|FORM 10-QUnited 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 June 30, 2001
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 August 10, 2001,
Alliance Bancorp of New England had 2,331,100 shares of common stock
outstanding.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|TABLE OF CONTENTS | Page
|----------------- | ----
|                 
|Table             |     
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|Part I            |     
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|Item 1            |     
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|Item 2            |     
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|Item 3            |     
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|Part II           |     
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|Table             |     
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|Signatures        |     

|Alliance Bancorp of New England, Inc. | 1 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Alliance Bancorp of New England, Inc. 
Consolidated Selected Financial Data (Unaudited)
|---------------------------------------------------------------------------------------

|                                         | As of and for the three monthsended June 30, | As of and for the six monthsended June 30, |  
|---------------------------------------- | -------------------------------------------- | ------------------------------------------ | -
|
|For the Quarter (in thousands)           |                                              |                                            |  
|Net interest income                      |                                              | $        3,009                             |  
|Provision for loan losses                |                                              | 62                                         |  
|Service charges and other income         |                                              | 417                                        |  
|Net (loss) gain on securities and assets |                                              | (76                                        | )
|Non-interest expense                     |                                              | 2,078                                      |  
|Net income                               |                                              | $           821                            |  
|                                        
|Per Share                                |                                             
|Earnings - basic                         |                                              | $          0.35                            |  
|Earnings - diluted                       |                                              | 0.34                                       |  
|Dividends declared                       |                                              | 0.075                                      |  
|Book value                               |                                              | 9.07                                       |  
|Common stock price:                      |                                             
|High                                     |                                              | 12.75                                      |  
|Low                                      |                                              | 9.00                                       |  
|Close                                    |                                              | 12.49                                      |  
|                                        
|At Quarter End (in millions)             |                                             
|Total assets                             |                                              | $        377.6                             |  
|Total loans                              |                                              | 246.4                                      |  
|Other earning assets                     |                                              | 105.1                                      |  
|Deposits                                 |                                              | 309.6                                      |  
|Borrowings                               |                                              | 45.5                                       |  
|Shareholders equity (a)                 |                                              | 21.1                                       |  
|                                        
|Operating Ratios (in percent)            |                                             
|Return on average equity (b)             |                                              | 16.56                                      | %
|Return on average assets (b)             |                                              | 0.93                                       |  
|Net interest margin (b) (c)              |                                              | 3.73                                       |  
|Equity % total assets (period end)       |                                              | 5.60                                       |  
|Dividend payout ratio                    |                                              | 21.30                                      |  
|                                        

|(a) |  | Shareholdersequity
includes accumulated other comprehensive income (loss), which consists of unrealized
gains (losses) on investment securities, net of taxes.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Annualized.
|--- |  | -----------

|(c) |  | Ratio
expressed as fully taxable equivalent, annualized.
|--- |  | --------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 2 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Alliance Bancorp of New
England, Inc. Consolidated
Balance Sheets
|-----------------------------------------------------------------

|(in thousands except share data)                            | June 30, 2001(Unaudited) | December 31, 2000(Audited)
|----------------------------------------------------------- | ------------------------ | --------------------------
|Assets                                                      |                          |                           
|Cash and due from banks                                     |                          | $   15,728                
|Short-term investments                                      |                          | 24,562                    
|                                                           
|Total cash and cash equivalents                             |                          | 40,290                    
|                                                            |                          |                           
|Securities available for sale (at fair value)               |                          | 64,966                    
|                                                            |                          |                           
|Securities held to maturity (at amortized cost), fair value |                         
|of $15,267 in 2001 and $22,188 in 2000                      |                          | 15,619                    
|                                                            |                          |                           
|Residential mortgage loans                                  |                          | 63,391                    
|Commercial mortgage loans                                   |                          | 77,405                    
|Other commercial loans                                      |                          | 41,428                    
|Consumer loans                                              |                          | 38,045                    
|Government guaranteed loans                                 |                          | 26,140                    
|                                                           
|Total loans                                                 |                          | 246,409                   
|Less: Allowance for loan losses                             |                          | (3,550                    
|                                                           
|Net loans                                                   |                          | 242,859                   
|                                                           
|Premises and equipment, net                                 |                          | 5,587                     
|Foreclosed assets, net                                      |                          | 206                       
|Accrued interest income receivable                          |                          | 2,845                     
|Cash surrender value of life insurance                      |                          | 2,822                     
|Other assets                                                |                          | 2,418                     
|                                                           
|Total assets                                                |                          | $ 377,612                 
|                                                           
|                                                           
|Liabilities and Shareholders' Equity                        |                         
|Demand deposits                                             |                          | $   53,616                
|NOW deposits                                                |                          | 33,051                    
|Money market deposits                                       |                          | 39,154                    
|Savings deposits                                            |                          | 49,580                    
|Time deposits                                               |                          | 134,195                   
|                                                           
|Total deposits                                              |                          | 309,596                   
|                                                           
|Borrowings                                                  |                          | 45,500                    
|Other liabilities                                           |                          | 1,375                     
|                                                           
|Total liabilities                                           |                          | 356,471                   
|                                                           
|Preferred stock ( $.01 par value; 100,000 shares            |                         
|authorized, none issued)                                    |                          |                          
|Common stock ($.01 par value; authorized 4,000,000          |                         
|shares; issued 2,531,699 in 2001 and in 2000;               |                         
|outstanding 2,331,100 in 2001 and in 2000)                  |                          | 25                        
|Additional paid-in capital                                  |                          | 11,516                    
|Retained earnings                                           |                          | 15,496                    
|Accumulated other comprehensive loss, net                   |                          | (2,787                    
|Treasury stock (200,599 shares)                             |                          | (3,109                    
|                                                           
|Total shareholders' equity                                  |                          | 21,141                    
|                                                           
|Total liabilities and shareholders' equity                  |                          | $ 377,612                 
|                                                           
|                                                            |                         

|See accompanying notes to
consolidated financial statements
|-----------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 3 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Alliance
Bancorp of New England, Inc.Consolidated Income Statements (Unaudited)
|-------------------------------------------------------------------------------

|                                                    | Three Months EndedJune 30, | Six Months EndedJune 30,
|--------------------------------------------------- | -------------------------- | ------------------------
|
|Interest Income                                     |                            |                         
|Loans                                               |                            | $        4,797          
|Debt securities                                     |                            | 1,282                   
|Dividends on equity securities                      |                            | 244                     
|Short-term investments                              |                            | 67                      
|                                                   
|Total interest and dividend income                  |                            | 6,390                   
|                                                   
|                                                   
|Interest Expense                                    |                           
|Deposits                                            |                            | 2,663                   
|Borrowings                                          |                            | 718                     
|                                                   
|Total interest expense                              |                            | 3,381                   
|                                                   
|                                                   
|Net Interest Income                                 |                            | 3,009                   
|                                                   
|Provision For Loan Losses                           |                            | 62                      
|                                                   
|Net interest income after provision for loan losses |                            | 2,947                   
|                                                   
|Non-Interest Income                                 |                           
|Service charges and other income                    |                            | 417                     
|Net (loss) gain on securities                       |                            | (85                     
|Net gain (loss) on assets                           |                            | 9                       
|                                                   
|Total non-interest income                           |                            | 341                     
|                                                   
|Non-Interest Expense                                |                           
|Compensation and benefits                           |                            | 1,130                   
|Occupancy                                           |                            | 159                     
|Data processing services and equipment              |                            | 247                     
|Office and insurance                                |                            | 133                     
|Purchased services                                  |                            | 240                     
|Other                                               |                            | 169                     
|                                                   
|Total non-interest expense                          |                            | 2,078                   
|                                                   
|Income before income taxes                          |                            | 1,210                   
|Income tax expense                                  |                            | 389                     
|                                                   
|Net Income                                          |                            | $           821         
|                                                   
|                                                   
|Per Share Data                                      |                           
|Basic earnings per share                            |                            | $          0.35         
|                                                   
|Diluted earnings per share                          |                            | $          0.34         
|                                                   
|                                                   
|Average basic shares outstanding                    |                            | 2,331,100               
|Average additional dilutive shares                  |                            | 67,758                  
|                                                   
|Average diluted shares                              |                            | 2,398,858               
|                                                   
|                                                    |                           

|See accompanying notes to
consolidated financial statements
|-----------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 4 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Alliance
Bancorp of New England, Inc.Consolidated
Statements of Changes in Shareholders Equity (Unaudited)
|-----------------------------------------------------------------------------------------------------------

|Six Months ended June 30(in thousands)  | Commonstock | Additionalpaid-Incapital | Retainedearnings | Accumulatedothercomprehensive(loss) | Treasurystock | Total   
|--------------------------------------- | ----------- | ------------------------ | ---------------- | ----------------------------------- | ------------- | --------
|                                       
|2000                                   
|Balance, December 31, 1999              |             | $        25              |                  | $ 11,429                            |               | $ 11,618
|Comprehensive income                    |            
|Net income                              |             |                          |                  |                                     |               | 1,567   
|Unrealized loss on securities,          |            
|net of reclassification adjustment      |             |                          |                  |                                     |               |         
|                                        |             |                          |                  |                                     |               |         
|Comprehensive income                    |             |                          |                  |                                     |               |         
|Dividends declared and paid             |             |                          |                  |                                     |               | (302    
|Issuance of shares pursuant to exercise |            
|exercise of stock options               |             |                          |                  | 87                                  |               |         
|                                       
|Balance, June 30, 2000                  |             | $        25              |                  | $ 11,516                            |               | $ 12,883
|                                       
|                                       
|                                       
|2001                                   
|Balance, December 31, 2000              |             | $        25              |                  | $ 11,516                            |               | $ 14,198
|Comprehensive income                    |            
|Net income                              |             |                          |                  |                                     |               | 1,647   
|Unrealized loss on securities,          |            
|net of reclassification adjustment      |             |                          |                  |                                     |               |         
|                                        |             |                          |                  |                                     |               |         
|Comprehensive income                    |             |                          |                  |                                     |               |         
|Dividends declared and paid             |             |                          |                  |                                     |               | (349    
|                                       
|Balance, June 30, 2001                  |             | $        25              |                  | $ 11,516                            |               | $ 15,496
|                                       
|                                       

Disclosure of reclassification amount

|Six months ended June 30 (in thousands)        |  |  |  | 2001    |  |  |  | 2000   |  
|---------------------------------------------- |  |  |  | ------- |  |  |  | ------ | -
|                                              
|Unrealized holding gain (loss) arising during  |  |  |  |         |  |  |  |        |  
|the period net of income tax expense (benefit) | 
|of $899 and ($375), respectively               |  |  |  | $ 1,670 |  |  |  | $ (727 | )
|Less reclassification adjustment for net gains | 
|(losses) included in net income net of income  | 
|tax expense (benefit) of ($9) and $35,         | 
|respectively                                   |  |  |  | 58      |  |  |  | (69    | )
|                                              
|Net unrealized gain (loss) on securities       |  |  |  | $ 1,728 |  |  |  | $ (796 | )
|                                              
|                                               | 

|See accompanying notes to
consolidated financial statements
|-----------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 5 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Alliance Bancorp
of New England, Inc.Consolidated Statements of Cash Flows (Unaudited)
|--------------------------------------------------------------------------------------

|                                                     | Six months ended June 30,
|---------------------------------------------------- | -------------------------
|
|Operating Activities:                                |                          
|Net income                                           |                          
|Adjustments to reconcile net income to               |                          
|net cash provided by operating activities:           |                          
|Provision for loan losses                            |                          
|Depreciation and amortization                        |                          
|Net loss (gain) on securities                        |                          
|Net (gain) loss on assets                            |                          
|(Increase) in loans held for sale                    |                          
|Decrease in other liabilities                        |                          
|Decrease in other assets                             |                          
|                                                    
|Net cash provided by operating activities            |                          
|                                                    
|Investing Activities:                                |                          
|Securities available for sale:                       |                          
|Proceeds from repayments and maturities              |                          
|Proceeds from sales of securities                    |                          
|Purchases of securities                              |                          
|Securities held to maturity:                         |                          
|Proceeds from amortization and maturities            |                          
|Net increase in loans                                |                          
|Proceeds from the sale of premises and equipment     |                          
|Purchases of premises and equipment                  |                          
|                                                    
|Net cash used in investing activities                |                          
|                                                    
|Financing Activities:                                |                          
|Net increase in interest-bearing deposits            |                          
|Net increase (decrease) in demand deposits           |                          
|Net (decrease) increase in borrowings                |                          
|Stock options exercised                              |                          
|Cash dividends paid                                  |                          
|                                                    
|Net cash provided by financing activities            |                          
|                                                    
|Net Change in Cash and Cash Equivalents              |                          
|Cash and cash equivalents at beginning of the period |                          
|                                                    
|Cash and cash equivalents at end of the period       |                          
|                                                    
|                                                    
|Supplemental Information On Cash Payments            |                          
|Interest expense                                     |                          
|Income tax expense                                   |                          
|                                                    
|Supplemental Information On Non-cash Transactions    |                          
|Net loans transferred to foreclosed assets           |                          
|Securities transferred to held to maturity           |                          
|Securities transferred to available for sale         |                          
|                                                     |                          

|See accompanying notes to
consolidated financial statements
|-----------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 6 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Notes to Consolidated Financial
Statements (unaudited)


Note
1.     Basis of Presentation and Description


The consolidated financial
statements have been prepared and presented in conformity with accounting
principles generally accepted in the United States America. 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 consolidated
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 consolidated 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 consolidated 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, 2000.


Alliance is a one bank
holding company, chartered in Delaware. Alliance owns 100% of the stock of
Tolland Bank (the Bank), a Connecticut chartered savings bank.
Alliance also wholly owns Alliance Capital Trust I (Trust I), a
Delaware chartered trust which was formed in 1999 and issued $3.5 million in
privately offered trust preferred securities. Proceeds from this issuance were
invested in subordinated notes issued by Alliance, which invested the note
proceeds in new common stock issued by the Bank. Alliance also wholly owns
Alliance Capital Trust II (Trust II), a Delaware chartered trust
which was formed in the first quarter of 2000 and issued $3.5 million in
privately offered trust preferred securities. Proceeds from the issuance of
Trust II were invested in subordinated notes issued by Alliance, which invested
the note proceeds in a capital contribution to the Bank.


Tolland Bank provides
consumer and commercial banking services from its nine offices located in and
around Tolland County, Connecticut. The Banks deposits are insured up to
the applicable limits by the Federal Deposit Insurance Corporation
(FDIC). Tolland Bank wholly owns Tolland Investment Corporation
(TIC), a passive investment corporation chartered in Connecticut in
1999 to own and service real estate secured loans purchased from the Bank. The
Bank also wholly owns a Connecticut chartered corporation named Asset Recovery
Systems, Inc. (ARS), which is a foreclosed asset liquidation
subsidiary. The consolidated financial statements include Alliance, Trust I,
Trust II, Tolland Bank, TIC, and ARS. All significant intercompany accounts and
transactions have been eliminated in consolidation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 7 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Note 2.     Securities
|----------------------

|June 30, 2001 (in thousands)     | AmortizedCost | UnrealizedGains | UnrealizedLosses | FairValue
|-------------------------------- | ------------- | --------------- | ---------------- | ---------
|Securities available for sale    |               |                 |                  |          
|U.S. Government and agency debt  |               | $  2,000        |                  | $       
|U.S. Agency mortgage-backed debt |               | 4,244           |                  | 23       
|Trust preferred                  |               | 27,589          |                  | 574      
|Other corporate debt             |               | 17,957          |                  | 216      
|Marketable equity                |               | 14,300          |                  | 206      
|Non-marketable equity            |               | 2,281           |                  |         
|                                
|Total available for sale         |               | $68,371         |                  | $1,019   
|                                
|Securities held to maturity      |              
|U.S. Government and agency debt  |               | $  3,058        |                  | $     55 
|U.S. Agency mortgage-backed debt |               | 4,419           |                  | 54       
|Other mortgage-backed debt       |               | 2,086           |                  | 35       
|Other corporate debt             |               | 6,056           |                  | 16       
|                                
|Total held to maturity           |               | $15,619         |                  | $   160  
|                                

|December 31, 2000 (in thousands) | AmortizedCost | UnrealizedGains | UnrealizedLosses | FairValue
|-------------------------------- | ------------- | --------------- | ---------------- | ---------
|Securities available for sale    |               |                 |                  |          
|U.S. Government and agency debt  |               | $  5,000        |                  | $  73    
|U.S. Agency mortgage-backed debt |               | 3,457           |                  | 5        
|Other mortgage-backed debt       |               | 2,093           |                  | 10       
|Trust preferred                  |               | 24,122          |                  | 235      
|Other corporate debt             |               | 6,042           |                  | 27       
|Marketable equity                |               | 14,659          |                  | 186      
|Non-marketable equity            |               | 2,281           |                  |         
|                                
|Total available for sale         |               | $57,654         |                  | $536     
|                                
|Securities held to maturity      |              
|U.S. Government and agency debt  |               | $     986       |                  | $  16    
|U.S. Agency mortgage-backed debt |               | 3,850           |                  | 2        
|Other mortgage-backed debt       |               | 251             |                  | 4        
|Trust preferred                  |               | 3,098           |                  | 114      
|Other corporate debt             |               | 14,828          |                  | 223      
|                                
|Total held to maturity           |               | $23,013         |                  | $359     
|                                
|                                 |              

|Alliance Bancorp of New England, Inc. | 8 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|Note 3.     Nonperforming Loans
|-------------------------------

|(in thousands)                                          | June 30,2001 | December 31,2000
|------------------------------------------------------- | ------------ | ----------------
|Total nonaccruing loans                                 |              | $2,490          
|Accruing loans past due 90 days or more                 |              |                
|Impaired loans:                                         |             
|Impaired loans - valuation allowance required           |              | 1,857           
|Impaired loans - no valuation allowance required        |              | 228             
|                                                       
|Total impaired loans                                    |              | $2,085          
|Total valuation allowance on impaired loans             |              | 219             
|Commitments to lend additional funds for impaired loans |              |                

|Note 4.      Allowance for Loan Losses
|--------------------------------------

|(in thousands)               | Six Months EndedJune 30,2001 | Six Months EndedJune 30,2000
|---------------------------- | ---------------------------- | ----------------------------
|Balance at beginning of year |                              | $ 3,400                     
|Charge-offs                  |                              | (39                         
|Recoveries                   |                              | 55                          
|Provision for loan losses    |                              | 134                         
|                            
|Balance at end of period     |                              | $ 3,550                     
|                            

|Note 5.     New Accounting Standards


In July 2001, the FASB issued SFAS
No. 141, Business Combinations. This statement addresses the financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16, Business
Combinations, and FASB Statement No. 38, Accounting for Preacquisition Contingencies of
Purchased Enterprises. All business combinations initiated after June 30, 2001, are to be
accounted for under a single method, the purchase method. Use of the pooling-of-interest
method is no longer permitted after June 30, 2001.


In July 2001, the FASB also
issued SFAS No. 142, Goodwill and Other Intangible Assets. This statement
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, Intangible Assets.
This statement requires that goodwill no longer be amortized to earnings but
instead be reviewed at least annually for impairment. Impairment losses would be
charged to earnings when they occur. Amortization of goodwill ceases upon
adoption of SFAS No. 142, which for calendar year-end entities such as Alliance
will be on January 1, 2002. SFAS No. 142 requires that intangible assets other
than goodwill (such as core deposit intangibles) continue to be amortized to
expense over their estimated useful lives. Alliance has intangible assets of $78
thousand at June 30, 2001; accordingly adoption of SFAS 142 is not expected to
have a significant effect on the consolidated statements.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 9 | Second Quarter, 2001
|------------------------------------- | - | --------------------

|
|

|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 change
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


Alliance reported a 3.3%
increase in earnings for the second quarter ended June 30, 2001, with net profit
totaling $821 thousand ($.34 per diluted share) compared to $795 thousand ($.34
per diluted share) a year earlier.


Net income for the first
half of 2001 increased by 5.1% to $1.65 million ($.69 per diluted share)
compared to $1.57 million ($.67 per diluted share) in the same period of 2000.


The second quarter cash
dividend declaration increased by .5 cent (7.1%) to 7.5 cents per share. For the
first half of 2001, the cash dividend declared increased by 2 cents (15.4%) to
15 cents per share.


Alliance realized the
benefit of several initiatives during the second quarter. The Company introduced
its new Tolland Bank ON-CALL Answer Center, offering expanded telephone service
hours and utilizing new technologies to provide responsive customer support.
Additionally, Alliance promoted home equity loans, with competitive fixed and
variable rate alternatives. As a result, consumer loans closed in the first half
of 2001 exceeded the total of consumer loans closed in all of the year 2000.


Additionally, in the second
quarter, Tolland Bank distributed its privacy policy to its customers. The Bank
has received positive customer response to its policy that it does not share or
sell non-public customer information with non-affiliates except as provided by
law. Customer privacy is another aspect in which Alliance distinguishes itself
from some larger competitors. Throughout the Company, personnel are focused on
providing excellent customer service, which is a key factor in the continued
account growth this year.


Loan growth produced much
of the earnings gain reported in 2001. Total loans increased by $18.1 million
for the first six months of this year, generating a 15.8% annualized growth
rate. Loan growth was recorded in all major loan categories, and included the
benefit of the home equity loan promotions previously mentioned. This growth
offset the effect of tighter margins caused by the 2.75% decrease in the prime
rate during the first half of 2001. The net interest margin decreased to 3.73%
in the most recent quarter, compared to 4.02% in the same quarter last year.


Additionally, management
reduced total operating expenses in the second quarter, and lower expenses were
recorded in most major categories for the first six months of the year despite
an overall increase compared to the first half of last year. These expense
reductions also helped offset lower non-interest income in 2001, which declined
by $103 thousand during the first half of the year due to the non-recurrence of
net securities gains realized in the prior year.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 10 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Total assets were $377.6
million at June 30, 2001, compared to $348.2 million at the prior year-end.
Total transactions account balances increased by $24.3 million, including a
$17.0 million increase in checking account balances due to a short term deposit
made by one customer at quarter-end. Average transactions account balances
increased at a 15.2% annualized rate from the fourth quarter of 2000 to the
second quarter of 2001. Additionally, higher balances were reported in all other
major deposit account categories at June 30, 2001, compared to the previous
year-end. Short term investments totaling $24.6 million at quarter-end included
proceeds from the short term $17.0 million deposit noted above.


Total problem assets,
including foreclosed real estate and nonaccruing loans, were $2.7 million (0.7%
of total assets) at June 30, 2001, compared to $1.1 million (0.3% of total
assets) at the prior year-end. Net loan recoveries totaled $16 thousand in the
first half of 2001.


Shareholders equity
totaled $21.1 million at June 30, 2001, increasing by 16.7% from the year-end
total. In addition to growth from retained earnings, shareholders equity
also benefited from net unrealized securities gains which increased net
comprehensive income by $1.7 million for the first half of 2001. Book value per
share was $9.07 at June 30, 2001, compared to $7.77 at year-end 2000.
Shareholders equity measured 5.6% of total assets at quarter-end, compared
to 5.2% at year-end 2000. Annualized return on shareholders equity
measured 16.6% during the most recent quarter. The Companys capital
remained in excess of all regulatory requirements.


In the following
discussion, income statement and average balance comparisons are against the
same period of the previous year; balance sheet comparisons are against the
previous fiscal year-end, unless otherwise noted.


This discussion and
analysis updates, and should be read in conjunction with, Managements
Discussion and Analysis included in the 2000 Annual Report on Form 10-K filed by
Alliance on April 2, 2001, and included in the Form 10-Q filed for the first
quarter of 2001.


RESULTS OF OPERATIONS


Net Interest Income:
Net interest income grew by $104 thousand (3.6%) in the second quarter and by
$386 thousand (6.8%) in the first half of the year. As noted above, this was due
to loan growth, which was partially offset by lower income on lower average
short term investments.


Compared to last year,
total average earning assets increased by $29.4 million (9.6%) in the second
quarter, following a 10.2% increase in the first quarter. Average loans
increased by $41.0 million (20.1%) in the second quarter while average short
term investments decreased by $12.6 million (67.0%). Second quarter asset growth
was funded by a $22.9 million (8.3%) increase in average interest bearing
liabilities and a $7.5 million (17.4%) increase in the total average balance of
demand deposits and shareholders equity (both of which are non interest
bearing funds sources).


The decline in the net
interest margin also affected net interest income. The net interest margin
declined by .29% to 3.73% in the second quarter and by .16% to 3.84% in the
first half of the year. Due to unusually aggressive monetary easing by the
Federal Reserve Board, the prime rate of interest declined by 2.75% in 2001, as
previously noted. The yield on earning assets decreased by .28% to 7.79% in the
second quarter due to the decline in interest rates this year. The cost of
interest bearing liabilities increased by .06% to 4.53% in the same period, due
to higher rates paid on time deposits in the second half of last year. The net
interest spread therefore decreased by .34% to 3.26% in the second quarter. Due
to the growth of non interest bearing funds sources, the .29% decrease in the
net interest margin was smaller than the .34% decrease in the net interest
spread.


Compared to the fourth
quarter of last year, the second quarter yield on earning assets decreased by
 .42%, while the cost of interest bearing liabilities decreased by .21%. Interest
rate sensitivity is further discussed in the later discussion on Interest Rate
Sensitivity.


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 little changed in 2001,
increasing by $7 thousand (12.7%) in the second quarter and deceasing by $8
thousand (5.6%) for the first half of the year. At June 30, 2001, the allowance
stood at $3.55 million, compared to $3.40 million at year-end 2000. Please see
the later discussion on the Allowance for Loan Losses.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 11 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Non-Interest Income:
Non-interest income declined by $37 thousand (9.8%) and $103 thousand (13.0%) in
the second quarter and first half of 2001, respectively. Service charges and
other income did not change significantly. Higher fee income on loans and
deposits in 2001 was partially offset by the non-recurrence of a $97 thousand
credit received in 2000 related to interest on tax refunds. Excluding this
credit, service charges and other income increased by $103 thousand (16.5%) in
the first half of 2001, including improvements in secondary market income,
merchant processing income, commercial loan fees, and overdraft fees. As noted
previously, the $103 thousand reduction in first half total non-interest income
was attributable to the non-recurrence of net securities gains realized in the
prior year.


Non-Interest Expense and
Tax Expense: Non-interest expense decreased by $80 thousand (3.7%) in the
second quarter and increased by $37 thousand (0.9%) in the first half of the
year. As noted previously, most categories decreased during both periods due to
managed cost reductions in response to the lower net interest margin. As noted
in the first quarter, a $108 thousand increase in purchased services expense was
related to projects which are not expected to recur. For the first half of the
year, higher cash compensation costs were offset by a $123 thousand increase in
salary deferrals due to the doubling of consumer loan volume. The effective tax
rate measured 30.6% in the first half of 2001, compared to 26.1% in the first
half of 2000. This increase is due both to lower equity security income eligible
for the dividends received deduction and to the lack of a tax benefit on the
security loss (a capital loss) recorded in the most recent quarter.


Comprehensive
Income: Comprehensive income includes changes (after tax) in the market
valuation of investment securities available for sale. Comprehensive income was
$3.38 million in the first half of this year, compared to $771 thousand in the
same period of 2000. Please see the following discussion on Investment
Securities.


FINANCIAL CONDITION


Cash and Cash
Equivalents: Total cash and cash equivalents increased to $40.3 million in
the first half of 2001. The $24.6 million of short-term investments at
period-end included $17.0 million related to a short term deposit made by one
customer at quarter-end. The remaining $7.6 million related to transaction
account growth during the second quarter. Short-term investments had been fully
reinvested into longer term assets and the Company was utilizing short term
borrowings for a short time in the second quarter before the above mentioned
funds inflows. The $5.0 million increase in cash and due from banks was also due
to short-term period-end activity.


Investment
Securities: Total investment securities increased by $4.2 million during the
first half of the year, due to purchases of medium term corporate bonds and
collateralized mortgage obligations in the first quarter.


As of January 1, 2001, in
implementing the provisions of SFAS No. 133, the Company redesignated securities
from held to maturity to available for sale. Securities with an amortized cost
totaling $11.88 million, net of a transfer adjustment of $1.57 million and with
a fair value totaling $11.59 million were transferred to available for sale from
held to maturity. Securities that were transferred were chosen primarily due to
an expectation of increasing valuations with the anticipated decline in interest
rates. At the same time, securities with an amortized cost totaling $7.04
million and a fair value totaling $7.13 million were transferred to held to
maturity from available for sale. The net impact on accumulated other
comprehensive loss was an increase of $196 thousand.


At June 30, 2001, the total
net unrealized loss on available for sale securities (before tax) was $3.41
million, compared to $4.26 million at year-end 2000. The net unrealized loss on
held to maturity securities (before tax) was $352 thousand, compared to $825
thousand at year-end 2000. The unrealized loss on the Companys securities
declined during the year due primarily to improved prices on trust preferred
securities, which had a cost basis totaling $27.2 million at the beginning of
the year.


The fully taxable
equivalent yield on investment securities was 7.85% in the most recent quarter,
compared to 8.00% in the fourth quarter of 2000, primarily reflecting the lower
yields on securities purchased in the current year.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 12 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Total Loans: Total
loans increased by $18.1 million (7.9%) during the first half of the year.
Residential mortgage growth of 8.8% resulted from a decision to retain more
newly originated mortgages as part of the program to reinvest funds from short
term investments. Commercial loan growth of 11.1% benefited from the strong
pipeline through the end of last year. Commercial loan growth has slowed from
the 28.4% growth rate recorded last year, reflecting a slowdown in economic
conditions. Conversely, consumer loans grew by 6.6% this year, with growth
accelerating beginning in the fourth quarter of last year, after being flat for
the first three quarters of 2000. This primarily reflects increased consumer
demand for closed-end amortizing home equity loans. Government guaranteed loans
increased by 19.9% during the first half of this year. These are 100% U.S.
Government guaranteed SBA and USDA loans and loan certificates purchased in the
secondary market, and are viewed as alternatives to purchases of investment
securities. The yield on total loans measured 7.85% in the second quarter,
compared to 8.45% in the fourth quarter of 2000. This decrease reflected the
decline in the prime rate, along with lower yields on government guaranteed
loans and tighter lending spreads in the commercial loan market.


Nonperforming
Assets: Nonperforming assets totaled $2.7 million (0.7% of total assets) at
June 30, 2001, including nonaccruing loans totaling $2.5 million and foreclosed
assets totaling $0.2 million. Nonperforming assets have increased by $1.6
million compared to $1.1 million (0.3% of total assets) at the prior year-end.
This increase includes $1.0 million of commercial loans which are nonaccruing
but which are current in their payments. Impaired loans totaled $2.1 million at
June 30, 2001, up from $1.2 million at year-end due to the above mentioned
commercial loans.


Allowance for Loan
Losses:The allowance totaled $3.55 million at June 30, 2001, compared to
$3.40 million at the prior year-end. The allowance measured 1.44% of total loans
and 1.61% of regular loans (excluding government guaranteed loans) at June 30,
2001, compared to 1.49% and 1.65% respectively at year-end. Net loan recoveries
totaled $16 thousand in the first half of 2001. The valuation allowance on
impaired loans was $219 thousand at June 30, 2001, compared to $112 thousand at
year-end. The loan loss allowance measured 143% of nonaccruing loans at
quarter-end.


Deposits and Borrowings:Total deposits increased by $29.1 million during the first half of the year.
Excluding the $17.0 million short term deposit from one customer at period-end,
the increase totaled $12.1 million (4.3%), with increases recorded in all
account categories. There were no new borrowings as of quarter-end. The cost of
deposits decreased to 4.21% during the second quarter, compared to 4.46% in the
fourth quarter of 2000. This primarily reflected lower CD and money market
account rates following the reductions in short term rates which occurred during
the first half of the year.


Interest Rate
Sensitivity: The one year interest rate gap at June 30, 2001 approximated
($3 million), or (0.8%) of total earning assets. Excluding the $17 million short
term deposit noted above, the one year interest rate gap aproximated ($20
million), or (5.7%) of earning assets. This negative gap reflects a liability
sensitive position at the one year point, making earnings sensitive to interest
rate increases at that time interval. The Company generally has a positive
interest rate gap for maturities under one year, making near-term earnings
sensitive to interest rate decreases. At year-end, the Companys interest
sensitivity model indicated that net interest income would decline in the event
of a 200 basis point interest rate decrease. During the first half of the year,
short term interest rates declined by 275 basis points; ten year treasury rates
initially declined, but ended the period up by 12 basis points. While the net
interest margin has tightened, net interest income did not decline due to: the
rapid reinvestment of short term investments at the beginning of the year; the
steepening of the yield curve producing higher long term rates; and continued
strong loan growth. As a result of the reinvestments and deposit rate
adjustments, the Company has reduced the sensitivity of its earnings at risk in
a downward rate environment. At June 30, 2001, the Company expected to be within
its policy limits for earnings and equity at risk. The equity at risk in a
downward environment also was more favorable than the model, due to the steeper
yield curve and to improved pricing spreads on the portfolio of trust preferred
investment securities.


Liquidity and Cash
Flows:The $17.0 million short term deposit at quarter-end was held in short
term investments. Excluding this event, the Banks primary use of funds has
been the origination of new loans and the purchases of investment securities and
government guaranteed loans. The primary sources of funds were the liquidation
of short term investments, together with deposit growth. 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 and to trust
preferred security holders.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 13 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Capital Resources:
During the first half of 2001, shareholders equity increased by $3.0
million (16.7%) to $21.1 million, reflecting the contribution of retained
earnings and other comprehensive income. Excluding accumulated other
comprehensive income or loss, the annualized return on average equity measured
14.61% during the first half of the year. Total equity measured 5.6% of total
assets at quarter-end, compared to 5.2% at year-end 2000. At quarter-end, both
Alliance and Tolland Bank continued to report regulatory capital ratios
consistent with the well capitalized regulatory classification.





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, 2000
filed April 2, 2001. See also the discussion of Interest Rate Sensitivity in
Item 2 of this Form 10Q.





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 PROCEEDSNone.
|------- | ----------------------------------------------

|Item 3. | DEFAULTS UPON
SENIOR SECURITIESNone.
|------- | ------------------------------------

|Item 4. | SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS(a)     The Annual Meeting of
Shareholders was held on April 11, 2001.
|------- | -------------------------------------------------------------------------------------------------------------------------

| | (b) | Proposal I. The following
current  directors were  re-elected to continue to serve for three-year  terms and until
their  successors are elected and  qualified:  Robert C.  Boardman,  William E. Dowty,  Jr. and
Kenneth R. Peterson.  Each of the persons nominated for director received at least 98.4% of the
votes for his election, representing a majority of the total of 1,970,648 voted or withheld.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Proposal II. A
total of 1,809,968 shares were voted in favor of Proposal II regarding the adjournment of
the Annual Meeting. 138,920 shares were voted against and 21,760 shares were abstained.
Proposal II would have adjourned the meeting in the event that there were not sufficient
votes to approve Proposal I, in order to permit further solicitation of proxies. Since
Proposal I was approved, adjournment was not necessary.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 5. | OTHER INFORMATIONNone.
|------- | ----------------------

|Item 6. | EXHIBITS AND REPORTS ON FORM 8-K
(a)     Exhibit index          None.
|------- | ---------------------------------------------------------------------

| | (b) | Reports on Form 8-K filed during the quarter ended June 30, 2001.
| | --- | -----------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 14 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|
|

| | (i) | On April 27, 2001, the Company filed a Form 8-K reporting, under Item 5, an
appointment to the Board of Directors.
| | --- | ------------------------------------------------------------------------------------------------------------------

| | (ii) | On April 30, 2001, the Company filed a Form 8-K reporting, under Item 6,
the resignation of one of the Companys directors.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------

|Alliance Bancorp of New England, Inc. | 15 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Average Balance Sheet and
Interest Rates - Fully Taxable Equivalent (FTE)
|-------------------------------------------------------------------------

|(dollars in thousands)        | Average Balance |          | Rate (FTE Basis)
|----------------------------- | --------------- | -------- | ----------------
|
|Loans                         |                 | $244,761 |                 
|Securities available for sale |                 | 66,929   |                 
|Securities held to maturity   |                 | 16,111   |                 
|Other earning assets          |                 | 6,211    |                 
|                             
|Total earning assets          |                 | 334,012  |                 
|Other assets                  |                 | 20,941   |                 
|                             
|Total assets                  |                 | $354,953 |                 
|                             
|Interest bearing deposits     |                 | $253,672 |                 
|Borrowings                    |                 | 45,522   |                 
|                             
|Interest bearing liabilities  |                 | 299,194  |                 
|Other liabilities             |                 | 35,875   |                 
|Shareholder's equity          |                 | 19,884   |                 
|                             
|Total liabilities and equity  |                 | $354,953 |                 
|                             
|Net Interest Spread           |                 |          |                 
|Net Interest Margin           |                 |          |                 
|                             
|                             

|(dollars in thousands)        | Average Balance |          | Rate (FTE Basis)
|----------------------------- | --------------- | -------- | ----------------
|
|Loans                         |                 | $238,963 |                 
|Securities available for sale |                 | 67,465   |                 
|Securities held to maturity   |                 | 16,821   |                 
|Other earning assets          |                 | 6,904    |                 
|                             
|Total earning assets          |                 | 330,153  |                 
|Other assets                  |                 | 20,626   |                 
|                             
|Total assets                  |                 | $350,779 |                 
|                             
|Interest bearing deposits     |                 | $251,092 |                 
|Borrowings                    |                 | 45,586   |                 
|                             
|Interest bearing liabilities  |                 | 296,678  |                 
|Other liabilities             |                 | 35,025   |                 
|Shareholder's equity          |                 | 19,076   |                 
|                             
|Total liabilities and equity  |                 | $350,779 |                 
|                             
|Net Interest Spread           |                 |          |                 
|Net Interest Margin           |                 |          |                 

|Alliance Bancorp of New England, Inc. | 16 | Second Quarter, 2001
|------------------------------------- | -- | --------------------

|Signatures
|----------

| | Pursuant
to the requirements of 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: | August 10, 2001 | /s/ Joseph H. Rossi
Joseph H. RossiPresident/CEO
|     
|     
|     
|     
|     
|     
|Date: | August 10, 2001 | /s/ David H. Gonci
Senior Vice President/CFO    

|Alliance Bancorp of New England, Inc. | 17 | Second Quarter, 2001
|------------------------------------- | -- | --------------------