<PAGE> 1

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

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


                                   FORM 10-Q




(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the quarterly period ended September 30, 1996.


                                       OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

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

                         Commission File Number  0-19985


                              WESTCO BANCORP, INC.
                              --------------------
             (Exact name of registrant as specified in its charter)

     Delaware                                            36-3823760
     --------                                            ----------
(State or other jurisdiction                          I.R.S. Employer
   of incorporation or                                Identification
     organization)                                        Number


 2121 South Mannheim Road, Westchester, Illinois           60154
 -----------------------------------------------         ----------
(Address of Principal Executive Offices)                 (Zip Code)

Registrant's telephone number, including area code:   (708)865-1100
                                                      --------------


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

                      Yes  (X)          No  ( )

     As of October 25, 1996, the Registrant had 2,578,643 shares of Common stock
issued and outstanding.


<PAGE> 2

                             WESTCO BANCORP, INC.



Part I.   FINANCIAL INFORMATION                                           Page


     Item 1.  Financial Statements

            Consolidated Statements of Financial Condition
             September 30, 1996 (Unaudited) and December 31, 1995           1

            Consolidated Statements of Income, Three and Nine Months
             Ended September 30, 1996 and 1995 (Unaudited)                  2

            Consolidated Statements of Cash Flows, Nine Months Ended
             September 30, 1996 and 1995 (Unaudited)                        3

            Notes to Consolidated Financial Statements                      4

     Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations                       5 - 10


Part II.  OTHER INFORMATION                                                11

SIGNATURES                                                                 12


<PAGE> 3

<TABLE>
<CAPTION>
                      WESTCO BANCORP, INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition


                                                  September 30,    December 31,
                                                      1996             1995
                                                  -------------    ------------
                                                   (Unaudited)
<S>                                               <C>               <C> 

Assets
------
Cash and amounts due from
  depository institutions                         $   2,902,188       4,418,600
Interest-bearing deposits                             1,504,666       3,971,471
                                                    -----------     -----------
     Total cash and cash equivalents                  4,406,854       8,390,071

Investment securities (market value of
  $76,629,446 at September 30, 1996 and
  $82,359,066 at December 31, 1995)                  76,213,079      82,110,883
Investment securities held for trade                    740,750         501,150
Loans receivable, net                               219,535,052     209,069,248
Stock in Federal Home Loan Bank of Chicago            1,876,000       1,861,400
Office properties and equipment, net                  1,923,197       1,868,567
Accrued interest receivable                           1,491,321       1,563,668
Prepaid expense and other assets                      1,586,234         777,665
                                                    -----------     -----------
     Total assets                                   307,772,487     306,142,652
                                                    ===========     ===========

Liabilities and Stockholders' Equity
------------------------------------
Deposits                                            252,968,882     250,643,639
Advance payments by borrowers for taxes
  and insurance                                       1,236,809       2,873,411
Other liabilities                                     5,867,126       4,708,983
                                                    -----------     -----------
     Total liabilities                              260,072,817     258,226,033
                                                    -----------     -----------
Stockholders' Equity:
  Common stock                                           34,828          34,768
  Additional paid-in capital                         22,504,866      22,298,822
  Retained earnings                                  37,652,441      36,450,398
  Treasury stock                                    (11,620,123)     (9,620,374)
  Common stock acquired by ESOP                        (684,357)       (871,000)
  Common stock awarded by Association
    Recognition and Retention Plan                     (187,985)       (375,995)
                                                    -----------     -----------
     Total stockholders' equity                      47,699,670      47,916,619
                                                    -----------     -----------
     Total liabilities and stockholders' equity   $ 307,772,487     306,142,652
                                                    ===========     ===========



See notes to consolidated financial statements.
</TABLE>

                                      -1-

<PAGE> 4

<TABLE>
<CAPTION>
                     WESTCO BANCORP, INC. AND SUBSIDIARIES
                 Consolidated Statements of Income (Unaudited)

                                  Three Months Ended       Nine Months Ended
                                     September 30,            September 30,
                              -----------------------   -----------------------
                                   1996        1995         1996        1995
                              -----------   ---------   ----------   ----------
<S>                           <C>           <C>         <C>          <C>  
Interest income:
  Interest on loans           $ 4,665,620   4,373,096   13,814,472   13,100,509
  Interest on investments       1,101,077   1,275,054    3,214,204    3,321,162
  Interest on interest-bearing
    deposits                       74,169      94,408      330,928      270,422
  Dividends on securities
    held for trade                  2,610       2,550        6,474        5,075
  Dividends on FHLB stock          31,989      32,303       93,682       88,124
                                ---------   ---------   ----------   ----------
     Total interest income      5,875,465   5,777,411   17,459,760   16,785,292
                                ---------   ---------   ----------   ----------
Interest expense:
  Interest on deposits          3,125,178   2,999,093    9,250,956    8,398,921
                                ---------   ---------   ----------   ----------
     Total interest expense     3,125,178   2,999,093    9,250,956    8,398,921
                                ---------   ---------   ----------   ----------
     Net interest income        2,750,287   2,778,318    8,208,804    8,386,371
                                ---------   ---------   ----------   ----------
Non-interest income:
  Loan fees and service charges    67,616      56,925      188,440      138,210
  Commission income                58,639      54,362      196,441      200,930
  Unrealized gain (loss) on
    trading account securities     14,500       6,250      (18,192)      34,375
  Gain on sale of trading
    account securities             47,414      30,742       15,373      135,210
  Other income                     64,001      59,536      185,690      180,026
                                ---------   ---------   ----------   ----------
     Total non-interest income    252,170     207,815      567,752      688,751
                                ---------   ---------   ----------   ----------
Non-interest expense:
  Staffing costs                  796,229     809,870    2,372,657    2,386,681
  Advertising                      42,084      28,328      119,248       87,826
  Occupancy & equipment expense   115,436     134,505      354,505      378,389
  Data processing                  50,918      49,255      155,897      165,431
  Federal deposit insurance
    premiums                    1,757,018     140,202    2,050,562      426,961
  Other                           148,112     160,506      482,182      525,241
                                ---------   ---------   ----------   ----------
     Total non-interest expense 2,909,797   1,322,666    5,535,051    3,970,529
                                ---------   ---------   ----------   ----------
Income before taxes                92,660   1,663,467    3,241,505    5,104,593
  Provision (benefit) for
    income taxes                  (14,800)    607,200    1,106,600    1,844,560
                                ---------   ---------   ----------   ----------
Net Income                     $  107,460   1,056,267    2,134,905    3,260,033
                                =========   =========   ==========   ==========
Earnings per share-primary          $ .04         .37          .75         1.11
Earnings per share-fully diluted    $ .04         .37          .75         1.11
Dividends declared per common share $ .12         .10          .36          .30

See notes to consolidated financial statements.
</TABLE>

                                      -2-
<PAGE> 5

<TABLE>
<CAPTION>
                      WESTCO BANCORP, INC. AND SUBSIDIARIES
               Consolidated Statements of Cash Flows (Unaudited)

                                                Nine Months Ended September 30,
                                                        1996           1995
                                                     -----------    ----------
<S>                                                 <C>           <C>  
Cash flows from operating activities:
  Net income                                        $  2,134,905     3,260,033
  Adjustments to reconcile net income to net 
    cash from operating activities:
    Depreciation                                         147,965       151,190
    Amortization of premiums and discounts on
      investment securities - net                       (113,144)     (712,196)
    Amortization of cost of stock benefit plans          374,653       374,653
    Unrealized (gain)loss on trading account securities   18,192       (34,375)
    Net gain on sale of trading account securities       (15,373)     (135,210)
    Federal Home Loan Bank stock dividend                   -          (26,800)
    Proceeds from sales of trading account securities  3,496,418     2,165,809
    Purchase of trading account securities            (3,740,700)   (1,517,500)
    Decrease in deferred income on loans                (229,439)     (321,705)
    Increase(decrease) in current and deferred
      federal income tax                                (965,322)      123,149
    (Increase)decrease in interest receivable             72,347      (230,712)
    Increase in interest payable                           2,782         5,816
    Change in prepaid and accrued items, net           1,472,390     1,394,895
                                                     -----------    ----------
Net cash provided by operating activities              2,655,674     4,497,047
                                                     -----------    ----------
Cash flows from investing activities:
  Proceeds from maturities of investment securities   49,999,546    65,100,000
  Purchase of investment securities                  (43,988,598)  (64,430,342)
  Purchase of Federal Home Loan Bank stock               (14,600)      (94,200)
  Disbursements for loans                            (41,838,321)  (37,736,926)
  Loan repayments                                     31,601,956    36,230,224
  Proceeds from sale of real estate owned                   -          447,180
  Property and equipment expenditures                   (202,595)      (92,859)
                                                     -----------    ----------
Net cash provided for investing activities            (4,442,612)     (576,923)
                                                     -----------    ----------
Cash flows from financing activities:
  Proceeds from exercise of stock options                 40,000        40,000
  Deposit account receipts                           185,688,036   201,313,960
  Deposit account withdrawals                       (191,729,721) (204,612,770)
  Interest credited to deposit accounts                8,366,928     7,695,556
  Increase(decrease) in advance payment
    by borrowers for taxes and insurance              (1,636,602)      601,670
  Payment of dividends                                  (925,171)     (834,697)
  Purchase of treasury stock                          (1,999,749)   (2,170,770)
                                                     -----------    ----------
Net cash provided by(for) financing activities        (2,196,279)    2,032,949
                                                     -----------    ----------
Net change in cash and cash equivalents               (3,983,217)    5,953,073
Cash and cash equivalents at beginning of period       8,390,071     6,146,066
                                                     -----------    ----------
Cash and cash equivalents at end of period          $  4,406,854    12,099,139
                                                     ===========    ==========
Cash paid during the period for:
     Interest                                       $  9,248,175     8,393,105
     Income taxes                                      1,590,722     1,610,500

See notes to consolidated financial statements.
</TABLE>
                                      -3-
<PAGE> 6

                      WESTCO BANCORP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


Note A - Basis of Presentation

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  for  interim
financial information and instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  However,  in the opinion of management,  all adjustments (which are
normal and  recurring in nature)  necessary  for a fair  presentation  have been
included.  The results of operations  for the three months and nine months ended
September  30, 1996 are not  necessarily  indicative of the results which may be
expected for the entire year.

Note B - Principles of Consolidation

The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts of Westco Bancorp, Inc. (the "Company"),  its wholly-owned subsidiaries
First Federal Savings and Loan  Association of Westchester  (the  "Association")
and Westco,  Inc., the Association's  wholly-owned  subsidiary.  All significant
intercompany accounts and transactions have been eliminated in consolidation.

Note C - Stock Repurchase

Since the initial public offering, the Company's Board of Directors has approved
six stock repurchase programs, each representing  approximately 5% of the shares
outstanding at the program's  initiation.  The current stock repurchase  program
was approved in September, 1995. As of October 25, 1996, 13,090 shares remain to
be repurchased in the open market.

Note D - Earnings Per Share

Earnings per share of common stock have been  determined  by dividing net income
for the  period by the  weighted  average  number of shares of common  stock and
common stock equivalents  outstanding,  after consideration of the 3 for 2 stock
split  completed  on May 17,  1996.  Stock  options are regarded as common stock
equivalents  and are  therefore  considered  in both  primary and fully  diluted
earnings per share calculations. Common stock equivalents are computed using the
treasury stock method.

Note E - Stockholders' Equity

On April 16, 1996, the Board of Directors of Westco Bancorp,  Inc.  approved a 3
for 2 stock split, effected in the form of a stock dividend which was payable on
May  17,  1996 to  stockholders  of  record  on  April  30,  1996.  Accordingly,
stock-holders  of record received 1 additional  share for each 2 shares owned as
of April 30, 1996.  All prior share  related  information  has been  restated to
reflect the stock split effect, including earnings per share data.






                                      -4-


<PAGE> 7

                     Management's Discussions and Analysis
                of Financial Condition and Results of Operations

Liquidity and Capital Resources:
-------------------------------

     The  Company's  primary  sources  of  funds  are  deposits,  proceeds  from
principal  and  interest  payments on loans and  proceeds  from the  maturity of
investment securities.  While maturities and scheduled amortization of loans and
investment  securities  are a  predictable  source of funds,  deposit  flows and
mortgage prepayments are greatly influenced by general interest rates,  economic
conditions, and competition from various financial markets. The primary business
activity  of  the  Company,  that  of  making  conventional  mortgage  loans  on
residential housing, is likewise affected by economic conditions.

     The Association is required to maintain  minimum levels of liquid assets as
defined  by OTS  regulations.  This  requirement,  which  may be  varied  at the
direction of the OTS depending upon economic  conditions  and deposit flows,  is
based upon a percentage  of deposits  and  short-term  borrowings.  The required
ratio is currently  5.0%. The  Association  has  historically  maintained a high
level of liquid assets. At September 30, 1996, the Association's liquidity ratio
was 30.0%.

     The Company employs an Interest Rate Risk Management strategy of offsetting
interest  rate risk  embedded in the mortgage  portfolio by  maintaining a large
part of the assets in overnight  deposits  and a portfolio of U.S.  Treasury and
Agency  securities  with  "laddered"  maturities.  This  strategy  results  in a
relatively  short weighted  average  maturity of these assets.  At September 30,
1996,  these  investments  totalled  $77.7 million,  or 25.3% of assets,  with a
weighted average life of  approximately  11 months.  At December 31, 1995, these
investments  totalled $86.1 million, or 28.1% of assets, with a weighted average
life of approximately 12 months.

     The Company's most liquid assets are cash and cash equivalents.  The levels
of these assets are dependent on the Company's operating, financing, lending and
investing  activities  during any given period.  At September 30, 1996, cash and
cash equivalents totalled $4.4 million.

     The  primary  investing  activity  of the  Company  is the  origination  of
mortgage  loans.  During the nine months ended  September 30, 1996 and 1995, the
Company  disbursed  loans in the  amounts of $41.8  million  and $37.7  million,
respectively.  Other  investing  activities  include the purchase of  investment
securities, which totalled $44.0 million for the nine months ended September 30,
1996 and $64.4  million for the nine months  ended  September  30,  1995.  These
activities  in 1996 were  funded  primarily  by  principal  repayments  on loans
totalling $31.6 million and maturities of investment  securities totalling $50.0
million.  The nine month activity for 1995 was funded by principal repayments on
loans and maturites of investment securities in the amounts of $36.2 million and
$65.1 million respectively.

     At September 30, 1996, the Company had outstanding loan commitments of $7.0
million.  At that same date,  there were no  commitments  to  purchase  loans or
investment  securities.  The Company  anticipates  that it will have  sufficient
funds  available to meet its current loan  commitments.  Certificates of deposit
which  are  scheduled  to mature in one year or less  from  September  30,  1996
totalled $78.7 million.  Management  believes that a significant portion of such
deposits will remain with the Company.

     The  regulatory  standards of the Office of Thrift  Supervision  impose the
following capital requirements: a risk based capital standard expressed as a 

                                      -5-


<PAGE> 8



percent of risk based assets, a leverage ratio of core capital to total adjusted
assets,  and a tangible  capital ratio  expressed as a percent of total adjusted
assets.  As of  September  30, 1996,  the  Association  exceeded all  regulatory
capital standards.

    Capital requirements, ratios and balances are as follows:
<TABLE>
<CAPTION>

                                      Actual    Required  Actual    Excess
                            Capital   Capital   Capital   Capital   Capital
                           Required   Ratio     Amount    Amount    Amount
                           --------   -------   --------  -------   -------
At December 31, 1995:
<S>                          <C>      <C>       <C>       <C>       <C>    
     Tangible                1.5%     13.3%     $4,520    $40,013   $35,493
     Core                    3.0      13.3       9,040     40,013    30,973
     Risk Based:
        Tier I (core)        4.0      32.4       4,937     40,013    35,076
        Total                8.0      33.1       9,873     40,896    31,023

At September 30, 1996:
     Tangible                1.5%     12.8%     $4,512    $38,536   $34,024
     Core                    3.0      12.8       9,024     38,536    29,512
     Risk Based:
        Tier I (core)        4.0      29.2       5,271     38,536    33,265
        Total                8.0      29.9      10,542     39,419    28,877
</TABLE>

CHANGE IN FINANCIAL CONDITION OVER THE NINE MONTHS ENDED SEPTEMBER 30, 1996:
----------------------------------------------------------------------------

     Total  assets  increased  $1.6  million,  or 0.5%,  to  $307.8  million  at
September  30, 1996 from $306.1  million at December 31, 1995.  This increase is
primarily attributable to an increase in savings deposits of $2.3 million, which
was used to fund loan originations. 

     Loans receivable  increased $10.5 million,  or 5.0%, to $219.5 million from
$209.1  million at December  31,  1995.  The increase is primarily a function of
loan  disbursements  of $41.8 million offset by amortization  and prepayments of
$31.6  million.  The growth in loans  receivable  is due  primarily to continued
originations of one-to-four  family loans.  Since the beginning of the year, the
Association  has closed $5.0 million in new  construction  loans on  residential
housing,  $2.7 million in land  development  loans and $4.3 million in permanent
loans on residential  property of five or more dwelling  units.  During the same
period in 1995, the Association  closed $1.4 million in  construction  loans and
$1.1 million in loans on properties having five or more dwelling units.

     Investment  securities decreased $5.9 million, or 7.2%, to $76.2 million at
September 30, 1996 as additional  funds were  allocated to meet  increased  loan
demand.  Cash and cash  equivalents  totalled $4.4 million at September 30, 1996
compared to $8.4 million at December 31, 1995.

     Savings  deposits  increased  $2.3 million,  or 0.9%, to $253.0  million at
September  30,  1996 from  $250.6  million at  December  31,  1995.  The Company
experienced a net deposit outflow of $6.0 million (before interest credited) for
the nine month period ended September 30, 1996.

     The balance of non-performing loans, which represented all of the Company's
non-performing assets,  totalling $1.62 million at September 30, 1996, increased
$478,000,  or  41.9%  from  $1.14  million  at  December  31,  1995  due  to the
delinquency of an additional two residential loans totalling $660,000. The ratio
of  non-performing  loans to total loans was .74% at September 30, 1996 compared
to 0.55% at December 31, 1995 while the ratio of non-performing  assets to total
assets  was  0.53%  and  0.37% at  September  30,  1996 and  December  31,  1995
respectively.  The Company's  allowance for loan losses  totalled  $882,800,  or
54.5% of non-
                                         -6-


<PAGE> 9


performing loans, at September 30, 1996.

     During 1992, the Association's  ESOP borrowed  $1,840,000 from an unrelated
third  party to fund the  Association's  ESOP  plan  which  was  established  in
connection with the conversion.  During 1993,  Westco Bancorp,  Inc.  refinanced
this loan on essentially  the same terms as the original  lender.  The September
30, 1996 balance of $684,400 is eliminated in the consolidation of the Company's
financial  statements.  At December 31, 1995, the outstanding  balance  totalled
$871,000.

     Retained  earnings  increased $1.2 million,  or 3.3%, to $37.7 million as a
result of earnings for the nine month period ended  September 30, 1996 offset by
the  declaration of dividend  payments to  stockholders  during the same period.
Stockholders'  equity  totalled  $47.7  million  or  15.5% of  total  assets  at
September 30, 1996, and the book value per common share outstanding was $18.34.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 
-----------------------------------------------------------------------------
AND SEPTEMBER 30, 1995:
-----------------------

     Net income for the quarter ended  September 30, 1996 decreased  $949,000 to
$107,000  million from $1.06 million for the quarter  ended  September 30, 1995.
The decrease in  quarterly  earnings  resulted  from a $1.61  million  provision
recognized in the quarter for the estimated amount of the special  assessment by
the FDIC to recapitalize the Savings Association  Insurance Fund pursuant to the
requirements  of  legislation  signed  into  law on  September  30,  1996.  This
provision was offset by a corresponding $624,000 decrease in income tax expense.
(See "Recent Developments" for further information.)

     In the quarter  ended  September  30, 1996 net  interest  income  decreased
$28,000,  or 1.0%,  due to  reductions  in both the interest rate spread and net
interest  margin.  Interest  income  increased  $98,000 while  interest  expense
increased $126,000. The Company's interest rate spread averaged 2.84% during the
1996  third  quarter,  compared  to 3.05%  during the 1995  third  quarter.  The
Company's net interest margin averaged 3.62% for the quarter ended September 30,
1996  compared to 3.78% for the quarter  ended  September  30, 1995.  During the
second  quarter of 1996,  the Company's net interest rate spread  averaged 2.92%
and its net interest margin averaged 3.69%.

     During the three months ended  September 30, 1996 and September 30, 1995 no
additional  provision for loan losses was made based upon (1) the absence of any
specific  asset  quality  problems,  (2) the current  level of general loan loss
reserves, and (3) management's  assessment of the inherent risk in the Company's
mortgage portfolio and possible prospective economic and regulatory conditions.

     Non-interest  income for the third quarter of 1996  increased  $44,000 over
the same  quarter in 1995 due  primarily  to a $25,000  increase in realized and
unrealized  gains on investments  held for trading,  an $11,000 increase in loan
fees  and  service  charges,  a  $4,000  increase  in  commissions  on  sales of
investment and insurance products and a $4,000 increase in other income.

     Apart from the $1.61 million provision previously  mentioned,  non-interest
expense remained  relatively stable,  decreasing by $23,000 for the three months
ended September 30, 1996 from the level for the three months ended September 30,
1995.  Staffing  costs  decreased  $13,000,  occupancy  and  equipment  expenses
decreased 19,000, and other operating costs decreased  $12,000.  These decreases
were partially offset by a $14,000 increase in advertising costs.

     Income tax for the third quarter of 1996 decreased  $622,000 as a result of
all of the above.

                                        -7-


<PAGE> 10


COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 
----------------------------------------------------------------------------
AND SEPTEMBER 30, 1995:
-----------------------

     Net income for the nine months ended  September  30, 1996  decreased  $1.13
million to $2.13 million from $3.26 million for the nine months ended  September
30, 1996.  This decrease  primarily  resulted  from the $1.61 million  provision
recognized in the quarter for the estimated amount of the special  assessment by
the FDIC to recapitalize the Savings Association Insurance Fund partially offset
by a corresponding $624,000 decrease in income tax expense.

     Also,  during the nine months ended  September  30, 1996,  interest  income
increased  $674,000  from the  year  earlier,  and  interest  expense  increased
$852,000  resulting in a reduction of the  Company's  net interest  margin.  The
Company's net interest margin averaged 3.63% for the nine months ended September
30, 1996,  compared to 3.86% for the same period in 1995. The Company's interest
rate spread  averaged  2.85%  during the nine months ended  September  30, 1996,
compared to 3.16% during the same period in 1995.

     During the nine months  ended  September  30,  1996 and 1995 no  additional
provision for loan losses was made based upon the absence of any specific  asset
quality  problems,   the  current  level  of  general  loan  loss  reserves  and
management's assessment of the inherent risk in the Company's mortgage portfolio
and possible prospective economic and regulatory conditions.

     Non-interest income for the nine months of 1996 decreased $121,000 over the
same period in 1995,  due to a decrease  of $172,000 in the net of realized  and
urealized  gains and losses on investments  held for trading,  and a decrease in
commissions on sales of insurance and investment products of $4,000,  which were
partially  offset by a net increase in loan fees and service charges of $50,000,
due in part to  increased  lending  volume,  and an  increase of $6,000 in other
income.

     Non-interest  expense  increased  $1.56  million for the nine months  ended
September  30, 1996 from the level for the nine months ended  September 30, 1995
primarily  as a result of the $1.61  million  provision  for the FDIC's  special
assessment.  That provision and a $31,000  increase in advertising  expense were
offset by decreases in staffing  costs,  occupancy  and  equipment  costs,  data
processing  expense  and  general  operating  costs in the  amounts of  $14,000,
$24,000, $10,000 and $43,000 respectively.

     The  provision  for income  taxes  decreased  as a result of the  decreased
earnings  before  income  taxes.  State income taxes were reduced  significantly
because the income  derived  from the  portfolio of Treasury  securities  nearly
offset  taxable  income.  The  effective  tax  rate for the  nine  months  ended
September 30, 1996 and 1995 was 34.1% and 36.1% respectively.



                                       -8-


<PAGE> 11


IMPACT OF NEW ACCOUNTING STANDARDS
----------------------------------

     Statement  of  Financial   Accounting   Standards  No.  121  ("SFAS  121"),
"Accounting for the Impairment of Long-Lived  Assets and Long-Lived Assets to be
Disposed of," is effective for fiscal years  beginning  after December 15, 1995.
The  statement   requires  that  long-lived  assets  and  certain   identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  An  impairment  loss is  recognized  if the sum of the
expected  future cash flows is less than the carrying  amount of the asset.  The
Company  adopted SFAS 121  effective  January 1, 1996,  resulting in no material
impact  on  the  Company's   consolidated   financial  position  or  results  of
operations.

     In May, 1995, the FASB issued Statement of Financial  Accounting  Standards
No. 122 ("SFAS 122"), "Accounting for Mortgage Servicing Rights." This statement
amends  Statement of Financial  Accounting  Standards  No. 65,  "Accounting  for
Certain  Mortgage  Banking  Activities,"  to  require  that a  mortgage  banking
enterprise  recognize as separate  assets rights to service  mortgage  loans for
others  however those  servicing  rights are acquired.  SFAS 122 requires that a
mortgage banking enterprise assess its capitalized mortgage servicing rights for
impairment  based on the fair value of those  rights.  SFAS 122 is effective for
fiscal  years  beginning  after  December  15,  1995.  SFAS  122 will not have a
material  effect on the  Company's  financial  position or results of operations
since the Association does not service loans for others.

     In  October  1995,  the  FASB  issued  Statement  of  Financial  Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based  Compensation." This
statement  establishes a fair value-based method of accounting for stock options
which  encourages  employers to account for stock  compensation  awards based on
their fair value at the date the awards are granted. The resulting  compensation
award would be shown as an expense on the income statement.

     SFAS 123 also  permits  entities  to continue  to use the  intrinsic  value
method,  allowing  them to continue to apply  current  accounting  requirements,
which  generally  result in no  compensation  cost for most fixed  stock  option
plans.   If  the  intrinsic   value  method  is  retained,   SFAS  123  requires
significantly expanded disclosure,  including disclosure of the pro-forma amount
of net income and earnings per share as if the fair value-based method were used
to account for stock-based compensation.  SFAS 123 is effective for fiscal years
beginning  after  December  15,  1995,  however,  employers  will be required to
include in that year's financial  statements,  information about options granted
in 1995.  The  Company  has  determined  that it will  continue to apply the APB
Opinion #25 method in preparing its consolidated financial statements.

     In June 1996, the FASB issued Statement of Financial  Accounting  Standards
No. 125 ("SFAS  125"),  "Accounting  for  Transfers  and  Servicing of Financial
Assets  and   Extinguishments   of  Liabilities."   This  statement   applies  a
"financial-components  approach"  in  recognizing  assets and  liabilities  that
focuses on control to recognize  financial  assets and  liabilities.  Under SFAS
125, an entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred.  An entity ceases to recognize  assets when control
has been  surrendered,  and it ceases  to  recognize  liabilities  when they are
extinguished. SFAS 125 establishes standards to distinguish between transfers of
financial  assets  that are sales and  transfers  of  financial  assets that are
secured  borrowings.  SFAS 125 is  effective  for  transfers  and  servicing  of
financial assets and extinguishments of liabilities occurring after December 31,
1996.  The Company  does not expect  this  pronouncement  to have a  significant
impact on its consolidated financial condition or results of operations.

                                      -9-


<PAGE> 12




RECENT DEVELOPMENTS
-------------------

     Legislation  regarding  the  recapitalization  of the  Savings  Association
Insurance  Fund (SAIF) of the FDIC was signed by the  President on September 30,
1996. As a result,  the disparity in bank and thrift deposit insurance  premiums
should be  reduced  significantly.  Beginning  January  1,  1997,  the  FDIC has
estimated that thrifts will pay a rate of 6.5 cents per $100 of deposits (a 16.6
cent reduction  from the current  assessment of 23 cents) and banks will pay 1.3
cents per $100 of deposits to fund FICO bond  interest  payments  until the year
2000 or the date at which the last federal savings  association ceases to exist.
At that time the payments will be shared on a pro-rata  basis.  Also, the merger
of SAIF and BIF,  as  addressed  in the  legislation,  depends  upon  subsequent
legislation to eliminate the federal thrift charter.  Management  cannot predict
the impact future  legislation or regulatory  changes may have on the operations
of the Company.

     Legislation  regarding bad debt recapture has been passed.  The legislation
requires  recapture of reserves  accumulated  after 1987.  The  recapture tax on
post-1987  reserves  must be paid over a six year period  starting in 1996.  The
payment of the tax can be  deferred  in each of 1996 and 1997 if an  institution
originates at least the same average annual  principal  amount of mortgage loans
that it originated in the six years prior to 1996.  Management  does not believe
that this  legislation  will have a  material  impact on the  operations  of the
Company.






                                       -10-


<PAGE> 13



                            PART II - OTHER INFORMATION

                                WESTCO BANCORP, INC.

Item 1.   LEGAL PROCEEDINGS
          -----------------

From  time to time,  the  Association  is a party to  legal  proceedings  in the
ordinary  course of business,  wherein it enforces its  security  interest.  The
Company  and the  Association  are not  engaged  in any legal  proceedings  of a
material nature at the present time.

Item 2.   CHANGES IN SECURITIES - Not applicable
          ---------------------

Item 3.   DEFAULTS UPON SENIOR SECURITIES - Not applicable
          -------------------------------

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not applicable
          ---------------------------------------------------

Item 5.   OTHER INFORMATION
          -----------------

STOCK OPTIONS

     On September  6, 1996,  in  accordance  with the  provisions  of the Westco
Bancorp,  Inc. 1992 Incentive Stock Option Plan, which was approved by a vote of
the  shareholders  on September 29, 1992,  Executive  Vice  President,  Gregg P.
Goossens exercised options on 1,500 shares of Common Stock granted to him.

STOCK REPURCHASE PROGRAM

     The Company began its current  common stock  repurchase  plan in September,
1995. As of October 25, 1996, 13,090 shares remain to be repurchased.

COMMON STOCK SHARES OUTSTANDING

     As a result of the exercise of options and shares repurchased in accordance
with the  repurchase  plan  previously  described,  the number of common  shares
outstanding on October 25, 1996 totalled 2,584,143 shares.

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

          (a)  The following exhibits are filed as part of this report:

          3.1  Certificate of Incorporation of Westco Bancorp, Inc.*
          3.2  Bylaws of Westco Bancorp, Inc.*
          4.0  Stock Certificte of Westco Bancorp, Inc.*
         11.0  Computation of earnings per share (filed herewith)
         27.0  Financial Data Schedule (filed herewith)

         *  Incorporated  herein by reference in this document from the Exhibits
            to Form S-1, Registration Statement, filed on March 23, 1992 and any
            amendments thereto, Registration No. 33-46441.

          (b)  No reports on Form 8-K were filed this quarter.



                                       -11-


<PAGE> 14




                                   SIGNATURES



     Pursuant to the  requirements  of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                        WESTCO BANCORP, INC.
                                        --------------------
                                            Registrant



DATE:  October 25, 1996        BY:  (s) /s/ David C. Burba
                                        ------------------
                                        David C. Burba
                                        President and
                                        Chief Executive Officer



DATE:  October 25, 1996        BY:  (s) /s/ Richard A. Brechlin
                                        -----------------------
                                        Richard A. Brechlin
                                        Executive Vice President and
                                        Chief Financial Officer



DATE:  October 25, 1996        BY:  (s) /s/ Kenneth J. Kaczmarek
                                        ------------------------
                                        Kenneth J. Kaczmarek
                                        Vice President and
                                        Chief Accounting Officer





                                      -12-