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,
         1997 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 11, 1998 was 1,781,661.


<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, 1997 and June 30, 1997........................2

                  Consolidated Condensed Statement of 
                  Income for the three-month
                  and six-month periods ended 
                  December 31, 1997 and 1996.................................3

                  Consolidated Condensed Statement of 
                  Changes in Shareholders' Equity
                  for the six months ended December 31, 1997.................4

                  Consolidated Condensed Statement of 
                  Cash Flows for the six months
                  ended December 31, 1997 and 1996...........................5

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

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

Item 3.     Quantitative and Qualitative 
                  Disclosures About Market Risk.............................14

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings...............................................17

Item 6.     Exhibits and Reports on Form 8-K................................17

SIGNATURES..................................................................18



<PAGE>



                           FORWARD LOOKING STATEMENTS

         This Annual Report on Form 10-Q ("Form 10-Q") contains statements which
constitute  forward  looking  statements  within  the  meaning  of  the  Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include  statements  regarding the intent,  belief,
outlook,  estimate  or  expectations  of the Company  (as  defined  below),  its
directors or its officers primarily with respect to future events and the future
financial  performance  of the Company.  Readers of this Form 10-Q are cautioned
that any such forward looking  statements are not guarantees of future events or
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially from those in the forward  looking  statements as a result of
various  factors.  The  accompanying  information  contained  in this  Form 10-Q
identifies  important factors that could cause such  differences.  These factors
include  changes in interest  rates;  loss of deposits  and loan demand to other
savings and financial  institutions;  substantial  changes in financial markets;
changes in real estate values and the real estate market; regulatory changes; or
unanticipated results in pending legal proceedings.

                                                         1

<PAGE>



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

             CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION


<TABLE>
<CAPTION>
                                                                      December 31,                  June 30,
                                                                          1997                        1997
                                                               --------------------------- ---------------------------
ASSETS
<S>                                                                     <C>                         <C>       
   Cash                                                                 $3,730,125                  $2,328,605
   Short-term interest bearing deposits                                  7,699,884                   1,294,134
                                                                  ----------------            ----------------
     Total cash and cash equivalents                                    11,430,009                   3,622,739
   Investment securities available for sale                              3,041,450                   2,997,500




   Investment securities held to maturity
     (market value $3,014,591 and $4,824,464)                            3,021,192                   4,847,519
   Loans receivable, net                                               155,203,638                 148,030,991
   Real estate owned, net                                                  805,648                           0
   Premises and equipment                                                1,951,435                   1,520,381
   Stock in Federal Home Loan Bank (at cost
     which approximates market)                                          1,047,300                   1,047,300
   Investment in limited partnerships                                    4,928,175                   1,448,869
   Core deposit intangibles and goodwill                                   856,693                           0
   Other assets                                                          9,568,833                   9,788,410
                                                                  ----------------            ----------------
   Total assets                                                       $191,854,373                $173,303,709
                                                                  ================            ================

LIABILITIES
   Deposits                                                           $133,641,622                $121,770,013
   Advances from FHLB                                                   10,689,069                   8,228,976
   Note payable                                                          3,604,406                           0
   Advances by borrowers for taxes and
     insurance                                                             182,289                     223,520
   Other liabilities                                                     3,868,039                   4,015,381
                                                                  ----------------            ----------------
     Total liabilities                                                 151,985,425                 134,237,890

SHAREHOLDERS' EQUITY
   Preferred Stock:
     Authorized and unissued--2,000,000 shares                                   0                           0
   Common stock, without par value:
     Authorized--5,000,000 shares
     Issued and outstanding--1,781,661 and
       1,768,099 shares                                                 10,337,778                  10,126,365
     Retained earnings                                                  29,550,819                  29,074,055
     Unrealized gain (loss) on securities available for sale                25,079                      (1,961)
     Unearned compensation                                                 (44,728)                   (132,640)
                                                                  -----------------           -----------------
       Total shareholders' equity                                       39,868,948                  39,065,819
                                                                  ----------------            ----------------
         Total liabilities and shareholders' equity                   $191,854,373                $173,303,709
                                                                  ================            ================
</TABLE>


                                                         2

<PAGE>



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

                   CONSOLIDATED CONDENSED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                      Three Months Ended                       Six Months Ended
                                                         December 31,                            December 31,
                                               ---------------------------------        --------------------------------
                                                   1997                 1996                1997                1996
                                               ------------         ------------        ------------        ------------
Interest Income
<S>                                             <C>                  <C>                  <C>                 <C>       
   Loans                                        $ 3,380,286          $ 3,202,867          $6,638,386          $6,386,241
   Mortgage-backed securities                           392               11,202               2,334              27,889
   Interest-bearing deposits                         62,621               69,794             121,048             142,337
   Investment securities                             86,688              127,295             178,770             266,339
   Other interest and dividend
        income                                       21,118               19,504              42,896              39,007
                                                     ------               ------              ------              ------
     Total interest income                        3,551,105            3,430,662           6,983,434           6,861,813

Interest expense
   Deposits                                       1,588,499            1,574,216           3,150,765           3,188,454
   Advances from FHLB                               167,537              109,064             314,462             209,097
                                                    -------              -------             -------             -------
     Total interest expense                       1,756,036            1,683,280           3,465,227           3,397,551
                                                  ---------            ---------           ---------           ---------
Net interest income                               1,795,069            1,747,382           3,518,207           3,464,262
   Provision for losses on loans                      6,729                5,759              15,554               9,949
                                                      -----                -----              ------               -----
Net interest income after
   provision for losses on loans                  1,788,340            1,741,623           3,502,653           3,454,313
                                                  ---------            ---------           ---------           ---------
Other income
   Net loan servicing fees                           19,467               22,886              39,038              45,093
   Annuity and other commissions                     29,562               45,387              67,459              89,903
   Equity in losses of limited
     partnerships                                  (36,000)             (60,000)           (125,100)           (120,000)
   Gain on sale of other assets                           0               51,376                   0              51,376
   Life insurance income and death
     benefits                                        43,750               34,975              92,543             214,762
   Other income                                      42,171               19,120              77,325              37,712
                                                     ------               ------              ------              ------
     Total other income                              98,950              113,744             151,265             318,846
                                                     ------              -------             -------             -------
Other expenses
   Salaries and employee benefits                   637,059              607,915           1,221,020           1,473,306
   Occupancy expense                                 59,281               36,817             106,668              80,765
   Equipment expense                                 23,616               14,021              41,490              28,322
   Deposit insurance expense                         31,652               85,129              63,290             946,780
   Real estate operations, net                      131,713                2,881             130,780              10,991
   Data processing expense                           47,260               34,023              86,739              68,681
   Advertising                                       50,819               29,745              77,503              65,989
   Other expenses                                   193,407              145,602             350,194             291,813
                                                    -------              -------             -------             -------
     Total other expenses                         1,174,807              956,133           2,077,684           2,966,647
                                                  ---------              -------           ---------           ---------
Income before income taxes                          712,483              899,234           1,576,234             806,512
   Income tax expense                               209,865              236,015             413,423              15,805
                                                    -------              -------             -------              ------
Net income                                         $502,618             $663,219          $1,162,811            $790,707
                                                   ========             ========          ==========            ========
Per Share
   Basic earnings per share                          $ 0.28               $ 0.37              $ 0.66              $ 0.43
   Diluted earnings per share                        $ 0.28               $ 0.36              $ 0.64              $ 0.42
   Dividends                                         $ 0.22               $ 0.20              $ 0.44              $ 0.40
</TABLE>


                                                         3

<PAGE>



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

       CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                Unrealized Gain     Unearned            Total
                                          Common Stock         Retained           (Loss) on       Compensation      Shareholders'
                                      Shares         Amount    Earnings           Securities           RRP             Equity
                                   -------------------------------------------------------------------------------------------------
<S>                               <C>          <C>            <C>                  <C>           <C>                <C>        
Balances, July 1, 1997             1,768,099    $10,126,365    $29,074,055          ($1,961)      ($132,640)         $39,065,819
                                                                                                                   
Exercise of stock options             13,562        211,413                                                              211,413
                                                                                                                   
Amortization of unearned                                                                                           
  compensation                                                                                       87,912               87,912
                                                                                                                   
Net change in unrealized                                                                                           
  gain (loss) on                                                                                                   
  securities available for sale                                                      27,040                               27,040
                                                                                                                   
Net income for the six months                                                                                      
  ended December 31, 1997                                        1,162,811                                             1,162,811
                                                                                                                   
Tax Benefit                                                                                                        
   on compensation plans                                            96,186                                                96,186
                                                                                                                   
Cash dividends                                                    (782,233)                                             (782,233)
                                                                                                                   
Balances, December 31, 1997        1,781,661    $10,337,778    $29,550,819          $25,079        ($44,728)         $39,868,948
                                   =========    ===========    ===========          =======        ========          ===========

</TABLE>

                                                                 4

<PAGE>



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

                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                  Six Months Ended
                                                                     December 31,
                                                              ---------------------------
                                                                1997            1996
                                                              ----------     -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                           <C>               <C>     
   Net income                                                 $1,162,811        $790,707
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Provision for loan losses                                    15,554           9,949
     Equity in loss of limited partnerships                      125,100         120,000
     Amortization of net loan origination fees                   (98,561)       (131,683)
     Net amortization (accretion) of investment
          securities' premiums and discounts                       2,226          10,317
     Net amortization (accretion) of mortgage-
       backed securities and CMO premiums                              0             750
     Amortization of unearned compensation                        87,912         167,258
     Amortization of core deposits and goodwill                    9,018               0
     Depreciation                                                 50,127          39,021
     Deferred income tax                                         (13,582)       (147,260)
     Origination of loans for sale                            (2,844,192)     (3,696,650)
     Proceeds from sale of loans                               2,844,192       3,696,650
     Change in:
       Interest receivable                                       170,545         (50,796)
       Interest payable and other liabilities                   (147,342)        128,638
       Cash value of insurance                                   (92,543)       (214,762)
       Prepaid expense and other assets                           57,546          61,942
                                                              ----------     -----------

    Net cash provided by operating                             1,328,811         784,081
                                                              ----------     -----------
     activities

INVESTING ACTIVITIES
   Purchase of investment securities                                   0      (1,007,031)
     available for sale
   Proceeds from maturity of investment
     securities available for sale                                     0       1,000,000
   Purchase of investment securities
     held to maturity                                                  0      (3,000,000)
   Proceeds from maturity of investment
     securities held to maturity                               1,610,000       5,937,161
   Payments on mortgage-backed securities                        214,928         860,812
   Cash received in branch acquisition                        11,544,302               0
   Net change in loans                                        (7,900,288)     (3,385,417)
   Proceeds from real estate owned sales                               0          30,722
   Purchases of premises and equipment                          (481,181)        (85,117)
   Premiums paid on life insurance                                     0        (860,000)
   Death benefits received on life insurance                     553,793         352,687
                                                              ----------     -----------

     Net cash provided (used) by investing
       activities                                              5,541,554        (156,183)
                                                              ----------     ------------
</TABLE>



                                                                 5

<PAGE>

           CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (continued)

<TABLE>
<CAPTION>

                                                            Six Months Ended
                                                              December 31,
                                                        1997                1996
                                                    ------------         -----------
<S>                                                   <C>                  <C>      
FINANCING ACTIVITIES
   Net change in:
     Noninterest-bearing deposits, NOW
       passbook and money market savings
       accounts                                       2,688,133            (473,687)
     Certificates of deposit                         (3,681,801)         (1,874,757)
   Proceeds from FHLB advances                        6,656,069           5,000,000
   Repayment of FHLB advances                        (4,195,907)         (3,008,084)
   Net change in advances by borrowers for
     taxes and insurance                                 41,231            (192,575)
   Proceeds from exercise of stock options              211,413              70,090
   Stock repurchases                                          0          (1,965,480)
   Dividends paid                                      (782,233)           (737,116)
                                                    ------------         -----------

     Net cash provided (used) by
       financing activities                             936,905          (3,181,609)
                                                    -----------          -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS               7,807,270          (2,553,711)

     Cash and Cash Equivalents,
       Beginning of Period                            3,622,739           7,520,323
                                                    -----------          ----------

     Cash and Cash Equivalents,
       End of Period                                $11,430,009          $4,966,612
                                                    ===========          ==========

ADDITIONAL CASH FLOWS AND
   SUPPLEMENTARY INFORMATION
   Interest paid                                     $3,417,949          $3,392,443
   Income tax paid                                      543,139             305,879
   Loan balances transferred to real
     estate owned                                       875,342              96,896
   Loans to finance the sale of real
     estate owned                                        68,500             210,000
</TABLE>



                                                                 6

<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, 1997,  results of operations for the three month and
six month periods ended  December 31, 1997 and 1996,  and cash flows for the six
mouth periods ended December 31, 1997 and 1996.

NOTE B: Dividends and Earnings Per Share

On November 17, 1997, the Board of Directors  declared a quarterly cash dividend
of $.22 per share.  This dividend was paid on December 15, 1997 to  shareholders
of record as of November 28, 1997.

Earnings per share (EPS) were computed as follows:


<TABLE>
<CAPTION>
                                                    Six Months Ended                          Six Months Ended
                                                    December 31, 1997                         December 31, 1996
                                                    -----------------                         -----------------
                                                         Weighted                                 Weighted
                                                          Average     Per Share                    Average       Per Share
                                            Income        Shares       Amount        Income        Shares         Amount
                                            ------        ------       ------        ------        ------         ------
Basic earnings per share
   Income available to
<S>                                         <C>           <C>           <C>             <C>         <C>           <C>      
     common shareholders                    $1,162,811    1,762,492     $     .66      $790,707     1,817,852     $     .43
                                                                        =========                                 =========
Effect of dilutive securities
   RRP program                                      --        3,435                          --         6,122
   Stock options                                    --       43,332                          --        47,368
                                        -----------------    ------                ------------        ------
Diluted earnings per share
   Income available to
     common shareholders and
     assumed conversions                    $1,162,811    1,809,259     $     .64      $790,707     1,871,342     $     .42
                                            ==========    =========     =========       =======     =========     =========

</TABLE>



                                                         7

<PAGE>

<TABLE>
<CAPTION>
                                                   Three Months Ended                        Three Months Ended
                                                    December 31, 1997                         December 31, 1996
                                                    -----------------                         -----------------
                                                        Weighted                                   Weighted
                                                         Average      Per Share                     Average      Per Share
                                           Income        Shares        Amount        Income         Shares        Amount
                                           ------        ------        ------        ------         ------        ------
Basic earnings per share
   Income available to common
<S>                                          <C>          <C>           <C>             <C>         <C>           <C>      
     shareholders                            $502,618     1,766,427     $     .28      $663,219     1,811,757     $     .37
                                                                        =========                                 =========
Effect of dilutive securities
   RRP program                                     --         3,702                          --         6,071
   Stock options                                    --       44,000                          --        46,827
                                        --------------       ------               -------------        ------
Diluted earnings per share
   Income available to common
     shareholders and assumed
     conversions                             $502,618     1,814,129     $     .28      $663,219     1,864,655     $     .36
                                             ========     =========     =========       =======     =========     =========
</TABLE>


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

General:

The Company's  total assets were $191.9 million at December 31, 1997 compared to
$173.3  million  at June 30,  1997.  Cash and cash  equivalents  increased  $7.8
million and investment  securities decreased $1.8 million or 22.7% from June 30,
1997 to December 31, 1997.  Loans receivable were $155.2 million at December 31,
1997, an increase of $7.2 million, or 4.9%, from June 30, 1997. This increase is
due in part to an  origination  of a $2.7 million loan to a limited  partnership
described  below.  Real estate owned increased to $805,648 at December 31, 1997,
as the  Company  accepted  a deed in  lieu  of  foreclosure  on a  nursing  home
property.  The Company has operated the home since  acquiring it in October 1997
and has entered into an agreement  to sell the property  subsequent  to December
31, 1997.

Investment  in limited  partnerships  increased  by $3.5 million at December 31,
1997  compared to June 30,  1997.  This  increase is related to another  limited
partnership  agreement entered into by the Company on a low income  multi-family
housing project, which benefits the Company in the form of tax credits.

 Deposits  increased to $133.6  million at December 31, 1997  compared to $121.8
million  at  June  30,  1997,  a 9.8%  increase.  This  $11.9  million  increase
represented a $7,132,000  increase in passbook and  transaction  accounts and an
approximate  $4,740,000  increase  in  certificate  of  deposit  accounts.  This
increase in total  deposits  results  primarily  from the  acquisition  of a new
branch in Gas City, Indiana from NBD First Chicago Bank. The branch was acquired
on December 5, 1997 and deposits,  net of public funds,  amounted to $11 million
on that date.

Note  payable was  increased  to $3.6  million at December  31,  1997.  The note
payable is for amounts due under a limited partnership agreement entered into by
the Company on a low income multi-family

                                                         8

<PAGE>



housing project.  This agreement calls for the Company to disburse $3.6 million,
in the form of annual  installments,  over a ten-year period in exchange for tax
credits.

Other  liabilities  decreased from $4.0 million at June 30, 1997 to $3.9 million
at December 31, 1997 as a result of normal operational decreases.

In October  1997,  the Company  opened its second Grant County office at the new
Wal-Mart  SuperCenter  in Marion,  Indiana The other branch office is located in
Decatur,  Indiana. This second Marion, Indiana location is a full-service branch
and the area's first seven-day-a-week banking facility. The high volume shopping
traffic and repeat weekly visits of customers, makes this an attractive location
to provide financial services.  The new branch,  operates approximately 57 hours
per  week  with a staff  of 6-7  individuals.  The  Company  believes  that  the
long-term prospects for growth from this new branch location are excellent.

On December 5, 1997, the Company acquired a new branch in Gas City, Indiana from
NBD First Chicago Bank. Deposits were acquired at a premium of $865,710, as well
as the branch  facilities and equipment.  Existing staff was also retained.  The
deposits  amounted to  $11,015,017,  net of public  funds.  The Gas City market,
which is  approximately  eight  miles  from our main  office  location,  has the
Company's second largest existing customer base prior to the acquisition;  so in
addition  to  acquiring  new  customers,  we can now better  serve our  existing
customer base.

Shareholders'  equity was $39.9 million at December 31, 1997,  compared to $39.1
million at June 30,  1997.  As of  December  31,  1997,  the  Company was in the
process of repurchasing an additional 5% of its outstanding  shares. The current
repurchase program was announced in May 1997, totaling 87,905 shares of which no
shares had been  repurchased by December 31, 1997,  leaving the entire amount to
be repurchased under the current program.

Net income for the six months ended December 31, 1997 of $1,162,811 represents a
47.1%  increase  in income  reported  for the same  period  in the  prior  year.
Earnings  for the six months  ended  December  31, 1996  included a FDIC special
assessment for all  institutions  with  SAIF-insured  deposits.  This assessment
amounted to $776,717  and is included in deposit  insurance  expense for the six
months ended December 31, 1996. The after-tax  effect on net income was $469,059
for the six months ended December 31, 1997. SAIF-insured institutions,  like the
Company, are also benefiting from a reduction of FDIC premiums beginning January
1, 1997.

For the six months ended December 31, 1997, the Bank made a provision of $15,554
for general  loan  losses  compared  to $9,949 in loss  provisions  for the same
period in the prior year.  Management  continues to review its current portfolio
to ensure that total loss reserves remain adequate.





                                                         9

<PAGE>



Results of  Operations  Comparison  of Three Months Ended  December 31. 1997 and
December 31,1996

Net interest income for the quarter ended December 31, 1997, equaled $1,795,069,
an increase of 2.7% over the quarter ended December 31, 1996 of $1,747,382.  Net
income for the three  months  ended  December  31, 1997 of $502,618  was a 24.2%
decrease  from  the  three  months  ended  December  31,  1996  of  $663,219.  A
significant  portion of the  decrease in net income is related to an increase in
real estate  operations  expense and start-up expenses related to two new branch
facilities.  The Company  acquired a nursing home by  voluntary  dead in lieu of
foreclosure during the quarter ended December 31, 1997. As a result, the Company
incurred  additional  expenses  to  maintain  the  continued  operations  of the
facilities,  since the cash flow from the nursing home was  insufficient to meet
all expenses.  These expenses had an after tax effect of  approximately  $80,000
for the three months ended  December 31, 1997. An offer to purchase was received
and accepted  subsequent  to December 31, 1997 which should result in no further
significant loss to the Company.  Also during the quarter,  the company incurred
start-up expenses for its new branch in Wal-Mart,  which opened in October 1997,
and in the acquisition of the Gas City Branch in December 1997.

A provision  of $6,729 for losses on loans was made for the three  months  ended
December 31, 1997, compared to a $5,759 provision in the same period last year.

Total other income  decreased by $14,794 for the three months ended December 31,
1997,  compared  to the  same  period  in the  prior  year.  This  decrease  was
attributed to a gain on the sale of other assets of $51,376 for the  three-month
period ended December 31, 1996.

Total other expenses increased by $218,674,  or 22.9% for the three months ended
December  31, 1997,  compared to the same period in the prior year.  Real estate
operations  expense  increased  $128,832 as the result of operating  the nursing
home described above.  Occupancy expense,  equipment expense and data processing
expense increased as the result of adding the two new branch locations.  Certain
of  these  expenses  can be  attributed  to  one-time  start-up  costs,  and not
recurring expenses. Other expense increases were normal operational increases.

Income tax expense for the three  months  ended  December  31, 1997  amounted to
$209,865,  a decrease of $26,150 over the three months ended  December 31, 1996,
as the result of decreased  income.  The  Company's  effective  tax rate for the
three  months  ended  December  31,  1997 was  29.5%  compared  to 26.3% for the
comparable period in 1996.

Results of  Operations  Comparison  of Six Months  Ended  December  31, 1997 and
December 31, 1996.

Net income for the six months ended  December 31, 1997 was  $1,162,811  compared
with $790,707 for the six months ended December 31,1996, an increase of $372,104
or 47.1%.  Net income for the six months ended  December 31, 1996,  included the
FDIC special assessment previously described. Interest income for the six months
ended December 31, 1997 increased  $121,621 or 1. 8% compared to the same period
in the prior year, while interest expense for the six months ended December 31,

                                                        10

<PAGE>



1997 increased $67,676 or 2.0% compared to the same period in the prior year. As
a result,  net  interest  income  for the six months  ended  December  31,  1997
amounted to  $3,518,207,  an  increase  of $53,945 or 1.4%  compared to the same
period in the prior year.

A $15,554 provision for loss on loans for the six months ended December 31, 1997
was made compared to $9,949 provision reported in the same period last year.

Total other income  decreased by $167,581 for the six months ended  December 31,
1997,  compared  to the same  period in the prior  year.  The prior year  period
included a significant  amount of death  benefits  received on key man insurance
policies.  Annuity and security product sales commissions were down $22,444,  or
25.0% for the six months ended December 31, 1997, compared to the same period in
the prior year.

Total other  expenses  decreased  by $888,963 or 30.0% for the six months  ended
December  31,  1997,  compared to the same  period in the prior  year.  The FDIC
special assessment  amounts for $776,717 of the decrease.  Salaries and employee
benefits  decreased  $252,286,  or 17.1%,  primarily as a result of inclusion of
expense for the vesting of remaining  shares under the RRP program of a deceased
director  in the prior  period.  Real  estate  operation  expense  increased  by
$119,789 for the six months ended December 31, 1997, compared to the same period
in the prior year as a result of operating the nursing home  property  discussed
above. Other expense increases were normal  operational  increases and increased
expenses  attributed to start-up  costs for the two new branch offices opened in
October and December of 1997.

Income tax expense  for the six months  ended  December  31,  1997,  amounted to
$413,423,  an increase of $397,618 from the six months ended December 31,1996 as
a result of increased income before income taxes.

Allowance for loan losses  amounted to $2.0 million at December 31, 1997,  which
was unchanged from June 30, 1997 after adjusting for charge-offs and recoveries.
Management considered the allowances for loan and real estate losses at December
31, 1997, 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
accounts for the six months ended December 31, 1997.



                                                        11

<PAGE>



                                  Allowance For     Allowance For      Total
                                   Loan Losses       REO Losses      Allowances

Balances at July 1, 1997........     $2,031,535    $          0      $2,031,535
Provision for losses............         15,554             857          16,411
Recoveries......................              0               0               0
Loans and REO charged off.......         (4,694)           (857)         (5,551)
                                     ----------           -----      ----------

Balances at December 31, 1997...     $2,042,395    $          0      $2,042,395
                                     ==========    ============      ==========

The loan loss  reserves  to total loans at December  31, 1997  equaled  1.30% of
total loans outstanding compared to 1.35% of total loans outstanding at June 30,
1997. Total non-performing assets increased during the six months ended December
31,  1997,  from $1.4  million at June 30, 1997 to $2.8  million at December 31,
1997.  Non-performing  assets at December 31, 1997 consisted of $806,000 in real
estate owned and loans delinquent greater than 90 days of $2.0 million.

Total  non-performing loans totaled 1.24% of total loans outstanding at December
31, 1997 compared to .94% of total loans at June 30, 1997.

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  uncollectible  for any loan past due in
excess of 90 days.
                                           December 31,               June 30,
                                              1997                      1997
                                                  (Dollars in Thousands)

Accruing loans delinquent
         more than 90 days............     $     ---                $     ---
Non-accruing loans:
         Residential..................         1,746                    1,238
         Multi-family.................           ---                      ---
         Commercial...................           133                      139
         Consumer.....................            68                       34
Troubled debt restructurings..........           ---                      ---
                                            --------                 --------
         Total non-performing loans...         1,947                    1,411
Real estate owned, net................           806                        0
                                            --------                     ----
         Total non-performing assets..        $2,753                   $1,411
                                              ======                   ======

Non-performing loans to
         total loans, net.............         1.24%                     .94%
Non-performing assets to
         total assets.................         1.43%                     .81%


                                                        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,
                                                   1997                                       1996
                                                               (Dollars in thousands)

                                    Average                       Average        Average                   Average
                                    Balance         Interest         Rate        Balance       Interest       Rate

Total interest-
<S>                                 <C>              <C>            <C>          <C>             <C>          <C>  
   earnings assets..............    $167,954         $3,551          8.46%       $163,623        $3,430       8.39%
Total interest-
   bearing liabilities..........     134,199          1,756          5.23%        129,603         1,783       5.19%

Net interest income/
Interest Rate Spread............                      1,795          3.23%                        1,747       3.20%
</TABLE>

<TABLE>
<CAPTION>
                                                           Six Months Ended December 31,
                                                   1997                                       1996
                                                               (Dollars in thousands)

                                    Average                       Average        Average                   Average
                                    Balance         Interest         Rate        Balance       Interest       Rate

Total interest-
<S>                                 <C>              <C>            <C>          <C>             <C>          <C>  
   earnings assets..............    $166,379         $6,983          8.39%       $164,215        $6,862       8.36%
Total interest-
   bearing liabilities..........     132,429          3,465          5.23%        129,242         3,398       5.26%

Net interest income/
Interest Rate Spread............                      3,518          3.16%                        3,464       3.10%
</TABLE>


Financial Condition

Shareholders'  equity at  December  31,  1997 was  $39,868,948,  an  increase of
$803,129  or 2.1% from June  30,1997.  The  Company's  equity to asset ratio was
20.78% at December  31,  1997  compared  to 22.54% at June 30,  1997.  All fully
phased-in capital requirements are currently met. The

                                                        13

<PAGE>



following  table  depicts  the  amounts  and ratios of the Bank's  capital as of
December  31,  1997,  under each of the three  regulatory  capital  requirements
(tangible, core, and fully phased-in risk based):

<TABLE>
<CAPTION>
                                                     Tangible               Core                Risk-Based
                                                      Capital              Capital                Capital
                                                                      (Dollars in thousands)

<S>                                                    <C>                  <C>                     <C>    
Amount...........................................      $35,357              $ 35,357                $36,948
As a percent of assets, as defined...............        18.9%                 18.9%                  29.1%
Required amount..................................        2,806                 5,612                 10,145
As a percent of assets, as defined...............         1.5%                  3.0%                   8.0%
Capital in excess of
    required amount..............................     $ 32,551              $ 29,745               $ 26,803
</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%, of which
1%must be comprised of short-term investments.  At December 31, 1997, the Bank's
liquidity   ratio  was  14.3%  of  which  9.71%  was   comprised  of  short-term
investments.

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).

Year 2000

Based on a preliminary study, the Company expects to spend approximately $25,000
to $50,000 from 1998 through  1999 to modify its  computer  information  systems
enabling proper processing of transactions relating to the year 2000 and beyond.
The Company  continues to evaluate  appropriate  courses of  corrective  action,
including  replacement  of  certain  systems  whose  associated  costs  would be
recorded as assets and amortized.  Accordingly,  the Company does not expect the
amounts  required  to be  expended  over the next three years to have a material
effect on its financial  position or results of operations.  The amount expensed
in 1997 was immaterial.

Item 3:  Quantitative and Qualitative Disclosures 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

                                                        14

<PAGE>



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 89% 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 units 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 relates  "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,
but 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
if 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 September 30, 1997, is an analysis  performed by the OTS
of the Bank's interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 100 basis point increments,
up and down 400 basis points.  At September 30, 1997, 2% of the present value of
the Bank's assets was approximately $3.6 million. Because the interest rate risk
of a 200 basis  point  decrease  in market  rates  (which was  greater  than the
interest rate risk of a 200 basis point  increase) was $1.0 million at September
30,  1997,  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.

                                                        15

<PAGE>



This data is presented as of September  30, 1997 since data from the most recent
quarter  (December  31,  1997) is not yet  available  from  the OTS.  Management
believes there has been no significant change in the interest rate risk measures
since September 30, 1997.

<TABLE>
<CAPTION>
                           Net Portfolio Value                                  NPV as % of PV of Assets
Change
in Rates          $ Amount          $ Change         % Change             NPV Ratio              Change
-------------------------------------------------------------------------------------------------------

<S>                   <C>              <C>                  <C>                <C>                   <C>  
+400 bp               37,169          -2,946               -7%                 21.63%               -59 bp

+300 bp               38,585          -1,530               -4%                 22.09%               -13 bp

+200 bp               39,664           - 451               -1%                 22.39%               +17 bp

+100 bp               40,208              93                0%                 22.45%               +23 bp

0 bp                  40,115                                                   22.22%

-100bp                39,470           - 656               -2%                 21.75%               -47 bp

-200 bp               39,092          -1,023               -3%                 21.40%               -82 bp

-300 bp               39,139            -976               -2%                 21.22%              -100 bp

-400 bp               39,418            -697               -2%                 21.15%              -107 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 levels of 6.00% for residential
loans and 9.00% for commercial  real estate loans.  Currently,  originations  of
residential  adjustable-rate-mortgages  have  interest  rate  minimums of 6.00%.
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  4.0% above the  origination  rate.  The Company  considers all of
these factors in monitoring its exposure to interest rate risk.


                                                        16

<PAGE>



                            PART II OTHER INFORMATION

Item 1.           Legal Proceedings

Neither the Company nor the Bank were during the six-month period ended December
31, 1997,  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 9, 1997,  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
Geo. S. Olive & Co., LLC as auditors for the fiscal year ending June 30, 1998.

Both director nominees were elected and the appointment of auditors was approved
and ratified by a majority of the 1,773,356 issued and outstanding  share votes.
A  tabulation  of votes cast as to each  matter  submitted  to  shareholders  is
presented below:

<TABLE>
<CAPTION>
                                                                        Broker
Director Nominees             For             Against     Abstain     Non-Votes
-----------------             ---             -------     -------     ---------
<S>                         <C>              <C>              <C>       <C>
Jon R. Marler                 1,537,251        34,521           0         0
Jerry D. McVicker             1,551,471        20,301           0         0
Other Matters
-------------
Approval and Ratification 
of Auditors                   1,558,706        10,519       2,547         0
</TABLE>

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).

          27   Financial Data Schedule (filed electronically)

b)       Reports on Form 8-K

          The  Company  filed no reports on Form 8-K  during the  quarter  ended
December 31, 1997.


                                                        17

<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 13, 1998               By:  /s/ John M. Dalton
                                           ---------------------------------
                                           John M. Dalton, President



Date: February 13, 1998              By:   /s/ Larry G. Phillips
                                           ----------------------------------
                                           Larry G. Phillips, Vice President,
                                           Secretary and Treasurer



                                                      18