SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 DECEMBER 31,
         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: 0-21108

                          MARION CAPITAL HOLDINGS, INC.
                          -----------------------------
               (Exact name of registrant specified in its charter)


          Indiana                                           35-1872393
--------------------------                            --------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                         Identification Number)

                              100 West Third Street
                                  P.O. Box 367

                              Marion, Indiana 46952
                    (Address of principal executive offices,
                               including Zip Code)

                                 (317) 664-0556
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  report),  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

The  number of shares of the  Registrant's  common  stock,  without  par  value,
outstanding as of February 3, 2000 was 1,356,250.


<PAGE>



                          Marion Capital Holdings, Inc.

                                    Form 10-Q

                                      Index

                                                                        Page No.

Forward Looking Statements.................................................1

PART I.   FINANCIAL INFORMATION

Item 1.     Financial Statements...........................................2

                  Consolidated Condensed Statement of
                  Financial Condition as of
                  December 31, 1999 and June 30, 1999......................2

                  Consolidated Condensed Statement of
                  Income for the three-month
                  and six-month periods ended
                  December 31, 1999 and 1998...............................3

                  Consolidated Condensed Statement
                  of Shareholders' Equity
                  for the six months ended December 31, 1999...............4

                  Consolidated Condensed Statement of
                  Cash Flows for the six months
                  ended December 31, 1999 and 1998.........................5

                  Notes to Consolidated Financial Statements...............7

Item 2.     Management's Discussion and Analysis of
                  Financial Condition and
                  Results of Operations....................................9

Item 3.     Quantitative and Qualitative Disclosures
                  About Market Risk.......................................16




PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings.............................................18

Item 4.    Submission of Matters to Vote of Security Holders .............18

Item 6.     Exhibits and Reports on Form 8-K..............................18

SIGNATURES................................................................20



<PAGE>



                           FORWARD LOOKING STATEMENTS

Except for historical  information contained herein, the discussion in this Form
10-Q quarterly  report includes  certain  forward-looking  statements based upon
management expectations. Factors which could cause future results to differ from
these  expectations   include  the  following:   general  economic   conditions,
legislative  and  regulatory  initiatives,  monetary and fiscal  policies of the
federal government,  deposit flows, the costs of funds,  general market rates of
interest,  interest  rates on competing  investments,  demand for loan products,
demand for financial services, changes in accounting policies or guidelines, and
changes in the  quality or  composition  of the  Company's  loan and  investment
portfolios.

The Company does not undertake  and  specifically  disclaims  any  obligation to
update any forward- looking  statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.

                                                         1


<PAGE>

                          MARION CAPITAL HOLDINGS, INC.
                           AND WHOLLY-OWNED SUBSIDIARY
                      FIRST FEDERAL SAVINGS BANK OF MARION

             CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>


                                                       December 31,          June 30,
                                                           1999                1999
                                                      -------------       -------------
ASSETS
<S>                                                   <C>                 <C>
  Cash                                                $   3,656,412       $   2,225,804
  Short-term interest bearing deposits                    2,235,198           6,626,884
                                                      -------------       -------------
    Total cash and cash equivalents                       5,891,610           8,852,688

  Investment securities available for sale                2,964,669           3,020,000
  Loans held for sale                                        39,968             326,901
  Loans receivable, net                                 165,701,974         165,797,406
  Real estate owned, net                                     63,348
  Premises and equipment                                  1,780,266           2,008,157
  Stock in Federal Home Loan Bank (at cost which
    approximates market)                                  1,395,200           1,163,600
  Investment in limited partnerships                      4,360,675           4,712,675
  Investment in other affiliate                             650,000             650,000
  Core deposit intangibles and goodwill                     648,682             698,580
  Cash value of life insurance                            7,135,616           5,797,666
  Other assets                                            4,113,243           4,073,816
                                                      -------------       -------------

    Total assets                                      $ 194,745,251       $ 197,101,489
                                                      =============       =============

LIABILITIES

  Deposits                                            $ 131,567,979       $ 142,087,269
  Advances from FHLB                                     24,326,490          15,533,732
  Other borrowings                                        2,825,560           3,240,344
  Advances by borrowers for taxes and
    insurance                                               207,025             201,919
  Other liabilities                                       4,470,154           4,294,658
                                                      -------------       -------------
    Total liabilities                                   163,397,208         165,357,922

SHAREHOLDERS' EQUITY
  Preferred stock:
    Authorized and unissued -- 2,000,000 shares
  Common stock, without par value:
    Authorized -- 5,000,000 shares
    Issued and outstanding -- 1,355,750 and
      1,424,550 shares                                    8,020,048           8,001,048
  Retained earnings                                      23,332,571          23,728,895
  Accumulated other comprehensive income (loss)              (4,576)             13,624
                                                      -------------       -------------
    Total shareholder's equity                           31,348,043          31,743,567
                                                      -------------       -------------

    Total liabilities and shareholders' equity        $ 194,745,251       $ 197,101,489
                                                      =============       =============
</TABLE>




<PAGE>


                          MARION CAPITAL HOLDINGS, INC.
                           AND WHOLLY-OWNED SUBSIDIARY
                      FIRST FEDERAL SAVINGS BANK OF MARION

                   CONSOLIDATED CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>


                                               Three Months Ended                   Six Months Ended
                                                  December 31,                        December 31,
                                             1999              1998              1999              1998
                                         -----------       -----------       -----------       -----------
<S>                                       <C>               <C>               <C>               <C>
Interest income
  Loans                                   $ 3,532,595       $ 3,703,316       $ 7,065,497       $ 7,347,209
  Interest-bearing deposits                    27,584            33,768           122,690            71,431
  Investment securities                        48,055            60,176            96,655           134,406
  Other interest and dividend income           24,474            22,875            47,937            45,835
                                          -----------       -----------       -----------       -----------
    Total interest income                   3,632,708         3,820,135         7,332,779         7,598,881

Interest expense
  Deposits                                  1,559,220         1,702,269         3,219,575         3,416,598
  Advances from FHLB                          310,545           233,268           565,967           465,332
                                          -----------       -----------       -----------       -----------
    Total interest expense                  1,869,765         1,935,537         3,785,542         3,881,930

Net interest income                         1,762,943         1,884,598         3,547,237         3,716,951

Provision for losses on loans                 253,027             6,886           458,027            16,189
                                          -----------       -----------       -----------       -----------

Net interest income after provision         1,509,916         1,877,712         3,089,210         3,700,762

Other income
  Net loan servicing fees                      20,822            18,854            42,043            39,406
  Annuity and other commissions                43,151            24,063            87,174            45,520
  Losses from limited
    partnerships                             (223,000)          (65,000)         (352,000)         (105,500)
  Life insurance income and
    death benefits                            759,400            61,250           798,450           102,500
  Gain on sale of branch office                     0                 0           231,626                 0
  Other income                                120,561            92,293           230,755           174,152
                                          -----------       -----------       -----------       -----------
    Total other income                        720,934           131,460         1,038,048           256,078
                                          -----------       -----------       -----------       -----------

Other expenses
  Salaries and employee benefits              764,569           608,654         1,422,795         1,279,196
  Occupancy expense                            62,550            65,151           131,260           129,828
  Equipment expense                            33,398            32,058            70,068            62,300
  Deposit insurance expense                    32,837            32,976            64,954            66,848
  Real estate operations, net                 117,657                19           117,818            (1,247)
  Data processing expense                      74,747            76,272           150,647           151,134
  Advertising                                  18,521            41,316            36,478            69,303
  Amortization of core deposit
    intangibles and goodwill                   24,649            26,453            49,899            53,506
  Other expenses                              242,144           194,720           465,606           404,209
                                          -----------       -----------       -----------       -----------
    Total other expenses                    1,371,072         1,077,619         2,509,525         2,215,077
                                          -----------       -----------       -----------       -----------

Income before income taxes                    859,778           931,553         1,617,733         1,741,763
  Income tax expense (benefit)                (85,860)          347,014            92,680           640,094
                                          -----------       -----------       -----------       -----------

Net income                                $   945,638       $   584,539       $ 1,525,053       $ 1,101,669
                                          ===========       ===========       ===========       ===========

Per share
  Basic earnings per share                $      0.69       $      0.37       $      1.09       $      0.69
  Diluted earnings per share              $      0.68       $      0.37       $      1.08       $      0.68
  Dividends                               $      0.22       $      0.22       $      0.44       $      0.44
</TABLE>




<PAGE>


                          MARION CAPITAL HOLDINGS, INC.
                           AND WHOLLY-OWNED SUBSIDIARY
                      FIRST FEDERAL SAVINGS BANK OF MARION

            CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                               Total
                                                           Shareholders'
                                                              Equity
                                                   -------------------------------
<S>                                                <C>                <C>
Balances, July, 1 1999 and 1998                    $ 31,743,567       $ 37,656,627

  Comprehensive income
    Net income                                        1,525,053          1,101,669
    Other comprehensive income, net of tax
      Unrealized gains (losses) on securities           (18,200)            18,616
                                                   ------------       ------------

    Comprehensive income                              1,506,853          1,120,285

  Exercise of stock options                              19,000             40,893

  Repurchase of common stock                         (1,308,413)        (3,786,575)

  Tax benefit of stock options excercised                     0            106,982

  Cash dividends                                       (612,964)          (703,843)
                                                   ------------       ------------

Balances, December 31, 1999 and 1998               $ 31,348,043       $ 34,434,369
                                                   ============       ============
</TABLE>




<PAGE>


                          MARION CAPITAL HOLDINGS, INC.
                           AND WHOLLY-OWNED SUBSIDIARY
                      FIRST FEDERAL SAVINGS BANK OF MARION

                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                            Six Months Ended
                                                                              December 31,

OPERATING ACTIVITIES                                                     1999               1998
                                                                     ------------       ------------
<S>                                                                  <C>                <C>
   Net Income                                                        $  1,525,053       $  1,101,669
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Provision for loan losses                                        458,027             16,189
         Losses from limited partnerships                                 352,000            105,500
         Amortization of net loan origination fees                       (106,398)          (125,680)
         Net amortization of investment securities'
            premiums and discounts                                        (15,736)               403
         Amortization of core deposits and goodwill                        49,899             53,506
         Depreciation                                                      96,679             88,267
         Deferred income tax                                             (357,969)            20,009
         Gain on sale of branch office                                   (231,626)                 0
         Gain on sale of loans                                             (9,187)           (20,840)
         Origination of loans for sale                                   (631,746)        (5,681,074)
         Proceeds from sale of loans                                      918,679          3,946,464
         Change in:
            Interest receivable                                           138,605            197,948
            Interest payable and other liabilities                        175,496           (429,709)
            Cash value of insurance                                      (887,950)          (102,500)
            Prepaid expense and other assets                              (83,840)            16,738
                                                                     ------------       ------------
               Net cash provided (used) by operating activities         1,389,986           (813,110)
                                                                     ------------       ------------

INVESTING ACTIVITIES
   Proceeds from maturity of investment securities
      held to maturity                                                  1,000,000          2,000,000
   Purchase of investment securities available
      for sale                                                           (959,070)
   Payments on mortgage-backed securities                                                      2,917
   Net changes in loans                                                  (272,797)          (801,328)
   Purchases of premises and equipment                                    (28,070)           (74,973)
   Premiums paid on life insurance                                       (450,000)
   Net cash disbursed in sale of branch office                         (8,593,288)
                                                                     ------------       ------------
      Net cash (used) by investing activities                          (9,303,225)         1,126,616
                                                                     ------------       ------------
</TABLE>

   (CONTINUED)

<PAGE>
<TABLE>
<CAPTION>

FINANCING ACTIVITIES
   Net change in:
<S>                                                                    <C>                <C>
      Interest-bearing demand and savings deposits                     (1,339,323)        (2,298,743)
      Certificates of deposit                                            (189,219)         5,011,658
   Proceeds from FHLB advances                                         12,500,000          8,000,000
   Repayment of FHLB advances                                          (3,707,242)        (6,017,940)
   Repayment of other borrowings                                         (414,784)          (394,062)
   Net change in advances by borrowers for taxes
      and insurance                                                         5,106             31,828
   Proceeds from exercise of stock options                                 19,000             40,893
   Repurchase of common stock                                          (1,308,413)        (3,786,575)
   Dividends paid                                                        (612,964)          (703,843)
                                                                     ------------       ------------
      Net cash provided (used) by financing activities                  4,952,161           (116,784)

                                                                     ------------       ------------
Net change in cash and cash equivalents                                (2,961,078)           196,722

Cash and Cash Equivalents, Beginning of Period                          8,852,688          5,134,764
                                                                     ------------       ------------

Cash and Cash Equivalents, End of Period                             $  5,891,610       $  5,331,486
                                                                     ============       ============

ADDITIONAL CASH FLOWS AND
SUPPLEMENTARY INFORMATION
   Interest paid                                                     $  3,777,183       $  3,906,877
   Income tax paid                                                        397,000            435,000
   Loans to finance the sale of real estate owned                          42,760              8,500

</TABLE>


<PAGE>




                          MARION CAPITAL HOLDINGS, INC.
                           AND WHOLLY-OWNED SUBSIDIARY
                      FIRST FEDERAL SAVINGS BANK OF MARION

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE A: Basis of Presentation

The unaudited interim  consolidated  condensed financial  statements include the
accounts of Marion  Capital  Holdings,  Inc. (the  "Company") and its subsidiary
First Federal Savings Bank of Marion (the "Bank").

The unaudited  interim  consolidated  condensed  financial  statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include  all  information  and  disclosures   required  by  generally   accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  the financial  statements reflect all adjustments,  comprising only
normal recurring  accruals,  necessary to present fairly the Company's financial
position as of December 31, 1999,  results of operations for the three-month and
six-month  periods ended  December 31, 1999 and 1998, and cash flows for the six
month periods ended December 31, 1999 and 1998.

NOTE B: Dividends and Earnings Per Share

On November 15, 1999, the Board of Directors  declared a quarterly cash dividend
of $.22 per share.  This dividend was paid on December 15, 1999 to  shareholders
of record as of November 29, 1999.

Earnings per share (EPS) were computed as follows:
<TABLE>
<CAPTION>


                                        Three Months Ended                             Three Months Ended
                                        December 31, 1999                              December 31, 1998
                           --------------------------------------------         -----------------------------------
                                           Weighted                                         Weighted
                                           Average           Per Share                      Average       Per Share
                           Income          Shares             Amount            Income      Shares         Amount
<S>                        <C>            <C>                   <C>             <C>        <C>               <C>
Basic earnings per share
 Income available to
 common shareholders       $945,638       1,374,512             $.69            $584,539   1,571,252         $.37
                                                                ====                                         ====

Effect of dilutive securities
 Stock Options                                7,363                                           21,976
                                          ---------                                        ---------

Diluted earnings per share
 Income available to
 common shareholders and
 assumed conversions       $945,638       1,381,875             $.68             $584,539    1,593,228       $.37
                           ========       =========             ====             =========   =========       ====
</TABLE>


                                                           7


<PAGE>
<TABLE>
<CAPTION>

                                        Three Months Ended                             Three Months Ended
                                        December 31, 1999                              December 31, 1998
                           --------------------------------------------         -----------------------------------
                                           Weighted                                         Weighted
                                           Average           Per Share                      Average       Per Share
                           Income          Shares             Amount            Income      Shares         Amount
<S>                      <C>              <C>                  <C>            <C>          <C>                <C>
Basic earnings per share
 Income available to
 common shareholders     $1,525,053       1,399,788            $1.09          $1,101,669   1,605,768          $.69
                                                               =====                                          ====

Effect of dilutive securities
 Stock Options                                7,972                                            24,578
                                          ---------                                         ---------

Diluted earnings per share
 Income available to
 common shareholders and
 assumed conversions     $1,525,053      1,407,760            $1.08           $1,101,669    1,630,346         $.68
                         ==========      =========            =====           ===========   =========         ====
</TABLE>




NOTE C: Reporting Comprehensive Income

The  Company  adopted  Statement  of  financial  Accounting  Standards  No. 130,
Reporting   Comprehensive  Income.   Comprehensive  income  includes  unrealized
gains(losses) on securities  available for sale, net of tax.  Accumulated  other
comprehensive income and income tax on such income reported are as follows:

                                                Six Months Ended
                                                  December 31
                                            -----------------------
                                              1999           1998
                                            --------       --------
Accumulated other comprehensive income
  Balance, July 1                             13,624       $ 30,332
  Net unrealized gains(losses)               (18,200)        18,616
                                            --------       --------

  Balance, September 30                     $  4,576       $ 48,948
                                            ========       ========

Income tax expense(benefit)
  Unrealized holding gains(losses)          $(11,937)      $ 12,210
                                            ========       ========


                                                           8


<PAGE>



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

General

The Company's  total assets were $194.7 million at December 31, 1999 compared to
$197.1  million  at June 30,  1999.  Cash and cash  equivalents  decreased  $3.0
million and investment  securities remained  relatively  unchanged from June 30,
1999 to December 31, 1999. Net loans  receivable were $165.7 million at December
31, 1999, a decrease of $.1 million,  or .1%, from June 30, 1999.  Cash value of
life insurance  increased $1.3 million from June 30, 1999, to December 31, 1999,
as a result of the increased cash  surrender  value of life insurance on key man
policies.  This increase was a combination of purchasing additional policies and
reflecting  the  increased  value as a result of the death of one of the insured
participants.

Deposits  decreased to $131.6  million at December  31, 1999  compared to $142.1
million at June 30,  1999,  a 7.4%  decrease.  This $10.5  million  decrease was
primarily  the result of the  Company  selling its  Decatur  branch  deposits on
September 3, 1999, to another financial institution.  The deposits sold amounted
to $9.0 million. Passbook and transaction accounts decreased by $3.1 million and
certificate of deposit accounts decreased by $7.4 million.

Federal Home Loan Bank  advances  increased by $8.8 million to $24.3  million at
December 31, 1999, compared to $15.5 million at June 30, 1999, a 56.6% increase.

Shareholders'  equity was $31.3 million at December 31, 1999,  compared to $31.7
million at June 30,  1999.  During the six months ended  December 31, 1999,  the
Company  repurchased  70,700 shares of common stock in the open market at a cost
of $1.3  million,  or an average  price of $18.51 per share.  This  reduced  the
number of shares outstanding to 1,355,750 at December 31, 1999.

Net  income  for the  six  months  ended  December  31,  1999,  of $1.5  million
represents a 38.4% increase in income  reported for the same period in the prior
year.  Earnings  for the  six  months  ended  December  31,  1999,  included  an
additional  $156,000 in federal income tax credits as compared to the six months
ended December 31, 1998. Also, for the six months ended December 31, 1999, death
benefits  proceeds  from key man  insurance  resulted  in  additional  income of
$725,000.  This increase of tax credits and the nontaxable proceeds from key man
insurance  had the effect of reducing the effective tax rate of the Company from
approximately  37% for the six months ended December 31, 1998, to 6% for the six
months ended December 31, 1999.

Results of  Operations  Comparison  of Three Months Ended  December 31, 1999 and
December 31, 1998

Net income for the three months ended  December 31, 1999 of $945,638 was a 61.8%
increase from the three months ended December 31, 1998 of $584,539. Net interest
income for the quarter ended December 31,1999, equaled $1,762,943, a decrease of
6.5% from the quarter ended December 31, 1998 of $1,884,598.

                                                           9


<PAGE>



A provision  of $253,027 for losses on loans was made for the three months ended
December 31, 1999,  compared to a $6,886 provision in the same period last year.
The  additional  loan loss  provision  was made as a result of (1) the Company's
ongoing  evaluation of its impaired loans and their net realizable  value; (2) a
review of recent  charge-offs  reflecting  a higher  loss ratio than in previous
years;  and (3) a recent  announcement  from a local  employer of  intentions to
close its Marion,  Indiana,  plant which may have an adverse effect on the local
economy.

Total other income increased by $589,474 for the three months ended December 31,
1999,  compared  to the  same  period  in  the  prior  year.  This  increase  is
attributable  to (1)  death  benefit  proceeds  from  key man  insurance,  which
resulted  in  additional  income of  $725,000;  (2)  commissions  from  sales of
annuities  and mutual  funds,  which  increased  by  $19,088;  (3) fee income on
deposit  accounts,  which  increased  by  $16,403;  and (4) other  miscellaneous
income, which increased by $11,865.  Also, during the quarter ended December 31,
1999,  the  Company  charged  off an  additional  $100,000  on an older  limited
partnership  investment in excess of normal operating  losses.  Recent financial
reports indicate a decline in net income produced by the partnership, which thus
reflects a lower  residual  value of the  investment.  Equity  losses in limited
partnerships  increased from $65,000 for the quarter ended December 31, 1998, to
a $123,000  loss for the  quarter  ended  December  31,  1999,  as a new limited
partnership began operations.

Total other expenses increased by $293,453,  or 27.2% for the three months ended
December  31, 1999,  compared to the same period in the prior year.  Real estate
operations  expense increased  $117,638 as a result of an increase in the number
of property foreclosures, plus a $100,000 nonrecurring estimated loss related to
real estate  operations.  Salaries and employee  benefits for the quarter  ended
December 31, 1999,  increased by $155,915  over the quarter  ended  December 31,
1998.  This  increase  is  primarily  due  to  funding  the  remaining  benefits
associated  with the key man death benefits  discussed  above.  Other  increases
reflect normal operating cost increases.

The income tax benefit for the three months ended December 31, 1999, amounted to
$85,860, compared to tax expense of $347,014 for the three months ended December
31, 1998.  The  Company's  effective tax benefit rate for the three months ended
December 31, 1999, was 10%,  compared to 37% tax rate for the comparable  period
in 1998. The decrease in income taxes is due from the  nontaxable  proceeds from
key man  insurance  and the  increase in federal  tax  credits  from the limited
partnerships.  A recent  investment  has generated new tax credits  beginning in
July 1999,  and will result in tax credits of  approximately  $370,000  per year
based upon current projections.

Results of  Operations  Comparison  of Six Months  Ended  December  31, 1999 and
December 31, 1998.

Net income for the six months ended December 31, 1999,  was $1,525,053  compared
with  $1,101,669  for the six months ended  December  31,  1998,  an increase of
$423,384,  or 38.4%. Interest income for the six months ended December 31, 1999,
decreased  $266,102,  or 3.5%,  compared  to the same  period in the prior year,
while  interest  expense for the six months ended  December 31, 1999,  decreased
$96,388,  or 2.5%,  compared to the same period in the prior year.  As a result,
net  interest  income for the six months ended  December  31, 1999,  amounted to
$3,547,237,  a decrease of $169,714, or 4.6%, compared to the same period in the
prior year.  Earnings  for the six months ended  December 31, 1999,  included an
additional  $156,000 in federal income tax credits as compared to the six months
ended  December  31,  1998.  This  increase in tax  credits  and the  nontaxable
proceeds from key man life  insurance had the effect of decreasing the effective
tax rate of the Company from approximately

                                                           10


<PAGE>



37% for the six months ended  December 31, 1998,  to 6% for the six months ended
December 31, 1999.

A $458,027  provision  for loss on loans for the six months  ended  December 31,
1999, was made compared to a $16,189 provision  reported in the same period last
year.  The  increased  provision  for the six months  ended  December  31, 1999,
compared to the prior period was made for the same reasons previously  described
above.

Total other income  increased by $781,970 for the six months ended  December 31,
1999,  compared  to the  same  period  in  the  prior  year.  This  increase  is
attributable to increased fee income from loan servicing fees, annuity and other
commissions, and other fee income of approximately $101,000 over income reported
in the prior period. Also, life insurance income and death benefits increased by
$695,950  over the prior  period  and gain on the sale of a branch  amounted  to
$231,626.  Also, for the six months ended December 31, 1999, the Company charged
off an  additional  $100,000 on one of its limited  partnership  investments  in
excess of normal operating  losses.  Recent financial reports indicate a decline
in net income produced by the  partnership  which thus reflects a lower residual
value of the investment.

Total other  expenses  increased  by $294,448 or 13.3% for the six months  ended
December 31, 1999,  compared to the same period in the prior year.  Salaries and
employee  benefits  increased  $143,599,  or  11.2%  primarily  due  to  funding
additional  benefits  associated  with  key  man  death  benefits.  Real  estate
operating  expense  increased by $119,065 for the six months ended  December 31,
1999,  compared  to  the  same  period  in  the  prior  year  as a  result  of a
nonrecurring estimated loss of $100,000 related to real estate operations.

Income tax expense  for the six months  ended  December  31,  1999,  amounted to
$92,680,  a decrease of $547,414  from the six months  ended  December 31, 1998,
resulting  in a decrease in the  effective  tax rate from 37% for the six months
ended December 31, 1998 to 6% for the six months ended  December 31, 1999.  This
change in effective tax rate is the result of  nontaxable  proceeds from key man
life  insurance  and an  increase in federal  income tax  credits as  previously
described above.

Allowance for loan losses  amounted to $2.3 million at December 31, 1999,  which
was  unchanged  from  June  30,  1999,   after  adjusting  for  charge-offs  and
recoveries. Management considered the allowances for loan and real estate losses
at December 31, 1999, to be adequate to cover estimated losses inherent in those
portfolios at that date, and its  consideration  included  probable  losses that
could be  reasonably  estimated.  Such belief is based upon an analysis of loans
currently outstanding, real estate owned, past loss experience, current economic
conditions  and other  factors  and  estimates  which are subject to change over
time. The following table  illustrates  the changes  affecting the allowance for
loan losses for the six months ended December 31, 1999.

                                                           11


<PAGE>
<TABLE>
<CAPTION>



                                     Allowance For      Allowance For        Total
                                      Loan Losses        REO Losses        Allowance

<S>                                   <C>               <C>               <C>
Balances at July 1, 1999 ..........   $ 2,271,701       $         0       $ 2,271,701
Provision for losses ..............       458,027                 0           458,027
Recoveries ........................         3,164            12,962            16,126
Loans and REO charged off .........      (415,931)             (262)         (416,193)
                                      -----------       -----------       -----------

Balances at December 31, 1999......   $ 2,316,961       $    12,700       $ 2,329,661
                                      ===========       ===========       ===========
</TABLE>


The loan loss  reserves  to total loans at December  31, 1999  equaled  1.38% of
total loans  outstanding,  compared to 1.35% of total loans  outstanding at June
30, 1999.  Total  non-performing  assets  decreased  during the six months ended
December  31,  1999,  from $3.3  million  at June 30,  1999 to $2.4  million  at
December 31, 1999. Non-performing assets at December 31, 1999 consisted of loans
delinquent greater than 90 days of $2,338,000 and repossessed assets of $63,000.

Total  non-performing loans totaled 1.39% of total loans outstanding at December
31, 1999, compared to 1.98% of total loans at June 30, 1999.

The  following  table further  depicts the amounts and  categories of the Bank's
non-performing  assets.  It is the  policy  of the  Bank  that  all  earned  but
uncollected  interest  on all loans be  reviewed  monthly  to  determine  if any
portion thereof should be classified as  uncollectable  for any loan past due in
excess of 90 days.

<TABLE>
<CAPTION>
                                         December 31,  June 30,
                                            1999         1999
                                         ------------  --------
                                         (Dollars in Thousands)
<S>                                       <C>          <C>
Accruing loans delinquent
    more than 90 days ..............      $   --       $   --
Non-accruing loans:
    Residential ....................         522        1,108
    Multi-family ...................          --          462
    Commercial real estate .........       1,616        1,585
    Commercial loans ...............         161          153
    Consumer .......................          39           21
Troubled debt restructurings .......          --           --
                                          ------       ------
   Total non-performing loans ......       2,338        3,329
Repossessed assets, net ............          63            2
                                          ------       ------
    Total non-performing assets.....      $2,401       $3,331
                                          ======       ======

Non-performing loans to
    total loans ....................        1.39%        1.98%
Non-performing assets to
    total assets ...................        1.21%        1.69%
</TABLE>




                                                           12


<PAGE>



Average Balances and Interest

The  following  table  presents for the periods  indicated  the monthly  average
balances  of  the  Company's   interest-earning   assets  and   interest-bearing
liabilities, the interest earned or paid on such amounts, and the average yields
earned and rates paid.  Such yields and costs are determined by dividing  income
or  expense by the  average  balance of assets or  liabilities  for the  periods
presented.

<TABLE>
<CAPTION>
                                                         Three Months Ended December 31
                                ------------------------------------------------------------------------------
                                                1999                                        1998
                                -----------------------------------           --------------------------------
                                                               (Dollars in thousands)

                                Average                     Average           Average                  Average
                                Balance       Interest      Rate              Balance      Interest      Rate
<S>                              <C>            <C>         <C>               <C>           <C>         <C>
Total interest-
  earnings assets . . . . . .    $175,090       $3,633      8.30%             $176,858      $3,820      8.64%
Total interest-
  bearing liabilities . . . .     152,990        1,870      4.89%             152,063       1,935       5.09%
                                                 -----                                      -----

Net interest income/
Interest rate spread. . . . .                   $1,763      3.41%                           $1,885      3.55%
                                                ======                                      ======

                                                           Six Months Ended December 31
                                ------------------------------------------------------------------------------
                                                1999                                        1998
                                -----------------------------------           --------------------------------
                                                             (Dollars in thousands)

                                Average                     Average           Average                  Average
                                Balance       Interest      Rate              Balance      Interest      Rate
<S>                              <C>            <C>         <C>               <C>           <C>         <C>
Total interest-
  earnings assets . . . . . .    $177,253       $7,333      8.27%             $176,470      $7,599      8.61%
Total interest-
  bearing liabilities . . . .     155,107        3,786      4.88%             151,311        3,882      5.13%
                                                 -----                                      ------

Net interest income/
Interest rate spread. . . . .                   $3,547      3.39%                           $3,717      3.48%
                                                 =====                                      ======
</TABLE>



Shareholders' Equity

Shareholders'  equity at  December  31,  1999,  was  $31,348,043,  a decrease of
$395,524 from June 30, 1999.  The Company's  equity to asset ratio was 16.10% at
December 31, 1999  compared to 16.11% at June 30,  1999.  There are five capital
categories  defined  in  the  regulations,  ranging  from  well  capitalized  to
critically   undercapitalized.   Classification   of  a  bank   in  any  of  the
undercapitalized  categories can result in actions by regulators that could have
a material  effect on a bank's  operations.  At December 31,  1999,  the Bank is
categorized  as  well   capitalized  and  met  all  subject   capital   adequacy


                                                           13


<PAGE>



requirements.  There are no conditions or events since  December 31, 1999,  that
management believes have changed the Bank's classification.
<TABLE>
<CAPTION>


                                                                       1999
                                    ---------------------------------------------------------------------------
                                                                      Required
                                                                    for Adequate              To Be Well
                                           Actual                     Capital                 Capitalized
December 31                           Amount        Ratio        Amount     Ratio          Amount     Ratio
---------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>           <C>            <C>          <C>
Total risk-based capital
  (to risk-weighted assets)         $28,452       20.3%         $11,184       8.0%           $13,980      10.0%
Tier I risk based capital
  (to risk-weighted assets)          26,697       19.1%          11,184       8.0%            13,980      10.0%
Core capital
   (to adjusted tangible assets)     26,697       14.2%           5,610       3.0%            11,221       6.0%
Core capital
   (to adjusted total assets)        26,697       14.2%           5,610       3.0%             9,351       5.0%
</TABLE>


Liquidity and Capital Resources

The standard measure of liquidity for savings  associations is the ratio of cash
and eligible  investments to a certain  percentage of net  withdrawable  savings
accounts  and  borrowings  due within one year.  The minimum  required  ratio is
currently set by the Office of Thrift Supervision  regulation at 5%. At December
31, 1999, the Bank's liquidity ratio was 7.7%.

Year 2000

The  Company's  lending and  deposit  activities,  like those of most  financial
institutions,  depend  significantly  upon computer systems.  As of December 31,
1999, the Company is not aware that it has incurred any problems associated with
the  possibility  that the computers  which control its systems,  facilities and
infrastructure may not be programmed to read four-digit date codes, causing some
computer applications to be unable to recognize the change from the year 1999 to
the year 2000,  and causing  computer  systems to generate  erroneous data or to
fail.

As of December 31, 1999,  the Company has completed an inventory of all hardware
and  software  systems and has made all mission  critical  classifications.  The
Company  has  implemented  both an  employee  awareness  program  and a customer
awareness  program aimed at educating people about the efforts being made by the
Company as well as bank regulators regarding the Year 2000 issue.

The Company's data processing is performed  primarily by a third party servicer.
The Company has completed  testing the systems of its primary service  provider.
The results from these tests  disclosed no  significant  weakness or problems in
processing and operating beyond December 31, 1999.

The Company also uses software and hardware which are covered under  maintenance
agreements with third party vendors.  Consequently,  the Company is dependent on
these vendors to conduct its business.  The Company has contacted each vendor to
request time tables for Year 2000  compliance and the expected costs, if any, to
be passed along to the Company.  The responses received disclosed no significant
weakness or problems related to the Year 2000 issue.

                                                           14


<PAGE>



In addition to possible  expenses related to the Company's own systems and those
of its  service  providers,  the  Company  could be  affected  by the Year  2000
problems affecting any of its depositors or borrowers.  The Company is not aware
of any  significant  problems  experienced by any of its depositors or borrowers
related to the Year 2000 issue that have materially affected or could materially
affect the Company.

Costs associated with Year 2000 issues have been immaterial. Although management
believes  it has taken  taking  the  necessary  steps to  address  the Year 2000
compliance issue and is not aware of any problems experienced as of December 31,
1999, no  assurances  can be given that some problems will not occur or that the
Company will not incur additional  expenses in future periods.  Amounts expensed
in fiscal 1999 and 1998 were immaterial.

Other

The  Securities  and  Exchange  Commission  maintains  a Web site that  contains
reports,   proxy  information   statements,   and  other  information  regarding
registrants that file electronically with the Commission, including the Company.
The address is (http://www.sec.gov).

                                                           15


<PAGE>



Item 3:  Quantitative and Qualitative Disclosure About Market Risk

The  Bank  is  subject   to   interest   rate  risk  to  the  degree   that  its
interest-bearing  liabilities,  primarily  deposits with short- and  medium-term
maturities,  mature or reprice  at  different  rates  than our  interest-earning
assets.  Although having  liabilities  that mature or reprice less frequently on
average than assets will be beneficial in times of rising interest  rates,  such
an  asset/liability  structure will result in lower net income during periods of
declining interest rates, unless offset by other factors.

The  Bank  protects   against  problems  arising  in  a  falling  interest  rate
environment  by  requiring   interest  rate  minimums  on  its  residential  and
commercial real estate adjustable-rate mortgages and against problems arising in
a rising  interest rate  environment  by having in excess of 86% of its mortgage
loans with  adjustable rate features.  Management  believes that these minimums,
which establish  floors below which the loan interest rate cannot decline,  will
continue to reduce its interest rate  vulnerability in a declining interest rate
environment.  For the loans  which do not adjust  because of the  interest  rate
minimums, there is an increased risk of prepayment.

The Bank  believes it is critical to manage the  relationship  between  interest
rates  and  the  effect  on its  net  portfolio  value  ("NPV").  This  approach
calculates the difference  between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities, as well as
cash  flows  from  off-balance  sheet  contracts.  The Bank  manages  assets and
liabilities  within the context of the marketplace,  regulatory  limitations and
within  its  limits on the  amount of  change in NPV which is  acceptable  given
certain interest rate changes.

The OTS  issued a  regulation,  which  uses a net market  value  methodology  to
measure the interest rate risk exposure of savings associations.  Under this OTS
regulation,  an institution's  "normal" level of interest rate risk in the event
of an assumed change in interest rates is a decrease in the institution's NPV in
an  amount  not  exceeding  2% of  the  present  value  of its  assets.  Savings
associations  with over  $300  million  in assets or less than a 12%  risk-based
capital  ratio are required to file OTS Schedule  CMR. Data from Schedule CMR is
used by the OTS to calculate  changes in NPV (and the related  "Normal" level of
interest rate risk) based upon certain interest rate changes  (discussed below).
Associations  which  do not  meet  either  of the  filing  requirements  are not
required to file OTS Schedule CMR, but may do so  voluntarily.  As the Bank does
not meet either of these requirements,  it is not required to file Schedule CMR,
although it does so voluntarily.  Under the regulation,  associations which must
file are required to take a deduction (the interest rate risk capital component)
from their  total  capital  available  to  calculate  their  risk based  capital
requirement of their interest rate exposure is greater than "normal". The amount
of that  deduction is one-half of the difference  between (a) the  institution's
actual  calculated  exposure  to a 200 basis  point  interest  rate  increase or
decrease  (whichever  results in the greater pro forma  decrease in NPV) and (b)
its "normal" level of exposure which is 2% of the present value of its assets.

Presented below, as of December 31,1999,  is an analysis performed by the OTS of
the Bank's interest rate risk as measured by change in NPV for instantaneous and
sustained parallel shifts in the yield curve, in 100 basis point increments,  up
and down 300 basis points.  At December 31, 1999, 2% of the present value of the
Bank's assets was approximately $3.7 million.  Because the interest rate risk of
a 200 basis point  increase in market rates (which was greater than the interest
rate risk of a 200 basis point  decrease) was $1.6 million at December 31, 1999,
the Bank would not have been required to make a deduction from its total capital
available to calculate its risk based capital requirement if it had been subject
to the OTS's reporting requirements under this methodology.

                                                           16


<PAGE>

<TABLE>
<CAPTION>

                 Net Portfolio Value             NPV as % of PV of Assets
Change
In Rates         $ Amount     $Change  %Change    NPV Ratio     Change
-------------------------------------------------------------------------
                              (Dollars in Thousands)

<S>               <C>          <C>        <C>       <C>         <C>
+300 bp           27,484      -3,064     -10%       15.07%     -102 bp

+200 bp           28,955      -1,593      -5%       15.63%      -46 bp

+100 bp           30,024        -523      -2%       15.99%      -10 bp

   0 bp           30,548                            16.09%

-100 bp           30,515         -33       0%       15.94%      -15 bp

-200 bp           30,371        -177      -1%       15.74%      -35 bp

-300 bp           30,407        -141       0%       15.61%      -48 bp
</TABLE>


As with any method of measuring  interest rate risk,  certain  shortcomings  are
inherent in the methods of  analysis  presented  above.  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 adjustable rate loans,  have features which restrict changes in
interest rates on a short-term basis and over the life of the asset. Most of the
Bank's   adjustable  rate  loans  have  interest  rate  minimums  of  6.00%  for
residential  loans  and 8.50%  for  commercial  real  estate  loans.  Currently,
originations  of  residential  adjustable  rate  mortgages  have  interest  rate
minimums of 7.50%. Further, in the event of a change in interest rates, expected
rates of  prepayments on loans and early  withdrawals  from  certificates  could
likely  deviate  significantly  from  those  assumed in  calculating  the table.
Finally, the ability of many borrowers to service their debt may decrease in the
event of an interest  rate  increase  although  the Bank does  underwrite  these
mortgages  at  approximately  2.0%  above  the  origination  rate.  The  Company
considers all of these factors in monitoring its exposure to interest rate risk.

                                                           17


<PAGE>



                            PART II OTHER INFORMATION

Item 1.           Legal Proceedings

Neither the  Company  nor the Bank were,  during the  three-month  period  ended
December  31,  1999,  or are,  as of the  date  hereof,  involved  in any  legal
proceeding of a material nature. From time to time, the Bank is a party to legal
proceedings  wherein it enforces its security  interests in connection  with its
mortgage loans.

Item 4.           Submission of Matters to Vote of Security Holders

On October 18, 1999,  the Company held its annual  meeting of  shareholders,  at
which time matters submitted to a vote of the shareholders included the election
of two Company directors and the approval and ratification of the appointment of
Olive LLP as auditors for the fiscal year ending June 30, 2000.

Both director nominees were elected and the appointment of auditors was approved
and ratified by a majority of the 1,424,550 issued and outstanding  share votes.
A  tabulation  of votes cast as to each  matter  submitted  to  shareholders  is
presented below:

                                                                  Votes
Director Nominees                  For            Against       Withheld
-----------------                  ---            -------       --------
Steven L. Banks                    1,061,350          -0-         83,730
W. Gordon Coryea*                  1,072,703          -0-         72,377

Other Matters
-------------
Approval and Ratification of
Auditors                           1,128,400       1,080          15,600

*Mr. Coryea passed away in November 1999.


Item 6.           Exhibits and Reports on Form 8-K

a)   Exhibits

     3(1)       The Articles of Incorporation of the Registrant are incorporated
                by reference to Exhibit  3(1) to the  Registration  Statement on
                Form S-1 (Registration No. 33-55052).

     3(2)       The  Code  of  By-Laws  of the  Registrant  is  incorporated  by
                reference to Exhibit 3(2) to the Registration  Statement on Form
                S-1 (Registration No. 33-55052).

     10(1)      Employment Agreement dated January 19, 2000 between the Bank and
                Steven L. Banks.



                                                           18


<PAGE>



     10(2)      Employment Agreement dated January 19, 2000 between the Bank and
                Larry G. Phillips.

     27         Financial Data Schedule

b)   Reports on Form 8-K

     The Company filed no reports on Form 8-K during the quarter ended  December
     31, 1999.

                                                           19




<PAGE>


                                   Signatures

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

                                          MARION CAPITAL HOLDINGS, INC.



Date: February 11, 2000                   By: /s/ Steven L. Banks
                                              -------------------
                                              Steven L. Banks, President



Date: February 11, 2000                   By: /s/ Larry G. Phillips
                                             ----------------------
                                             Larry G. Phillips, Vice President,
                                             Secretary and Treasurer





                                                      18