SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

(Mark One)

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

                  For the quarterly period ended June 30, 1999


                                       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 0-20082

                                Alliance Bancorp
             (Exact name of registrant as specified in its charter)


         Delaware                                                36-3811768
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)

One Grant Square, Hinsdale, Illinois                                60521
(Address of principal executive offices)                          (Zip Code)


                                 (630) 323-1776
              (Registrant's telephone number, including area code)

       Indicate  by check  mark  whether  the  registrant  (1) has filed all the
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______

       Indicate the number of shares outstanding of each of the issuer's classes
of stock, as of the latest practicable date.

       Common Stock, $0.01 par value -11,021,628 shares outstanding as of August
7, 1999.


<PAGE>




                        Alliance Bancorp and Subsidiaries
                                    Form 10-Q

                                      Index

PART I.     FINANCIAL INFORMATION                                           Page

Item 1.     Financial Statements (unaudited)

            Consolidated Statements of Financial Condition
            as of June 30, 1999 and December 31, 1998                          1

            Consolidated Statements of Income for the Three
            and Six Months Ended June 30, 1999 and 1998                        2

            Consolidated Statements of Changes in Stockholders' Equity
            for the Six Months Ended June 30, 1999 and 1998                    3

            Consolidated Statements of Cash Flows for the
            Six Months Ended June 30, 1999 and 1998                            4

            Notes to Consolidated Financial Statements                         5

Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                          8

Item 3.     Quantitative and Qualitative Disclosures About Market Risk
            See "Management's Discussion and Analysis of Financial Condition
            and Results of Operations," "Asset/Liability Management"          14

PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings                                                 20

Item 2.     Changes in Securities and Use of Proceeds                         20

Item 3.     Defaults upon Senior Securities                                   20

Item 4.     Submission of Matters to a Vote of Security Holders               20

Item 5.     Other Information                                                 21

Item 6.     Exhibits and Reports on Form 8-K                                  22

            Signature Page                                                    23


<PAGE>






Alliance Bancorp and Subsidiaries
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>



                                                                                          June 30,    December 31,
(In thousands, except share data)                                                           1999          1998
--------------------------------------------------------------------------------------------------------------------
                                                                                                 (unaudited)
<S>                                                                                 <C>                    <C>
Assets
Cash and due from banks                                                             $        9,273         17,195
Interest-bearing deposits                                                                    1,262         63,802
Investment securities available for sale, at fair value                                     84,579         61,516
Mortgage-backed securities available for sale, at fair value                               468,869        332,347
Loans, net of allowance for losses of $6,307 at
   June 30, 1999 and $6,350 at December 31, 1998                                         1,275,550      1,333,401
Accrued interest receivable                                                                 11,026         10,759
Real estate                                                                                 21,618         20,185
Premises and equipment, net                                                                 12,684         12,590
Stock in Federal Home Loan Bank of Chicago, at cost                                         25,572         24,523
Due from broker                                                                                  -         71,336
Other assets                                                                                42,160         34,842
--------------------------------------------------------------------------------------------------------------------
                                                                                    $    1,952,593      1,982,496
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Liabilities:
   Deposits                                                                         $    1,231,273      1,298,044
   Borrowed funds                                                                          516,977        464,450
   Advances by borrowers for taxes and insurance                                            12,418         12,935
   Accrued expenses and other liabilities                                                   18,404         21,130
--------------------------------------------------------------------------------------------------------------------
       Total liabilities                                                                 1,779,072      1,796,559
--------------------------------------------------------------------------------------------------------------------

Stockholders' Equity:
   Preferred stock, $.01 par value; authorized 1,500,000 shares; none outstanding                -              -
   Common stock, $.01 par value; authorized 21,000,000 shares;
     11,659,211 shares issued and 11,020,628 outstanding at June 30, 1999
     11,617,903 shares issued and 11,463,881 outstanding at December 31, 1998                  117            116
   Additional paid-in capital                                                              107,602        107,130
   Retained earnings, substantially restricted                                              86,227         80,219
   Treasury stock, at cost; 638,583 shares at June 30, 1999 and
     154,022 at December 31, 1998                                                          (11,202)        (1,511)
   Accumulated other comprehensive loss                                                     (9,223)           (17)
--------------------------------------------------------------------------------------------------------------------
       Total stockholders' equity                                                          173,521        185,937
--------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
--------------------------------------------------------------------------------------------------------------------
                                                                                    $    1,952,593      1,982,496
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       1

<PAGE>


<TABLE>
<CAPTION>

Alliance Bancorp and Subsidiaries
Consolidated Statements of Income
                                                               Three Months Ended             Six Months Ended
                                                                    June 30,                      June 30,
(In thousands, except per share amounts)                       1999         1998             1999         1998
--------------------------------------------------------------------------------------------------------------------
                                                                                  (unaudited)
<S>                                                           <C>           <C>              <C>          <C>
Interest Income:
   Loans                                                 $     23,437       23,776           47,312       47,293
   Mortgage-backed securities                                   7,182        7,391           12,584       12,568
   Investment securities                                        1,842        2,621            3,331        5,154
   Interest-bearing deposits                                      441          566            2,172        2,011
--------------------------------------------------------------------------------------------------------------------
     Total interest income                                     32,902       34,354           65,399       67,026
--------------------------------------------------------------------------------------------------------------------

Interest Expense:
   Deposits                                                    13,043       15,168           26,682       30,339
   Borrowed funds                                               6,618        6,131           12,733       10,690
   Collateralized mortgage obligations                              -           15                -           38
--------------------------------------------------------------------------------------------------------------------
     Total interest expense                                    19,661       21,314           39,415       41,067
--------------------------------------------------------------------------------------------------------------------
     Net interest income                                       13,241       13,040           25,984       25,959
     Provision for loan losses                                     50           56              100          162
--------------------------------------------------------------------------------------------------------------------
     Net interest income after provision for loan              13,191       12,984           25,884       25,797
     losses
--------------------------------------------------------------------------------------------------------------------

Noninterest Income:
   Gain on sales of loans                                          87          113              469          152
   Gain (loss) on sales of mortgage-backed securities
      available for sale                                          (17)           -              (22)         326
   Gain on sales of investment securities available
      for sale                                                      -            -                -          178
   Income from real estate operations                           1,217          206            1,728          901
   Servicing fee income                                            83           78              231          152
   ATM fee income                                                 547          507            1,027          968
   Other fees and commissions                                   4,710        3,793            9,514        8,060
   Other                                                           56          153              436          289
--------------------------------------------------------------------------------------------------------------------
     Total noninterest income                                   6,683        4,850           13,383       11,026
--------------------------------------------------------------------------------------------------------------------

Noninterest Expense:
   Compensation and benefits                                    6,962        8,420           14,369       14,647
   Occupancy expense                                            1,842        1,556            3,616        3,062
   Federal deposit insurance premiums                             192          203              393          404
   Advertising expense                                            332          299              542          479
   ATM expense                                                    340          443              680          836
   Computer services                                              327          594              664        1,005
   Other                                                        2,780        3,196            5,387        5,373
--------------------------------------------------------------------------------------------------------------------
     Total noninterest expense                                 12,775       14,711           25,651       25,806
--------------------------------------------------------------------------------------------------------------------
     Income before income taxes                                 7,099        3,123           13,616       11,017
   Income tax expense                                           2,592        1,382            4,508        4,439
--------------------------------------------------------------------------------------------------------------------
     Net income                                          $      4,507        1,741            9,108        6,578
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
   Basic earnings per share                              $       0.41         0.15             0.81         0.58
   Diluted earnings per share                            $       0.39         0.14             0.78         0.55
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       2
<PAGE>



<TABLE>
<CAPTION>


Alliance Bancorp and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
                                                                                                        Common    Accumulated
                                                                  Additional                             Stock          Other
                                          Comprehensive   Common     Paid-in   Retained    Treasury  Purchased  Comprehensive
(In thousands, except per share amounts)         Income    Stock     Capital   Earnings       Stock    By ESOP  Income (Loss)  Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>       <C>         <C>        <C>         <C>        <C>
                                                                                        (unaudited)
Six Months Ended June 30, 1998
Balance at December 31, 1997                $               114     104,178     70,851      (1,527)      (320)    1,630      174,926
Net income                                       6,578        -          -       6,578           -          -         -        6,578
Other comprehensive income, net of tax
 Change in unrealized gain (loss) on
 securities available for sale, net of            (962)       -          -           -           -          -      (962)       (962)
  reclassification adjustment
                                              ------------
Total comprehensive income                       5,616
Cash dividends declared, $0.25 per share                      -          -      (2,867)          -          -         -      (2,867)
Treasury stock distributed under employee
  benefit plan                                                -        (17)           -         16          -         -          (1)
Issuance of stock (71,866 shares)                             1       1,499           -          -          -         -        1,500
Proceeds from exercise of stock options                       1         495           -          -          -         -          496
Tax benefit from stock related compensation                   -         645           -          -          -         -          645
Principal payment on ESOP loan                                -          -            -          -        320         -          320
------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998                    $               116     106,800      74,562      (1,511)        -       668      180,635
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended June 30, 1999
Balance at December 31, 1998                $               116     107,130      80,219      (1,511)        -       (17)     185,937
Net income                                       9,108        -          -        9,108           -         -         -        9,108
Other  comprehensive income, net of tax
 Change in unrealized gain (loss) on
 securities available for sale, net of          (9,206)       -          -           -           -          -    (9,206)     (9,206)
  reclassification adjustment
                                              ----------
Total comprehensive loss                           (98)
Cash dividends declared, $0.28 per share                      -          -      (3,100)          -          -         -      (3,100)
Purchase of treasury stock                                    -          -           -      (9,691)         -         -      (9,691)
Proceeds from exercise of stock options                       1        278           -           -          -         -          279
Tax benefit from stock related                                -        194           -           -          -         -          194
compensation
------------------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1999                    $               117    107,602      86,227     (11,202)         -    (9,223)     173,521
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>
See accompanying notes to unaudited consolidated financial statements.

                                       3
<PAGE>



<TABLE>
<CAPTION>

Alliance Bancorp and Subsidiaries
Consolidated Statements of Cash Flows

                                                                                             Six Months Ended
                                                                                                 June 30,
(In thousands)                                                                              1999          1998
--------------------------------------------------------------------------------------------------------------------
                                                                                                (unaudited)
<S>                                                                                          <C>             <C>
Cash Flows From Operating Activities:
Net income                                                                         $         9,108         6,578
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization                                                                1,274           898
Provision for loan losses                                                                      100           162
Amortization of premiums, discounts, and deferred loan fees                                    808           620
Originations of loans held for sale                                                       (349,470)     (393,663)
Sale of loans originated for resale                                                        438,411       306,608
Gain on sales of loans                                                                        (469)         (152)
(Gain) loss on sales of mortgage-backed securities available for sale                           22          (326)
Gain on sales of investment securities available for sale                                        -          (178)
Increase  in accrued interest receivable                                                      (267)       (2,623)
Increase in other assets                                                                    (2,215)      (11,323)
Increase (decrease) in accrued expenses and other liabilities                               (2,470)       10,928
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                                         94,832       (82,471)
--------------------------------------------------------------------------------------------------------------------

Cash Flows From Investing Activities:
Loans originated or purchased for investment                                              (223,796)     (196,372)
Purchases of:
   Mortgage-backed securities available for sale                                          (237,351)     (359,763)
   Investment securities available for sale                                                (64,655)      (66,479)
   Stock in Federal Home Loan Bank of Chicago                                               (2,500)      (10,173)
   Premises and equipment                                                                   (1,368)       (1,749)
Proceeds from sale of:
   Mortgage-backed securities available for sale                                            84,665        51,046
   Investment securities available for sale                                                      -           234
   Stock in Federal Home Loan Bank of Chicago                                                1,451           370
   Loans held for investment                                                                14,594         3,286
Proceeds from maturities of investment securities available for sale                        39,425        75,487
Net (increase) decrease in real estate joint ventures                                       (1,786)          350
Principal collected on loans                                                               178,170       188,210
Principal collected on mortgage-backed securities available for sale                        75,192        44,214
--------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                     (137,959)     (271,339)
--------------------------------------------------------------------------------------------------------------------

Cash Flows From Financing Activities:
Net increase (decrease) in deposits                                                        (66,771)       12,635
Proceeds from borrowed funds                                                                59,327       395,287
Repayment of borrowed funds                                                                 (6,800)      (78,500)
Repayment of collateralized mortgage obligations                                                 -          (535)
Net increase (decrease) in advance payments by borrowers for taxes and insurance              (517)          140
Purchase of treasury stock                                                                  (9,691)            -
Proceeds from sale of treasury stock                                                             -         1,500
Cash dividends paid                                                                         (3,162)       (2,867)
Decrease in ESOP loan                                                                            -           320
Proceeds from exercise of stock options                                                        279           496
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities                                        (27,335)      328,476
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                                                  (70,462)      (25,334)
Cash and cash equivalents at beginning of period                                            80,997        58,513
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                          $       10,535        33,179
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
   Interest                                                                         $       39,270        40,225
   Income taxes                                                                              6,485         7,343

Supplemental Disclosures of Noncash Activities:
Loans exchanged for mortgage-backed securities                                      $          473        11,527
Additions to real estate acquired in settlement of loans                            $          208           740
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
                                       4

<PAGE>





Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)

Six Months Ended June 30, 1999 and 1998

(1)  Basis of Presentation

    The  accompanying  unaudited  consolidated  financial  statements  have been
prepared in accordance with generally accepted  accounting  principles  ("GAAP")
for interim  financial  information  and with the  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 GAAP for complete financial statements. In
the opinion of management,  all adjustments (consisting of only normal recurring
accruals) necessary for a fair presentation have been included.

    The  unaudited  consolidated  financial  statements  include the accounts of
Alliance Bancorp (the "Company") and its wholly-owned subsidiaries. All material
intercompany balances and transactions have been eliminated.

(2)  Comprehensive Income

    The   following   table  sets  forth  the   required   disclosures   of  the
reclassification   amounts  as  presented  in  the   statements  of  changes  in
stockholders'  equity and the related tax effects allocated to each component of
other comprehensive income for the periods indicated:
<TABLE>
<CAPTION>

                                                                             Before          Tax           Net
                                                                               Tax        (Expense)       of Tax
(In thousands)                                                               Amount       or Benefit      Amount
-------------------------------------------------------------------- ---- -------------- ------------- -------------
<S>                                                                              <C>            <C>             <C>
Six Months Ended June 30, 1998
Disclosure of reclassification amount:
Unrealized holding gain (loss) on securities arising during
      the period                                                       $      (1,961)          696        (1,265)
Less: reclassification adjustment for gain (loss) included in
      net income                                                                 504          (201)          303
-------------------------------------------------------------------- ---- -------------- ------------- -------------
Net unrealized gain (loss) on securities                               $      (1,457)          495          (962)
-------------------------------------------------------------------- ---- -------------- ------------- -------------

Six Months Ended June 30, 1999
Disclosure of reclassification amount:
Unrealized holding gain (loss) on securities arising during
      the period                                                       $     (14,141)        4,949        (9,192)
Less: reclassification adjustment for gain (loss) included in
      net income                                                                 (22)            8           (14)
-------------------------------------------------------------------- ---- -------------- ------------- -------------
Net unrealized gain (loss) on securities                               $     (14,163)        4,957        (9,206)
-------------------------------------------------------------------- ---- -------------- ------------- -------------
</TABLE>

                                       5

<PAGE>
Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
(unaudited)

Six Months Ended June 30, 1999 and 1998

(3)  Earnings per Share

    The following table sets forth the computation of basic and diluted earnings
per share for the periods indicated:
<TABLE>
<CAPTION>

                                                                Three Months Ended            Six Months Ended
                                                                     June 30,                     June 30,
                                                            ---------------------------- ---------------------------
(In thousands, except share data)                               1999          1998           1999          1998
------------------------------------------------------ ---- ------------- -------------- ------------- -------------
<S>                                                               <C>           <C>            <C>           <C>
Numerator:
  Net income                                             $         4,507          1,741         9,108         6,578
Denominator:
  Basic earnings per share-weighted average shares            11,042,591     11,364,946    11,217,619    11,327,323
  Effect of dilutive securities-stock options                    550,956        644,909       521,192       641,812
  Diluted   earnings  per   share-adjusted   weighted
    average shares                                            11,593,547     12,009,855    11,738,811    11,969,135
Basic earnings per share                                 $          0.41           0.15          0.81          0.58
Diluted earnings per share                               $          0.39           0.14          0.78          0.55

</TABLE>


(4)  Commitments and Contingencies

    At June 30, 1999,  the Company had  outstanding  commitments to originate or
purchase  loans of $115.9  million.  Unused equity lines of credit  available to
customers were $102.6 million at June 30, 1999.

(5)  Operating Segments

    The Company's operations include two primary segments:  banking and mortgage
brokerage.  Through  its  banking  subsidiary's  network  of 20  retail  banking
facilities in Chicago;  north,  west and  southwestern  Cook County;  and DuPage
County in Illinois,  the Company provides traditional community banking services
such as  accepting  deposits and making  loans.  Mortgage  brokerage  activities
conducted through the Bank's  subsidiary,  Preferred Mortgage  Associates,  Ltd.
("Preferred")  include the origination of primarily  residential  mortgage loans
for  sale to  various  investors  as  well as to the  Bank.  The  Company's  two
reportable  segments are strategic business units that are separately managed as
they  offer  different  products  and  services  and  have  different  marketing
strategies.  Smaller  operating  segments  are combined and consist of financial
advice  and   brokerage   services,   insurance,   joint   venture  real  estate
developments, and holding company investments.  Assets and results of operations
are based on generally accepted accounting principles, with profit and losses of
equity  method  investees  excluded.  Inter-segment  revenues  and  expenses are
eliminated in reporting consolidated results of operations.

<TABLE>
<CAPTION>

     Operating segment information is as follows:
                                                                Mortgage               Inter-segment Consolidated
(In thousands)                                     Banking     Brokerage        Other  Eliminations         Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>          <C>          <C>             <C>
Three Months Ended June 30, 1999
Interest income                            $        32,951           486          121         (656)        32,902
Interest expense                                    19,671           537          109         (656)        19,661
--------------------------------------------------------------------------------------------------------------------
Net interest income (expense)                       13,280          (51)           12            -         13,241
Provision for loan losses                               50             -            -            -             50
--------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
   loan losses                                      13,230          (51)           12            -         13,191
Other fees and commissions                           1,358         3,696          681         (395)         5,340
Other noninterest income                               118             -        1,275          (50)         1,343
Noninterest expense                                  8,726         3,779          715         (445)        12,775
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                    5,980         (134)        1,253            -          7,099
Income tax expense (benefit)                         2,148          (53)          497            -          2,592
--------------------------------------------------------------------------------------------------------------------
Net income (loss)                          $         3,832          (81)          756            -          4,507
--------------------------------------------------------------------------------------------------------------------
Assets                                     $     1,926,441        58,641       37,485      (69,974)     1,952,593
--------------------------------------------------------------------------------------------------------------------
Investment in equity method investees      $         9,086             -      164,431            -              -
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       6
<PAGE>


<TABLE>
<CAPTION>

Alliance Bancorp and Subsidiaries
Notes to Consolidated Financial Statements - (Continued)
(unaudited)

Six Months Ended June 30, 1999 and 1998

                                                                Mortgage               Inter-segment Consolidated
(In thousands)                                     Banking     Brokerage        Other  Eliminations         Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>          <C>          <C>             <C>
Six Months Ended June 30, 1999
Interest income                            $        65,178         1,558          336       (1,673)        65,399
Interest expense                                    39,442         1,434          212       (1,673)        39,415
--------------------------------------------------------------------------------------------------------------------
Net interest income                                 25,736           124          124             -        25,984
Provision for loan losses                              100             -            -             -           100
--------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
   loan losses                                      25,636           124          124             -        25,884
Other fees and commissions                           2,646         8,132        1,249       (1,255)        10,772
Other noninterest income                               645             -        2,066         (100)         2,611
Noninterest expense                                 17,989         7,680        1,337       (1,355)        25,651
--------------------------------------------------------------------------------------------------------------------
Income before income taxes                          10,938           576        2,102             -        13,616
Income tax expense                                   3,449           224          835             -         4,508
--------------------------------------------------------------------------------------------------------------------
Net income                                 $         7,489           352        1,267             -         9,108
--------------------------------------------------------------------------------------------------------------------
Assets                                     $     1,926,441        58,641       37,485      (69,974)     1,952,593
--------------------------------------------------------------------------------------------------------------------
Investment in equity method investees      $         9,086             -      164,431             -             -
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------

Three Months Ended June 30, 1998
Interest income                            $        34,177         1,490          344       (1,657)        34,354
Interest expense                                    21,366         1,476          124       (1,652)        21,314
--------------------------------------------------------------------------------------------------------------------
Net interest income                                 12,811            14          220           (5)        13,040
Provision for loan losses                               56             -            -            -             56
--------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
   loan losses                                      12,755            14          220           (5)        12,984
Other fees and commissions                           1,293         3,534          619       (1,068)         4,378
Other noninterest income                               369             -          189          (86)           472
Noninterest expense                                 10,949         3,121        1,800       (1,159)        14,711
--------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                    3,468           427        (772)            -          3,123
Income tax expense                                   1,113           167          102            -          1,382
--------------------------------------------------------------------------------------------------------------------
Net income (loss)                          $         2,355           260        (874)            -          1,741
--------------------------------------------------------------------------------------------------------------------
Assets                                     $     2,004,851       137,580       41,837     (116,071)     2,068,197
--------------------------------------------------------------------------------------------------------------------
Investment in equity method investees      $        10,497             -      160,463            -              -
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------

Six Months Ended June 30, 1998
Interest income                            $        66,663         2,228          738       (2,603)        67,026
Interest expense                                    41,207         2,198          253       (2,591)        41,067
--------------------------------------------------------------------------------------------------------------------
Net interest income                                 25,456            30          485          (12)        25,959
Provision for loan losses                              162             -            -            -            162
--------------------------------------------------------------------------------------------------------------------
Net interest income after provision for
   loan losses                                      25,294            30          485          (12)        25,797
Other fees and commissions                           2,511         6,751        1,134       (1,216)         9,180
Other noninterest income                               985             -        1,033         (172)         1,846
Noninterest expense                                 18,585         6,064        2,557       (1,400)        25,806
--------------------------------------------------------------------------------------------------------------------
Income before income taxes                          10,205           717           95            -         11,017
Income tax expense                                   3,716           280          443            -          4,439
--------------------------------------------------------------------------------------------------------------------
Net income (loss)                          $         6,489           437        (348)            -          6,578
--------------------------------------------------------------------------------------------------------------------
Assets                                     $     2,004,851       137,580       41,837     (116,071)     2,068,197
--------------------------------------------------------------------------------------------------------------------
Investment in equity method investees      $        10,497             -      160,463            -              -
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>



(6)  Reclassifications

    Certain  reclassifications  of prior year  amounts have been made to conform
with the current year presentation.

                                       7

<PAGE>



Alliance  Bancorp  and  Subsidiaries
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

General

     Alliance Bancorp ( the "Company") is a registered  savings and loan holding
company  incorporated  under the laws of the state of Delaware and is engaged in
the business of providing  financial  service products to the public through its
wholly-owned subsidiary, Liberty Federal Bank (the "Bank").

     The Bank,  a Federal  savings  bank  chartered  under the  authority of the
Office of Thrift  Supervision  ("OTS"),  originally  was organized in 1934,  and
changed its charter  from a federal  savings and loan  association  to a federal
savings  bank in 1991.  The Bank is a  member  of the  Federal  Home  Loan  Bank
("FHLB")  System and its deposit  accounts are insured to the maximum  allowable
amount  by the  Federal  Deposit  Insurance  Corporation  ("FDIC").  The Bank is
regulated  by the OTS and the  FDIC and is  further  regulated  by the  Board of
Governors of the Federal Reserve System as to reserves required to be maintained
against deposits and certain other matters.

     The  Bank is a  community-oriented  company  providing  financial  services
through twenty full service retail banking  facilities in Chicago;  north,  west
and southwestern Cook County;  and DuPage County in Illinois.  The Bank offers a
variety of deposit  products  in an  attempt to attract  funds from the  general
public in highly competitive  market areas surrounding its offices.  In addition
to deposit  products,  the Bank also offers its customers  financial  advice and
security brokerage services through INVEST Financial Corporation ("INVEST"). The
Bank invests its retail  deposits  primarily  in mortgage  and  consumer  loans,
investment  securities  and  mortgage-backed  securities,  secured  primarily by
one-to four-family residential loans.

     The  earnings  of the  Bank are  primarily  dependent  on its net  interest
income, which is the difference between the interest income earned on its loans,
mortgage-backed  and investment  securities  portfolios,  and its cost of funds,
consisting of the interest paid on its deposits and borrowings.

     On May 31, 1995, the Company acquired Preferred Mortgage  Associates,  Ltd.
("Preferred"),  one of the largest mortgage brokers in the Chicago  metropolitan
area. Preferred has four mortgage origination offices including its headquarters
in Downers  Grove,  Illinois.  The  acquisition  of  Preferred  has  resulted in
increases in both noninterest income and noninterest expense.

     The Bank's  earnings are also  affected by  noninterest  income,  including
income  related  to loan  origination  fees  contributed  by  Preferred  and the
noncredit  consumer related financial  services offered by the Bank, such as net
commissions received by the Bank from securities brokerage services, commissions
from the sale of  insurance  products,  loan  servicing  income,  fee  income on
transaction  accounts,  and  interchange  fees from its shared ATMs.  The Bank's
noninterest  income  has also been  affected  by gains  from the sale of various
assets, including loans, mortgage-backed securities, investment securities, loan
servicing, and real estate. Noninterest expense consists principally of employee
compensation  and  benefits,   occupancy  expense,   federal  deposit  insurance
premiums,  and  other  general  and  administrative  expenses  of the  Bank  and
Preferred.

     On  February  10,  1997,  the  Company  (then  named   Hinsdale   Financial
Corporation) and Liberty Bancorp,  Inc., the holding company for Liberty Federal
Savings Bank, consummated a merger in a stock-for-stock  exchange. In connection
with that  transaction,  Liberty  Federal  Savings Bank was merged into Hinsdale
Federal Bank for Savings, and the resulting Bank operates under the name Liberty
Federal Bank.  The  transaction  was accounted for under the purchase  method of
accounting and 1.054 shares of Alliance  Bancorp common stock were exchanged for
each share of Liberty  Bancorp  outstanding  common stock.  There were 3,930,405
shares of common  stock of  Alliance  Bancorp  issued  for  3,733,013  shares of
Liberty  Bancorp common stock.  Liberty Bancorp had total assets of $680 million
and  deposits of $516  million at the date of the merger.  The fair value of the
net assets acquired  approximated the purchase price,  accordingly;  no goodwill
was recorded.

                                       8
<PAGE>




     On June 30, 1998,  the Company  consummated  the  acquisition  of Southwest
Bancshares,   the  holding  company  for  Southwest  Federal  Savings  and  Loan
Association of Chicago ("the  Association").  The  transaction was accounted for
under  the  pooling-of-interests  method  of  accounting  and  1.1981  shares of
Alliance  Bancorp  common  stock  were  exchanged  for each  share of  Southwest
Bancshares  outstanding  common stock.  There were 3,411,500  shares of Alliance
Bancorp shares issued for 2,847,585  shares of Southwest  Bancshares.  Southwest
Bancshares  had total assets of $391 million and deposits of $308 million at the
date of acquisition.  The consolidated  financial statements of Alliance Bancorp
for periods prior to the combination  have been restated to include the accounts
and the results of operations of Southwest Bancshares for all periods presented.

    The Bank's results of operations are also significantly  affected by general
economic and  competitive  conditions,  particularly  changes in market interest
rates, government policies and actions of regulatory authorities.

Forward-Looking Statements

    This  Quarterly  Report on Form  10-Q may  contain  certain  forward-looking
statements  consisting  of estimates  with respect to the  financial  condition,
results of  operations  and  business of the Company that are subject to various
factors  which  could  cause  actual  results  to differ  materially  from these
estimates.  These  factors  include,  but are not limited to,  general  economic
conditions,  changes in interest rates,  deposit flows, loan demand, real estate
values,  and  competition;   changes  in  accounting  principles,  policies,  or
guidelines;   changes  in  legislation  or  regulation;   and  other   economic,
competitive,  governmental,  regulatory, and technological factors affecting the
Company's  operations,  pricing,  products  and  services,  including  Year 2000
issues.

Liquidity/Capital Resources

    The Company's primary sources of funds are deposits,  borrowings,  principal
and interest  payments on loans and  mortgage-backed  securities and the sale of
loans, mortgage-backed and investment securities. While maturities and scheduled
amortization of loans and mortgage-backed securities are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by interest
rate cycles and economic conditions.

    The Bank is required by regulation to maintain  specific  minimum  levels of
liquid investments. Regulations currently in effect require the Bank to maintain
liquid  assets at least equal to 4.0% of the sum of its average daily balance of
net  withdrawable  accounts  and  short-term  borrowed  funds.  This  regulatory
requirement  may be  changed  from  time to time by the OTS to  reflect  current
economic  conditions and deposit flows.  The Bank's average  liquidity ratio was
5.29% for the quarter ended June 30, 1999.

    The  Company's  most  liquid  assets  are cash and cash  equivalents,  which
include   investments   in   highly   liquid,    short-term    investments   and
interest-bearing  deposits.  The  levels of these  assets are  dependent  on the
Company's  operating,  financing,  lending and investing  activities  during any
given period. At June 30, 1999, cash and cash equivalents totaled $10.5 million.

    Liquidity  management for the Company is both a daily and long-term function
of the Company's  management  strategy.  Excess funds are generally  invested in
short-term  investments  and  interest-bearing  deposits.  In the event that the
Company  should  require funds beyond its ability to generate  them  internally,
additional  sources of funds are available  through the use of Federal Home Loan
Bank of Chicago ("FHLB") advances.

    The Company's cash flows are comprised of three classifications:  cash flows
from operating activities,  cash flows from investing activities, and cash flows
from financing activities. Net cash related to operating activities,  consisting
primarily of interest and dividends received less interest paid on deposits, and
the  origination  and sale of loans,  provided  $94.8 million for the six months
ended June 30,  1999.  Net cash  related  to  investing  activities,  consisting
primarily of  disbursements  for loans  originated or purchased for  investment,
purchases of  mortgage-backed  and  investment  securities  available  for sale,
offset by sales of mortgage-backed  securities available for sale, maturities of
investment  securities  available for sale,  principal  collections on loans and
mortgage-backed  securities,  utilized  $138.0  million for the six months ended
June 30, 1999. Net cash utilized by financing  activities,  consisting primarily
of net  activity in deposit and escrow  accounts,  net  proceeds  from  borrowed
funds,  the payment of  dividends  and the purchase of treasury  stock,  totaled
$27.3 million for the six months ended June 30, 1999.

                                       9
<PAGE>

    In connection with the Company's loan origination activities,  the Company's
interest  rate risk  management  policy  specifies  the use of  certain  hedging
activities  in an attempt to reduce  exposure to changes in loan  market  prices
from the time of  commitment  until  securitization.  The  Company may engage in
hedging  transactions as a method of reducing its exposure to interest rate risk
present  in  the  secondary  market.  The  Company's  hedging  transactions  are
generally forward commitments to sell fixed-rate mortgage-backed securities at a
specified  future  date.  The loans  securitized  through the  Federal  National
Mortgage  Association  ("FNMA")  are  generally  used to satisfy  these  forward
commitments.  The  sale of  fixed-rate  mortgage-backed  securities  for  future
delivery  presents a risk to the  Company  that,  if the  Company is not able to
deliver the mortgage-backed securities on the specified delivery date, it may be
required to repurchase the forward commitment to sell at the then current market
price.  At June 30,  1999 the Company  had no forward  commitments  to sell FNMA
mortgage-backed securities.

    The Bank's tangible capital ratio at June 30, 1999 was 7.70%.  This exceeded
the tangible  capital  requirement of 1.5% of adjusted assets by $119.5 million.
The Bank's leverage capital ratio at June 30, 1999 was 7.70%.  This exceeded the
leverage  capital  requirement of 3.0% of adjusted assets by $90.5 million.  The
Bank's risk-based  capital ratio was 14.02% at June 30, 1999. The Bank currently
exceeds the risk-based  capital  requirement of 8.0% of risk-weighted  assets by
$65.9 million.

Changes in Financial Condition

    The Company had total assets of $2.0 billion at June 30, 1999, a decrease of
$29.9 million,  or 1.5%, from December 31, 1998.  Mortgage-backed and investment
securities  increased  $159.6  million  offset  by a  decrease  in cash and cash
equivalents  and due from  broker  of  $141.8  million.  Loans  decreased  $57.9
million.  Loans held for sale were $52.5  million at June 30,  1999  compared to
$110.6 million at December 31, 1998, a decrease of $58.1 million.

    Loans  totaled $1.3  billion at June 30, 1999, a decrease of $57.9  million.
Loan  originations  were $573.3  million for the six months ended June 30, 1999,
offset by loan  sales of  $453.0  million  and  principal  repayments  of $178.2
million.

    Deposits totaled $1.2 billion at June 30, 1999, a decrease of $66.8 million.
The deposit base and the interest  paid on deposits  continues to be affected by
alternative  investment  products and  competition  within the Company's  market
areas.

    Stockholders'  equity totaled $173.5 million at June 30, 1999, a decrease of
$12.4  million.  On February 2, 1999, the Company  announced a stock  repurchase
plan under which the Company is authorized to repurchase up to 1,146,000  shares
of its  outstanding  common  stock.  At June 30, 1999,  484,561  shares had been
repurchased for a total cost of $9.7 million,  which is reflected as a reduction
in stockholders'  equity. In addition,  Stockholders' equity was reduced by $9.2
million as a result of changes in the market values of investment securities and
mortgage-backed securities available for sale, net of tax. At June 30, 1999, the
number of common shares outstanding was 11,020,628 and the book value per common
share outstanding was $15.75 per share. On June 17, 1999, the Company declared a
$0.14 per share cash dividend payable July 14, 1999 to shareholders of record on
June 30, 1999.

Year 2000

    The Company has  established a Year 2000 Project plan to address systems and
facilities  changes  necessary  to properly  recognize  dates  after  1999,  has
assigned  implementation  responsibilities,  and has established  management and
Board reporting processes. All of the Company's significant financial accounting
systems  are  provided  under  contract  with  major  national  banking  systems
providers who are progressing  under their own Year 2000 plans. Most significant
systems  changes have been completed as of December 31, 1998. The Company's plan
follows  the  five  step  approach   required  by  its  regulators:   Awareness,
Assessment,  Modification,   Verification,  and  Implementation.  The  Company's
project also addresses its other suppliers,  customers,  and other constituents,
as well as remediation and business  resumption  contingency plans. The costs of
the project,  and the date on which the Company  plans to complete the Year 2000
modifications  are based on  management's  best  estimates,  which were  derived
utilizing  numerous   assumptions  of  future  events  including  the  continued
availability  of certain  resources,  third party  modification  plans and other
factors.  However,  there  can be no  guarantee  that  these  estimates  will be
achieved and

                                       10
<PAGE>

actual  results  could  differ  materially  from those  plans.  The
primary  uncertainty  facing the Company is the  ability of third party  systems
providers  to identify  and modify  software as planned.  Specific  factors that
might cause material differences from plans include, but are not limited to, the
availability  and cost of personnel  trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.

    Additional information about the Company's Year 2000 status at June 30, 1999
was as follows:

    Readiness:  The Company's plan includes both information  technology  ("IT")
and non-IT systems.  Most of the Company's primary Year 2000 exposures relate to
IT systems,  primarily  to the vendor of its  account  processing  systems.  The
Company  utilizes  a  national  third  party  provider  for the bulk of its data
processing  needs. As a result,  a large part of the Company's  mission critical
Year 2000  testing  is for  products  and  services  processed  by that  service
provider.  The service provider has completed the remediation and testing of its
system and has had its Year 2000 compliant  systems in production since June 30,
1998. The Company continues to independently  test its activities on that system
to verify  that the service  provider's  system  functions  in the Year 2000 for
those services used by the Company.  In November 1998, the Company  successfully
completed  the first  phase of that  testing.  Testing of the  second  phase was
successfully completed in April 1999.

    Costs: The Company has not incurred material costs  specifically  related to
its Year 2000  program  and does not expect  these  costs to have a  significant
impact on the Company's results of operations,  liquidity or capital  resources.
Direct costs of the Year 2000 issue have been  estimated to not exceed  $250,000
per year for the years  ended  December  31,  1998,  1999 and 2000.  The primary
direct costs include compensation and benefits paid to staff dedicated solely to
the Year 2000  issues,  direct  costs paid to vendors or others  related to Year
2000  preparedness  and the income  statement  effect of hardware  and  software
purchased to replace items not Year 2000 compliant.  The figure does not include
costs  considered by the Company to be indirect costs. The primary indirect cost
includes the time and effort of many of the  Company's  employees to prepare for
the Year 2000 in addition to performing their normal work routine.  The costs of
the Year 2000 project are based on the Company's best  estimates,  which include
numerous assumptions about future events.  Actual costs may differ due to actual
events being  different  than those assumed at the time the cost  estimates were
prepared.

    Risks:  The  most  significant  risk  anticipated  by  the  Company  is  the
possibility  of  interruptions  to its account  processing  systems.  Due to the
progress  described above,  the Company does not presently  foresee any material
interruptions  to these  systems.  The next most  significant  risk  relates  to
interruptions in the payment processing  systems,  which are integrated with the
Company's account  processing  systems.  The Company is working with its payment
processing  vendors,  the most  significant  of which are  reported to be making
satisfactory  progress in complying with federal regulatory  guidelines for Year
2000 readiness.

    Contingency  Plans:  The  Company has taken  actions to comply with  federal
regulatory   requirements  for  Year  2000  contingency  planning.  The  Company
presently believes that the compliance effort can and will be completed prior to
the Year 2000. However, if required product or service upgrades are not complete
by that time,  the Year 2000 issues could disrupt  normal  business  operations.
Although not expected at this time, the most likely worst case scenario includes
the  Company  being  unable  to  process  some or all of its  transactions  on a
temporary basis. Because of the nature of this scenario, the Company established
contingency  plans for all mission critical  services.  Those  contingency plans
will also be tested as part of the Company's  Year 2000  preparedness,  which is
scheduled for the fall of 1999.  Additionally,  a business  resumption  plan has
been developed to mitigate risks associated with the failure of mission critical
systems.  The Year 2000  business  resumption  contingency  plan is  designed to
ensure that mission critical core banking processes will continue if one or more
supporting  systems fail and to allow for limited  transaction  processing until
the Year 2000 problems are fixed.

    Readers should be cautioned that forward looking statements contained in the
Year  2000  disclosure   should  be  read  in  conjunction  with  the  Company's
disclosures regarding "Forward-Looking Statements".

Recent and Proposed Changes in Accounting Rules

    In June 1998,  FASB issued SFAS No. 133,  "Accounting  for  Derivatives  and
Similar Financial  Instruments and for Hedging  Activities,"  which is effective
for fiscal years  beginning  after June 15,  1999.  The  statement  requires all
derivatives  to be measured at fair value and to be  recognized as either assets
or liabilities in the statement of

                                       11
<PAGE>

financial position. In June 1999, FASB issued
SFAS   No.   137,   "Accounting   for   Derivative   Instruments   and   Hedging
Activities-Deferral  of the  Effective  Date  of  FASB  Statement  No.  133,  an
Amendment of FASB Statement No. 133." This  statement  defers the effective date
for one  year.  Management,  at this  time,  has not  determined  the  impact of
adopting this statement on January 1, 2001.

Asset Quality
Non-performing Assets

    The following table sets forth  information as to non-accrual loans and real
estate owned at the dates  indicated.  The Company  discontinues  the accrual of
interest  on loans  ninety  days or more past due, at which time all accrued but
uncollected  interest  is  reversed.  There  were no loans at June 30,  1999 nor
during the quarter ended June 30, 1999,  which met the definition of an impaired
loan. A loan is considered  impaired when it is probable that a creditor will be
unable to collect  contractual  principal  and  interest  due  according  to the
contractual terms of the loan agreement.  Loans considered for impairment do not
include residential mortgage and consumer installment loans.
<TABLE>
<CAPTION>

                                                                     Quarter Ended
                                    --------------------------------------------------------------------------------
                                       June 30,           March 31,    December 31,   September 30,    June 30,
(Dollars in thousands)                   1999               1999           1998           1998           1998
--------------------------------------------------------------------------------------------------------------------

<S>                                          <C>                <C>            <C>            <C>            <C>
Non-accrual mortgage loans
   90 days or more past due      $         3,416              4,513          3,117          3,363          2,231
Non-accrual commercial loans
   90 days or more past due                  250                  -              -              -              3
Non-accrual consumer loans
   90 days or more past due                  177                157            165             61            110
                                    --------------------------------------------------------------------------------

Total non-performing loans                 3,843              4,670          3,282          3,424          2,344
Total foreclosed real estate                 164                148            514            212            261

                                    --------------------------------------------------------------------------------
Total non-performing assets      $         4,007              4,818          3,796          3,636          2,605
                                    --------------------------------------------------------------------------------
Total non-performing loans
   to total loans                           0.30    %          0.37           0.25           0.24           0.18

Total non-performing assets
   to total assets                          0.21    %          0.25           0.19           0.17           0.13
</TABLE>



Classification of Assets

    The Company  regularly  reviews  the assets in its  portfolio  to  determine
whether  any  assets  require   classification  in  accordance  with  applicable
regulations.

    As of June 30, 1999 the Company had total classified assets of $3.6 million,
of which $3.4 million were classified "substandard" and $200,000 were classified
as "doubtful." The assets so classified  consisted of auto loans,  single family
residential  loans and foreclosed  single family  residential loans (real estate
owned).

Asset/Liability Management

     The Company's asset and liability  management strategy attempts to minimize
the risk of a significant  decrease in net interest  income caused by changes in
the interest rate environment  without  penalizing  current income. Net interest
income,  the primary source of the Company's  earnings,  is affected by interest
rate  movements.  To mitigate the impact of changes in interest rates, a balance
sheet must be structured so that repricing  opportunities  exist for both assets
and liabilities in approximately  equivalent  amounts at basically the same time
intervals.

     The Company seeks to reduce the  volatility  of its net interest  income by
managing the  relationship  of interest rate  sensitive  assets to interest rate
sensitive liabilities. To accomplish this, the Company has attempted to increase
the percentage of assets,  whose interest rates adjust more  frequently,  and to
reduce the average  maturity of such assets.  A principal focus in recent years,
has been the origination of  adjustable-rate  residential  real estate loans and
consumer  loans,   which  generally  have  shorter  maturities  than  fixed-rate
residential  real estate loans.  The Company also  originates  shorter  maturity
fixed-rate  commercial real estate loans and purchases  commercial leases, which
generally mature or reprice more quickly than fixed-rate residential real estate
loans.

                                       12
<PAGE>

     However,  adjustable-rate  loans are nearly as likely to  refinance  in low
interest rate  environments  as fixed-rate  loans.  Often,  interest rate cycles
allow for these  refinancings  before  the  adjustable-rate  loans can adjust to
fully indexed market rates. In such declining interest rate  environments,  that
result in high  levels of loan  refinancings,  the Company may decide to acquire
longer fixed-rate  mortgage loans or mortgage-backed  securities.  To provide an
acceptable  level of interest  rate risk,  the Company will  implement a funding
strategy  using  long-term  Federal  Home Loan Bank  borrowings.  Imbalances  in
repricing  opportunities at any point in time constitute an interest sensitivity
gap,  which is the difference  between  interest  sensitive  assets and interest
sensitive  liabilities.  These static measurements do not reflect the results of
any  potential  activity  and are best  used as early  indicators  of  potential
interest rate exposures.

     As part of its  asset/liability  strategy,  the Company has  implemented  a
policy to maintain its cumulative one-year interest sensitivity gap ratio within
a range of (15%) to 15% of total  assets,  which  reflects the current  interest
rate  environment  and allows the Company to maintain an acceptable net interest
rate spread.  The gap ratio will fluctuate as a result of market  conditions and
management's expectation of future interest rate trends.


<TABLE>
<CAPTION>

Interest Rate Sensitivity Gap Analysis
                                                                         At June 30, 1999
                                                   -----------------------------------------------------------------
                                                                   More Than   More Than
                                                       1 Year         1 Year     3 Years    More Than
(Dollars in thousands)                                Or Less     To 3 Years  To 5 Years      5 Years       Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>         <C>         <C>           <C>
Interest-Earning Assets:
Mortgage loans (1)                               $    322,684        180,273     164,150     400,414    1,067,521
Equity lines of credit (1)                             92,193              -           -           -       92,193
Consumer loans and leases (1)                           8,544         23,839      75,607      10,228      118,218
Mortgage-backed securities (2)                        164,489         93,133      69,642     153,613      480,877
Interest-bearing deposits                               1,262              -           -           -        1,262
Investment securities (2)                             110,757             70           -       1,250      112,077
--------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets                      699,929        297,315     309,399     565,505    1,872,148

Interest-Bearing Liabilities:
Savings accounts                                       35,787         54,356      35,436      84,930      210,509
NOW interest-bearing accounts                          22,425         20,528       5,493      12,163       60,609
Money market accounts                                  67,297          9,372       4,462       4,055       85,186
Certificate accounts                                  694,959        107,395      14,854           -      817,208
Borrowed funds                                        135,827        168,650     112,500     100,000      516,977
--------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities                 956,295        360,301     172,745     201,148    1,690,489
--------------------------------------------------------------------------------------------------------------------
Interest sensitivity gap                         $  (256,366)       (62,986)     136,654     364,357      181,659
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap              $  (256,366)      (319,352)   (182,698)     181,659
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Cumulative interest sensitivity gap as a
   percentage of total assets                         (13.04)   %    (16.24)      (9.29)        9.24
Cumulative net interest-earning assets as a
   percentage of interest-bearing liabilities           73.19   %      75.74       87.73      110.75
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)  For purposes of the gap analysis,  mortgage,  equity and consumer loans and
     leases are not reduced by the allowance for loan losses and are reduced for
     non-performing loans.
(2)  Mortgage-backed and investment  securities are not increased (decreased) by
     unrealized  gains (losses)  resulting from the accounting for available for
     sale securities under SFAS No. 115.



    Certain shortcomings are inherent in the method of analysis presented in the
foregoing table.  For example,  although certain assets and liabilities may have
similar maturities or periods to repricing,  they may react in different degrees
to changes in market interest  rates.  Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates,  while  interest  rates on other  types may lag behind  changes in market
rates.  Additionally,  certain  assets,  such as ARM loans,  have features which
restrict  changes in interest  rates on a short-term  basis and over the life of
the asset.  Further, in the event of a change in interest rates,  prepayment and
early withdrawal levels would likely deviate significantly from those assumed in
calculating the
                                       13

<PAGE>

table.  Finally,  the ability of many borrowers to service their
debt may decrease in the event of an interest rate increase.

Quantitative and Qualitative Disclosures About Market Risk

     As its primary interest rate risk planning tool, the Bank utilizes a market
value model.  The model measures the Bank's interest rate risk by  approximating
the  Bank's net  portfolio  value  ("NPV"),  which is the net  present  value of
expected  cash  flows  from  assets,   liabilities  and  any  off-balance  sheet
contracts,  under a range  of  interest  rate  scenarios,  which  range  from an
immediate 300 basis point  increase to an immediate 300 basis point  decrease in
market interest rates (measured in 100 basis point increments). The Bank's asset
and liability  structure  results in a decrease in NPV in a rising interest rate
scenario and an increase in NPV in a declining  interest rate  scenario.  During
periods of rising  interest  rates,  the value of monetary  assets declines more
rapidly than the value of monetary liabilities rises. Conversely, during periods
of falling  interest rates, the value of monetary assets rises more rapidly than
the value of monetary  liabilities  declines.  However,  the amount of change in
value of specific assets and liabilities due to changes in interest rates is not
the same in a rising rate  environment as in a falling interest rate environment
(i.e.,  the amount of value increase under a specific rate decline may not equal
the amount of value decrease under an identical upward interest rate movement).

    There have been no material  changes in market risk since December 31, 1998,
as reported in the Company's Form 10-K for the year ended December 31, 1998.

Analysis of Net Interest Income

    Net  interest   income   represents   the   difference   between  income  on
interest-earning  assets  and  expense  on  interest-bearing   liabilities.  Net
interest  income  depends  upon  the  volume  of  interest-earning   assets  and
interest-bearing liabilities and the interest rate earned or paid on them.

                                       14
<PAGE>

Average Balance Sheets

    The following table sets forth certain information relating to the Company's
Consolidated Statements of Financial Condition and reflects the average yield on
assets and the  average  cost of  liabilities  for the periods  indicated.  Such
yields and costs are  derived  by  dividing  income or  expense  by the  average
balance of assets or liabilities,  respectively,  for the periods shown. Average
balances  are derived  from average  daily  balances and include  non-performing
loans.  The yields and costs include fees which are  considered  adjustments  to
yields.

<TABLE>
<CAPTION>



                                            Three Months Ended June 30,
                             ----------------------------------------------------------
                                        1999                          1998
                             ----------------------------------------------------------
                                                Average                        Average
                              Average           Yield/       Average           Yield/
(Dollars in thousands)        Balance    Interest Cost       Balance    Interest Cost
--------------------------------------------------------   ----------------------------
<S>                                <C>      <C>    <C>           <C>       <C>    <C>
Assets:
Interest-earning assets:
Mortgage loans, net        $ 1,059,629 $ 19,593   7.40 % $ 1,112,641  $ 20,780   7.47 %
Equity lines of credit          95,077    1,719   7.25        93,584     1,856   7.95
Consumer loans and leases      104,799    2,125   8.13        53,529     1,140   8.52
Mortgage-backed securities     464,167    7,182   6.19       448,012     7,391   6.60
Interest-bearing deposits       37,853      441   4.61        40,315       566   5.55
Investment securities          111,099    1,842   6.64       149,269     2,621   7.03
----------------------------------------------------------------------------------------
Total interest-earning       1,872,624   32,902   7.03     1,897,350    34,354   7.24
assets
Noninterest-earning assets      97,245                        91,025
----------------------------------------------------------------------------------------

Total assets               $ 1,969,869                   $ 1,988,375
----------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity:

Interest-bearing
liabilities:
Deposits:
Savings accounts          $ 1,039,348  $ 12,186   4.70 % $ 1,087,984  $ 14,137   5.21 %
NOW interest-bearing           63,803       162   1.02        71,045       162   0.91
accounts
Money market accounts          85,520       695   3.26       109,694       869   3.18
----------------------------------------------------------------------------------------
Total deposits              1,188,671    13,043   4.40     1,268,723    15,168   4.80
Funds borrowed:
Borrowed funds                498,802     6,618   5.25       444,990     6,131   5.45
Collateralized mortgage             -         -      -           539        15  11.13
----------------------------------------------------------------------------------------
Total funds borrowed          498,802     6,618   5.25       445,529     6,146   5.46
----------------------------------------------------------------------------------------
Total interest-bearing      1,687,473    19,661   4.65     1,714,252    21,314   4.97
liabilities
Noninterest-bearing           102,712                         94,650
liabilities
----------------------------------------------------------------------------------------
Total liabilities           1,790,185                      1,808,902
Stockholders' equity          179,684                        179,473
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Total liabilities and
   stockholders' equity   $ 1,969,869                    $ 1,988,375
----------------------------------------------------------------------------------------
Net interest income/
   interest rate spread                $ 13,241   2.38 %              $ 13,040   2.27 %
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net interest-earning
assets/                   $   185,151             2.83 % $   183,098             2.75 %
   net interest margin
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Interest-earning assets to
   interest-bearing              1.11 X                         1.11 X
liabilities
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>

Average Balance Sheets (Continued)

                                               Six Months Ended June 30,
                             -----------------------------------------------------------             At June 30,
                                        1999                          1998                              1999
                             -----------------------------------------------------------          ----------------
                                                Average                         Average
                              Average           Yield/       Average            Yield/                     Yield/
(Dollars in thousands)        Balance    Interest Cost       Balance    Interest  Cost             Balance  Cost
--------------------------------------------------------   -----------------------------          ----------------
<S>                                <C>      <C>    <C>           <C>       <C>     <C>                <C>     <C>
Assets:
Interest-earning assets:
Motgage loans, net       $  1,083,393  $  39,941   7.37 %  $ 1,101,284  $ 41,606   7.56 %      $  1,064,479  7.43 %
Equity lines of credit         95,097      3,414   7.24         93,498     3,695   7.97              92,426  7.44
Consumer loans and leases      96,858      3,957   8.22         48,026     1,992   8.30             118,645  8.19
Mortgage-backed securities    402,950     12,584   6.25        374,860    12,568   6.71             468,869  6.32
Interest-bearing deposits      94,599      2,172   4.57         70,588     2,011   5.67               1,262  5.53
Investment securities          98,530      3,331   6.78        148,321     5,154   6.96             110,152  6.62
----------------------------------------------------------------------------------------          ----------------
Total interest-earning
assets                      1,871,427     65,399   6.99      1,836,577    67,026   7.30           1,855,833  7.15
Noninterest-earning assets     94,658                           85,233                               96,760
----------------------------------------------------------------------------------------          ----------------
Total assets             $  1,966,085                      $ 1,921,810                         $  1,952,593
----------------------------------------------------------------------------------------          ----------------
----------------------------------------------------------------------------------------          ----------------

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
Savings Accounts         $  1,053,541  $  25,008   4.79 %  $ 1,088,871   $ 28,216  5.23 %      $  1,027,717   4.74 %
NOW interest-bearing
  accounts                     61,081        312   1.03         71,010        370  1.05              60,609   0.95
Money market accounts          84,934      1,362   3.23        111,051      1,753  3.18              85,186   3.31
----------------------------------------------------------------------------------------          ----------------
Total deposits              1,199,565     26,682   4.49      1,270,932     30,339  4.81           1,173,512   4.44
Funds borrowed:
Borrowed funds                480,465     12,733   5.27        380,158     10,690  5.59             516,977   5.25
Collateralized mortgage             -          -      -            654         38 11.62                   -      -
----------------------------------------------------------------------------------------          ----------------
Total funds borrowed          480,465     12,733   5.27        380,812     10,728  5.60             516,977   5.25
----------------------------------------------------------------------------------------          ----------------
Total interest-bearing
  liabilities               1,680,030     39,415   4.71      1,651,744     41,067  5.00           1,690,489   4.69
Noninterest-bearing
  liabilities                 103,237                           92,106                               88,583
----------------------------------------------------------------------------------------          ----------------
Total liabilities           1,783,267                        1,743,850                            1,779,072
Stockholders' equity          182,818                          177,960                              173,521
----------------------------------------------------------------------------------------          ----------------
Total liabilities and
  stockholders' equity   $  1,966,085                      $ 1,921,810                         $  1,952,593
----------------------------------------------------------------------------------------          ----------------
----------------------------------------------------------------------------------------          ----------------
Net interest income/
  interest rate spread                 $  25,984   2.28 %                 $ 25,959  2.30 %                    2.46 %
----------------------------------------------------------------------------------------                     -----
----------------------------------------------------------------------------------------                     -----
Net interest-earning assets/
  net interest margin    $    191,397              2.78 %  $   184,833              2.83 %
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Interest-earning assets to
  interest-bearing
  liabilities                    1.11 X                           1.11 X
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>





                                       15


<PAGE>

Rate/Volume Analysis

    The following  table  presents the extent to which changes in interest rates
and  changes  in the  volume of  interest-earning  assets  and  interest-bearing
liabilities  have affected the Company's  interest  income and interest  expense
during the periods  indicated.  Information  is provided in each  category  with
respect to (i)  changes  attributable  to changes in volume  (changes  in volume
multiplied by prior rate), (ii) changes attributable to changes in rate (changes
in rate  multiplied  by prior  volume),  and (iii) the net  change.  The changes
attributable  to the  combined  impact  of volume  and rate have been  allocated
proportionately to the changes due to volume and the changes due to rate.

<TABLE>
<CAPTION>

                                     Three Months Ended June 30, 1999          Six Months Ended June 30, 1999
                                               Compared To                               Compared To
                                     Three Months Ended June 30, 1998          Six Months Ended June 30, 1998

                                    --------------------------------------   ---------------------------------------
                                           Increase (Decrease)                       Increase (Decrease)
                                          In Net Interest Income                   In Net Interest Income
                                                  Due To                                   Due To
                                    --------------------------------------   ---------------------------------------

(In thousands)                       Volume          Rate          Net        Volume          Rate           Net
--------------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>          <C>             <C>         <C>           <C>
Interest-Earning Assets:
Mortgage loans, net              $     (992)         (195)      (1,187)         (654)       (1,011)       (1,665)
Equity lines of credit                   30          (167)        (137)           63          (344)         (281)
Consumer loans and leases             1,039           (54)         985         1,984           (19)        1,965
Mortgage-backed securities              261          (470)        (209)          909          (893)           16
Interest-bearing deposits               (33)          (92)        (125)          597          (436)          161
Investment securities                  (640)         (139)        (779)       (1,693)         (130)       (1,823)
--------------------------------------------------------------------------------------------------------------------
   Total                               (335)       (1,117)      (1,452)        1,206        (2,833)       (1,627)
--------------------------------------------------------------------------------------------------------------------

Interest-Bearing Liabilities:
Deposits                               (916)       (1,209)      (2,125)       (1,674)       (1,983)       (3,657)
Funds borrowed                          708          (236)         472         2,659          (654)        2,005
--------------------------------------------------------------------------------------------------------------------
   Total                               (208)       (1,445)      (1,653)          985        (2,637)       (1,652)
--------------------------------------------------------------------------------------------------------------------
Net change in net interest       $     (127)          328          201           221          (196)           25
income
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Comparison of Operating Results for the Three Months Ended
June 30, 1999 and June 30, 1998

General

    Net income  totaled  $4,507,000,  or $0.39 per  diluted  share for the three
months  ended June 30,  1999,  as compared to  $1,741,000,  or $0.14 per diluted
share  reported  for the quarter  ended June 30,  1998.  On June 30,  1998,  the
Company completed its acquisition of Southwest  Bancshares,  which was accounted
for as a  pooling-of-interests.  The prior  year  quarter  includes  acquisition
related costs, totaling $3,550,000, reducing net income by $2,485,000, resulting
in a decrease  in  diluted  earnings  per share by $0.21.  These  costs  include
professional fees, data processing  conversion penalties and employee severance.
Net interest  income for the three months ended June 30, 1999 was $13.2 million,
an  increase  of  $201,000,  or 1.5%,  from the June 30,  1998  quarter of $13.0
million.

Interest Income

    Interest income for the quarter ended June 30, 1999 totaled $32.9 million, a
decrease of $1.5  million,  or 4.2%,  from the prior  year's  quarter.  Interest
income on mortgage  loans,  the largest  component of  interest-earning  assets,
decreased  $1.2  million,  or 5.7%, to $19.6 million from the June 1998 quarter.
The  average  balance of the  mortgage  portfolio  decreased  $53  million.  The
annualized  average yield on the mortgage loan portfolio  decreased to 7.40% for
the three months ended June 30, 1999 from 7.47% for the 1998 period.  The Bank's
mortgage loan portfolio is being affected by market  conditions  which prevailed
over the last twelve  months,  whereby,  higher  yielding  loans were repaid and
replaced by lower  yielding  loans.  Interest  income on equity  lines of credit
decreased $137,000,  or 7.4%, to $1.7 million from the prior year's quarter. The
Bank's  home equity  line of credit  product is priced  based on the prime rate,
which was 7.75% for the current  quarter as compared to 8.50% for the comparable
quarter a year

                                       16
<PAGE>

 ago. The average balance of equity lines of credit increased $1.5
million,  or 1.6%,  to $95.1  million  from  $93.6  million  from the June  1998
quarter. Interest income on consumer loans and leases increased $985,000 to $2.1
million for the three  months ended June 30,  1999.  The average  balance of the
consumer  loans and  leases  increased  $51.3  million,  or 95.8%  from the 1998
period,  primarily  as a result of indirect  auto  lending.  Interest  income on
mortgage-backed  securities  for the three months ended June 30, 1999  decreased
$209,000  to $7.2  million  while the  average  balance  of the  mortgage-backed
securities  portfolio  increased  $16.2  million from the June 1998 period.  The
annualized average yield on the mortgage-backed  securities  portfolio decreased
to 6.19% for the  three  months  ended  June 30,  1999  from  6.60% for the 1998
period. Interest income on investment securities for the three months ended June
30,  1999  decreased  $779,000 to $1.8  million  and the average  balance of the
investment  securities  portfolio  decreased  $38.2  million  from the June 1998
period.  The  annualized  average yield on the investment  securities  portfolio
decreased  to 6.64% for the three  months ended June 30, 1999 from 7.03% for the
1998 period. Until recently,  market interest rates had been declining,  leading
to rapid  repayment of  mortgage-backed  securities and the maturity of callable
Federal Home Loan Bank notes.  The net cash received from these  portfolios  was
reinvested  at current  market  rates  resulting in lower  yields.  Purchases of
mortgage-backed  and  investment  securities for the three months ended June 30,
1999 totaled $117.6 million offset by maturities, sales and principal repayments
of $62.4 million.

Interest Expense

    Interest  expense on deposit accounts  decreased $2.1 million,  or 14.0%, to
$13.0 million,  for the quarter ended June 30, 1999 compared to the prior year's
quarter.   The   decrease   is  related  to  both  a  decrease  in  the  average
interest-bearing  deposit base and the annualized average cost of deposits.  The
annualized average cost of deposits for the three months ended June 30, 1999 was
4.40%,  a decrease from the  annualized  average cost of 4.80% for the June 1998
period.  The average  interest-bearing  deposit base decreased  $80.1 million to
$1.2 billion  during the 1999 period.  For the quarter ended June 30, 1999,  the
Company  recorded  interest  expense  on  borrowed  funds of $6.6  million on an
average  balance of $498.8  million  at an  annualized  cost of 5.25%  primarily
related to FHLB borrowings. Additional net proceeds from FHLB borrowings for the
three months ended June 30, 1999 totaled $49.5 million.

Net Interest Income

    Net  interest  income for the three  months  ended June 30,  1999  increased
$201,000 or 1.5%, to $13.2 million from the 1998 period.  The annualized average
yield on  interest-earning  assets  decreased from 7.24% to 7.03% when comparing
the 1998 and 1999  quarters.  The  annualized  average cost of  interest-bearing
liabilities  decreased  from  4.97% to 4.65%.  This  resulted  in an  annualized
average net interest rate spread of 2.38% for the three-month  period ended June
30, 1999 compared to 2.27% for the prior year's period.

Provision for Loan Losses

    Based on  management's  evaluation  of the loan  portfolio,  a provision  of
$50,000 for loan  losses was  recorded  during the  quarter  ended June 30, 1999
compared to $56,000 for the prior year  quarter.  The  allowance for loan losses
represents  0.49% of total  loans  receivable  at June 30,  1999.  The amount of
non-performing  loans at June 30,  1999,  was  $3.8  million,  or 0.30% of total
loans, compared to $2.3 million or 0.18% of total loans at June 30, 1998.

Noninterest Income

    Total  noninterest  income for the three months ended June 30, 1999 was $6.7
million,  an increase of $1.8  million  from the 1998  period.  Income from real
estate operations increased $1.0 million from the year ago period, primarily due
to income  generated from additional  investments in joint venture  partnerships
entered into in 1998. Other fees and commissions  increased $917,000,  primarily
due to loan origination fees contributed by Preferred.

                                       17
<PAGE>



Noninterest Expense

    Noninterest  expense  for the  quarter  ended June 30,  1999  totaled  $12.8
million, a decrease of $1.9 million, or 13.2% from the prior year's quarter. The
June 1998 quarter included  acquisition costs including  professional fees, data
processing   conversion  penalties  and  employee  severance  of  $3.6  million.
Exclusive  of  these  expenses,  noninterest  expense  increased  $1.6  million.
Compensation and benefits increased  $738,000,  or 11.9%,  exclusive of year ago
acquisition  costs. This increase is primarily related to the origination,  sale
and  delivery  of loans  by  Preferred.  Occupancy  expense  increased  $286,000
primarily due to depreciation expense on additional equipment. Other noninterest
expense  increased  $688,000,  exclusive  of year ago  acquisition  costs.  This
increase is primarily  attributable  to consulting  fees related to  operational
efficiency studies and other loan servicing and loan origination costs.

Income Tax Provision

    The  provision for income taxes for the three months ended June 30, 1999 was
$2.6  million.  The  effective tax rate for the three months ended June 30, 1999
was  36.5%  compared  to the  effective  tax rate of 44.3%  for the  prior  year
quarter.  The prior year quarter included certain  acquisition  costs which were
not tax deductible.

Comparison of Operating Results for the Six Months Ended
June 30, 1999 and June 30, 1998

General

    Net income totaled $9,108,000, or $0.78 per diluted share for the six months
ended June 30,  1999,  as compared  to  $6,578,000,  or $0.55 per diluted  share
reported for the six months ended June 30, 1998.  On June 30, 1998,  the Company
completed its acquisition of Southwest Bancshares,  which was accounted for as a
pooling-of-interests.  The prior year period included acquisition related costs,
totaling $3,795,000, reducing net income by $2,679,000,  resulting in a decrease
in diluted earnings per share by $0.22.  These costs include  professional fees,
data processing conversion penalties and employee severance. Net interest income
for the six months ended June 30, 1999 was $26  million,  an increase of $25,000
from the June 30, 1998 period.

Interest Income

    Interest  income  for the six  months  ended  June 30,  1999  totaled  $65.4
million,  a decrease of $1.6  million,  or 2.4%,  from the prior year's  period.
Interest  income on mortgage  loans  decreased  $1.7 million,  or 4.0%, to $39.9
million from the June 1998 period. The average balance of the mortgage portfolio
decreased  $18  million.  The  annualized  average  yield on the  mortgage  loan
portfolio  decreased  to 7.37% for the six months ended June 30, 1999 from 7.56%
for the 1998 period.  The Bank's  mortgage loan  portfolio is being  affected by
market conditions which prevailed over the last twelve months,  whereby,  higher
yielding loans were repaid and replaced by lower yielding loans. Interest income
on equity lines of credit decreased $281,000,  or 7.6%, to $3.4 million from the
prior  year's  period.  The Bank's home equity line of credit is priced based on
the prime rate,  which was 7.75% for the current six months as compared to 8.50%
for the  comparable  period a year ago.  The average  balance of equity lines of
credit increased $1.6 million, or 1.7%, to $95.1 million from $93.5 million from
the June 1998 period.  Interest  income on consumer  loans and leases  increased
$2.0 million to $4.0 million for the six months ended June 30, 1999. The average
balance of the consumer loans and leases  increased  $48.8 million from the 1998
period,  primarily  as a result of indirect  auto  lending.  Interest  income on
mortgage-backed  securities  for the six  months  ended June 30,  1999  remained
approximately the same and the average balance of the mortgage-backed securities
portfolio increased $28.1 million from the June 1998 period.  Interest income on
investment  securities  for the six months  ended June 30, 1999  decreased  $1.8
million to $3.3  million and the average  balance of the  investment  securities
portfolio  decreased  $49.8 million from the June 1998 period.  The decreases in
the average annualized yields on the mortgage-backed  and investment  portfolios
can be attributed to the market interest rates which had been  declining,  until
recently,  leading to rapid  repayment  of  mortgage-backed  securities  and the
maturity of callable  Federal Home Loan Bank notes.  The net cash  received from
these  portfolios  was  reinvested  at current  market rates  resulting in lower
yields.  Purchases of  mortgage-backed  and  investment  securities  for the six
months ended June 30, 1999 totaled $302.0  million  offset by maturities,  sales

                                       18
<PAGE>

and  principal   repayments   of  $199.3   million.   The  average   balance  of
interest-bearing  cash increased $24.0 million,  to $94.6 million primarily as a
result of repositioning  the investment  portfolios to accommodate the cash flow
and liquidity needs of the Bank.

Interest Expense

    Interest  expense on deposit accounts  decreased $3.7 million,  or 12.1%, to
$26.7  million,  for the six months  ended June 30,  1999  compared to the prior
year's  period.  The  decrease  is  related to both a  decrease  in the  average
interest-bearing  deposit base and the annualized average cost of deposits.  The
annualized  average  cost of deposits for the six months ended June 30, 1999 was
4.49%,  a decrease from the  annualized  average cost of 4.81% for the June 1998
period.  The average  interest-bearing  deposit base decreased  $71.4 million to
$1.2 billion during the 1999 period. For the six months ended June 30, 1999, the
Company  recorded  interest  expense on  borrowed  funds of $12.7  million on an
average  balance of $480.5  million  at an  annualized  cost of 5.27%  primarily
related to FHLB borrowings. Additional net proceeds from FHLB borrowings for the
six months ended June 30, 1999 totaled $52.5 million.

Net Interest Income

    Net  interest  income  for the six  months  ended  June 30,  1999  increased
$25,000. The annualized average yield on interest-earning  assets decreased from
7.30% to 6.99% when comparing the 1998 and 1999 periods.  The annualized average
cost of  interest-bearing  liabilities  decreased  from  5.00%  to  4.71%.  This
resulted  in an  annualized  average net  interest  rate spread of 2.28% for the
six-month  period  ended June 30, 1999  compared  to 2.30% for the prior  year's
period. Both the average balance of interest-earning assets and interest-bearing
liabilities  increased during the six months ended June 30, 1999 compared to the
1998 period.

Provision for Loan Losses

    Based on  management's  evaluation  of the loan  portfolio,  a provision  of
$100,000 for loan losses was recorded  during the six months ended June 30, 1999
as compared to $162,000  recorded during the six months ended June 30, 1998. The
allowance for loan losses represents 0.49% of total loans receivable at June 30,
1999. The amount of non-performing  loans at June 30, 1999, was $3.8 million, or
0.30% of total  loans,  compared to $2.3 million or 0.18% of total loans at June
30, 1998.

Noninterest Income

    Total  noninterest  income for the six months  ended June 30, 1999 was $13.4
million,  an  increase  of $2.4  million  from the 1998  period.  Other fees and
commissions  increased  $1.5  million,  primarily due to an increase in security
brokerage fees contributed by Liberty Financial  Services,  Inc. of $128,000 and
an increase in loan  origination  fees contributed by Preferred of $1.4 million.
The current six months  includes  gains on sales of loans,  mortgage-backed  and
investment  securities  of  $447,000,  compared to $656,000 for the 1998 period.
Income  from real  estate  operations  for the six months  ended  June 30,  1999
increased   $827,000,   primarily  due  to  income   generated  from  additional
investments  in joint  venture  partnerships  entered into in 1998.  Real estate
income  for  the  1998  period  included  income  of  $474,000  related  to  the
termination of a real estate venture. Other income for the six months ended June
30,  1999,  includes a gain on the sale of  Liberty  Financial  Services  Inc.'s
insurance book of business of $250,000.

Noninterest Expense

    Noninterest  expense for the six months  ended June 30, 1999  totaled  $25.7
million,  a decrease of $155,000  from the prior year's  period.  The six months
ended June 30, 1998 included acquisition costs including professional fees, data
processing   conversion  penalties  and  employee  severance  of  $3.8  million.
Exclusive  of  these  expenses,  noninterest  expense  increased  $3.6  million.
Compensation and benefits  increased $1.9 million,  or 15.4%,  exclusive of year
ago acquisition  costs.  This increase is primarily  related to the origination,
sale and  delivery  of loans by  Preferred  for a total of $1.5  million.  Other
noninterest  expense  increased $1.3 million,  exclusive of year ago acquisition
costs.  This increase is primarily  attributable  to consulting  fees related to
operational  efficiency  studies and other loan  servicing and loan  origination
costs.


                                       19
<PAGE>



Income Tax Provision

    The  provision  for income  taxes for the six months ended June 30, 1999 was
$4.5 million.  The effective tax rate for the six months ended June 30, 1999 was
33.1%  compared to the effective tax rate of 40.3% for the six months ended June
30,  1998.  The lower  effective  tax rate for the  current  period was due to a
reduction in the provision of $700,000 as a result of the completion of a review
of the  Company's  tax liability and the effective tax rate for the prior year's
period included certain acquisition costs which were not tax deductible.

Part II - Other Information

Item 1.  Legal Proceedings

               Not Applicable.

Item 2.  Changes in Securities and Use of Proceeds

               Not Applicable.

Item 3.  Defaults Upon Senior Securities

               Not Applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

      (a)  The Company held its Annual Meeting of Shareholders on June 23, 1999

      (b) The names of each  director  elected at the Annual  Meeting  are as
follows:

              Edward J. Burns
              Whit G. Hughes
              Edward J. Nusrala
              William R. Rybak
              Donald E. Sveen

         (c)  The names of each of the directors whose term of office  continued
              after the Annual Meeting are as follows:

              Kenne P. Bristol
              Howard A. Davis
              H. Verne Loeppert
              David D. Mill
              Howard R. Jones
              Fredric G. Novy
              William C. O'Donnell
              Russell F. Stephens, Jr.
              Vernon B. Thomas, Jr.
              Richard E. Webber


                                       20
<PAGE>



         (d)  The  following  matters were voted upon at the Annual  Meeting and
              the  number of votes cast with the  respect  to each  matter is as
              follows:

              (i) The election of five directors for terms of three years each:

<TABLE>
<CAPTION>


Management Nominees                    For                     Withheld
---------------------------- ------------------------- --------------------------
<S>                                 <C>                         <C>
Edward J. Burns                     5,229,122                   374,216
Whit G. Hughes                      5,227,236                   376,102
Edward J. Nusrala                   5,487,990                   115,348
William R. Rybak                    5,249,617                   353,721
Donald E. Sveen                     5,252,800                   350,538
</TABLE>



LaSalle  Financial  Partners,  Limited  Partnership  ran a slate of nominees for
election as directors which received the following votes:
<TABLE>
<CAPTION>

Opposition Nominees                    For                     Withheld
---------------------------- ------------------------- --------------------------
<S>                                 <C>                         <C>
Richard J. Nelson                   3,039,644                   15,122
William D. King                     3,039,644                   15,122
George L. Barr                      3,039,644                   15,122
</TABLE>


              Management's nominees,  having received a plurality of votes cast,
              were elected as directors of the Company.


              (ii)The  ratification  of  KPMG  LLP as  independent  auditors  of
                  Alliance Bancorp for the fiscal year ending December 31, 1999:
<TABLE>
<CAPTION>

            For                      Against                   Withheld
---------------------------- ------------------------- --------------------------
<S>         <C>                         <C>                        <C>
         8,447,877                   143,365                    66,863

</TABLE>


Item 5.  Other Information

               Not Applicable.

                                       21
<PAGE>



Item 6.  Exhibits and Reports on Form 8-K.

     (a) Exhibit No. 11 Statement re: Computation of Per Share Earnings
<TABLE>
<CAPTION>

                                                                                    Three Months Ended
                                                                              June 30, 1999     June 30, 1998
                                                                             --------------------------------
<S>                                                                               <C>               <C>
Net income                                                                $       4,507,000         1,741,000
                                                                             --------------------------------

Basic earnings per share-weighted average shares                                 11,042,591        11,364,946

Effect of dilutive securities-stock options                                         550,956           644,909
                                                                             --------------------------------

Diluted earnings per share-adjusted weighted average shares                      11,593,547        12,009,855
                                                                             --------------------------------

Basic earnings per share                                                  $            0.41              0.15
                                                                             --------------------------------

Diluted earnings per share                                                $            0.39              0.14
                                                                             --------------------------------

                                                                                     Six Months Ended
                                                                              June 30, 1999     June 30, 1998
                                                                             --------------------------------
Net income                                                                $       9,108,000         6,578,000
                                                                             --------------------------------

Basic earnings per share-weighted average shares                                 11,217,619        11,327,323

Effect of dilutive securities-stock options                                         521,192           641,812
                                                                             --------------------------------

Diluted earnings per share-adjusted weighted average shares                      11,738,811        11,969,135
                                                                             --------------------------------

Basic earnings per share                                                  $            0.81              0.58
                                                                             --------------------------------

Diluted earnings per share                                                $            0.78              0.55
                                                                             --------------------------------

</TABLE>


               (b) Reports on Form 8-K.

               None.

                                       22
<PAGE>



SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                                Alliance Bancorp





Dated: August 7, 1999                              /s/    Kenne P. Bristol
       ------------------------
                                                   -----------------------------
                                                   Kenne P. Bristol
                                                   President and
                                                   Chief Executive Officer





Dated: August 7, 1999                              /s/    Richard A. Hojnicki
       ------------------------
                                                   -----------------------------

                                                   Richard A. Hojnicki
                                                   Executive Vice President and
                                                   Chief Financial Officer


                                       23
<PAGE>