
     Total assets                                 $278,353       $244,564
------------------------------------------------------------------------------------------------------------------------
Interest bearing deposits                         $213,334       $201,018                       4.14        4.45
Borrowings                                          23,610          3,763                       5.14        6.39
------------------------------------------------------------------------------------------------------------------------
Interest bearing liabilities                       236,944        204,781                       4.24        4.48
Other liabilities                                   23,449         21,521
Shareholder's equity                                17,960         18,262
------------------------------------------------------------------------------------------------------------------------
Total liabilities and equity                      $278,353       $244,564
------------------------------------------------------------------------------------------------------------------------
Net Interest Spread                                                                             3.28%       3.26%
Net Interest Margin                                                                             3.77%       3.83%
</TABLE>
                                       16

<PAGE>

Signatures

         Pursuant to the requirements to Section 13 or 15(d) 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.

                                           ALLIANCE BANCORP OF NEW ENGLAND, INC.





         Date:    May 12, 1999             /s/ Joseph H. Rossi
                                           -------------------
                                           Joseph H. Rossi
                                           President/CEO



         Date:    May 12, 1999             /s/ David H. Gonci
                                           ------------------
                                           David H. Gonci
                                           Senior Vice President/CFO

                                       17