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 MARCH 31, 1998
         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 May 4, 1998 was 1,747,843.


<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
                 March 31, 1998 and June 30, 1997..........................2

                 Consolidated Condensed Statement of Income 
                 for the three-month and nine-month periods 
                 ended March 31, 1998 and 1997.............................3

                 Consolidated Condensed Statement of Changes 
                 in Shareholders' Equity
                 for the nine months ended March 31, 1998..................4

                 Consolidated Condensed Statement of 
                 Cash Flows for the nine months
                 ended March 31, 1998 and 1997.............................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.....16

PART II. OTHER INFORMATION

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

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

SIGNATURES................................................................19



<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>
                                                                        March 31,                   June 30,
                                                                          1998                        1997
                                                                  -----------------           ----------------
ASSETS
<S>                                                                     <C>                         <C>       
   Cash                                                                 $3,175,854                  $2,328,605
   Short-term interest bearing deposits                                  5,782,853                   1,294,134
                                                                  ----------------            ----------------
     Total cash and cash equivalents                                     8,958,707                   3,622,739
   Investment securities available for sale                              3,045,000                   2,997,500
   Investment securities held to maturity
     (market value $2,009,210 and $4,824,464)                            2,015,782                   4,847,519
   Loans receivable, net                                               160,049,761                 148,030,991
   Real estate owned, net                                                  184,734                           0
   Premises and equipment                                                1,892,563                   1,520,381
   Stock in Federal Home Loan Bank (at cost
     which approximates market)                                          1,047,300                   1,047,300
   Investment in limited partnerships                                    4,935,675                   1,448,869
   Core deposit intangibles and goodwill                                   829,639                           0
   Other assets                                                          9,572,443                   9,788,410
                                                                  ----------------            ----------------
   Total assets                                                       $192,531,604                $173,303,709
                                                                  ================            ================

LIABILITIES
   Deposits                                                           $133,310,809                $121,770,013
   Advances from FHLB                                                   10,689,069                   8,228,976
   Note payable                                                          3,634,406                           0
   Advances by borrowers for taxes and
     insurance                                                             375,645                     223,520
   Other liabilities                                                     4,956,258                   4,015,381
                                                                  ----------------            ----------------
     Total liabilities                                                 152,966,187                 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--1,773,892 and
       1,768,099 shares                                                  9,863,818                  10,126,365
     Retained earnings                                                  29,677,127                  29,074,055
     Unrealized gain (loss) on securities available for sale                32,572                      (1,961)
     Unearned compensation                                                  (8,100)                   (132,640)
                                                                  -----------------           -----------------
       Total shareholders' equity                                       39,565,417                  39,065,819
                                                                  ----------------            ----------------
         Total liabilities and shareholders' equity                   $192,531,604                $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                 Nine Months Ended
                                                  March 31,                          March 31,
                                       ------------------------------      ------------------------------
                                           1998              1997              1998              1997
                                       ------------      ------------      ------------      ------------
Interest Income
<S>                                    <C>               <C>               <C>               <C>         
   Loans                               $  3,400,099      $  3,243,805      $ 10,038,485      $  9,630,046
   Mortgage-backed securities                   171             7,151             2,505            35,040
   Interest-bearing deposits                111,262            74,853           232,310           217,190
   Investment securities                     77,947           110,488           256,717           376,827
   Other interest and dividend
        income                               20,659            19,131            63,555            58,138
                                       ------------      ------------      ------------      ------------
     Total interest income                3,610,138         3,455,428        10,593,572        10,317,241

Interest expense
   Deposits                               1,640,979         1,532,083         4,791,744         4,720,537
   Advances from FHLB                       162,044           125,671           476,506           334,768
                                       ------------      ------------      ------------      ------------
     Total interest expense               1,803,023         1,657,754         5,268,250         5,055,305
                                       ------------      ------------      ------------      ------------
Net interest income                       1,807,115         1,797,674         5,325,322         5,261,936
   Provision for losses on loans              7,534            37,250            23,088            47,199
                                       ------------      ------------      ------------      ------------
Net interest income after
   provision for losses on loans          1,799,581         1,760,424         5,302,234         5,214,737
                                       ------------      ------------      ------------      ------------
Other income
   Net loan servicing fees                   19,566            21,988            58,604            67,081
   Annuity and other commissions             27,013            37,573            94,472           127,476
   Equity in losses of limited
     partnerships                           (22,500)          (60,000)         (147,600)         (180,000)
   Gain on sale of other assets                   0                 0                 0            51,376
   Life insurance income and death
     benefits                                41,251           325,575           133,794           540,337
   Other income                              53,568            21,663           130,893            59,375
                                       ------------      ------------      ------------      ------------
     Total other income                     118,898           346,799           270,163           665,645
                                       ------------      ------------      ------------      ------------
Other expenses
   Salaries and employee benefits           681,122           654,896         1,902,142         2,128,202
   Occupancy expense                         74,053            54,460           180,721           135,225
   Equipment expense                         27,731            16,576            69,221            44,898
   Deposit insurance expense                 33,119            16,849            96,409           963,629
   Real estate operations, net               85,592           (27,229)          216,372           (16,238)
   Data processing expense                   60,242            41,010           146,981           109,691
   Advertising                               27,944            46,871           105,447           112,860
   Other expenses                           218,598           182,512           568,792           474,325
                                       ------------      ------------      ------------      ------------
     Total other expenses                 1,208,401           985,945         3,286,085         3,952,592
                                       ------------      ------------      ------------      ------------
Income before income taxes                  710,078         1,121,278         2,286,312         1,927,790
   Income tax expense                       189,333           217,912           602,756           233,717
                                       ------------      ------------      ------------      ------------
Net income                             $    520,745      $    903,366      $  1,683,556      $  1,694,073
                                       ------------      ------------      ------------      ------------
Per Share
   Basic earnings per share            $       0.29      $       0.50      $       0.95      $       0.93
   Diluted earnings per share          $       0.29      $       0.48      $       0.93      $       0.91
   Dividends                           $       0.22      $       0.20      $       0.66      $       0.60
</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 Securities  Compensation   Shareholders'
                                       Shares          Amount          Earnings   Available for Sale        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              24,793         238,453                                                              238,453

Repurchase of common stock            (19,000)       (501,000)

Amortization of unearned
  compensation                                                                                           124,540           124,540

Net change in unrealized 
  gain (loss) on
  securities available 
  for sale                                                                              34,533                              34,533

Net income for the nine months
  ended March 31, 1998                                               1,683,556                                           1,683,556

Tax benefit on compensation plans                                       96,186                                              96,186

Cash dividends                                                      (1,176,670)                                         (1,176,670)
                                   ----------      ----------      -----------         -------           -------       -----------
Balances, March 31, 1998            1,773,892      $9,863,818      $29,677,127         $32,572           ($8,100)      $39,565,417
                                   ==========      ==========      ===========         =======           ========      ===========
</TABLE>
                                                                 4

<PAGE>




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

                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                          Nine Months Ended
                                                              March 31,
                                                    ------------------------------
                                                        1998              1997
                                                    ------------      ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                 <C>               <C>         
   Net income                                       $  1,683,556      $  1,694,073
   Adjustments to reconcile net income to
     net cash provided by operating activities:
     Provision for loan losses                            23,088            47,199
     Provision for real estate owned losses                    0           (28,668)
     Equity in loss of limited partnerships              147,600           180,000
     Amortization of net loan origination fees          (136,567)         (204,957)
     Net amortization (accretion) of investment
          securities' premiums and discounts               2,957            14,388
     Net amortization (accretion) of mortgage-
       backed securities and CMO premiums                      0               750
     Amortization of unearned compensation               124,540           229,825
     Amortization of core deposits and goodwill           27,053                 0
     Depreciation                                         91,370            61,104
     Deferred income tax                                 (70,271)         (270,309)
     Origination of loans for sale                    (2,950,851)       (3,696,650)
     Proceeds from sale of loans                       2,950,851         3,696,650
     Change in:
       Interest receivable                              (162,349)              (98)
       Interest payable and other liabilities            940,877         1,119,137
       Cash value of insurance                          (133,793)         (540,337)
       Prepaid expense and other assets                  (27,887)         (113,332)
                                                    ------------      ------------

    Net cash provided by operating activities          2,510,174         2,188,775
                                                    ------------      ------------

INVESTING ACTIVITIES
   Purchase of investment securities                           0        (3,002,125)
     available for sale
   Proceeds from maturity of investment                        0         1,000,000
     securities available for sale
   Purchase of investment securities                           0        (3,000,000)
     held to maturity
   Proceeds from maturity of investment                2,610,000         9,937,161
     securities held to maturity
   Contribution to limited partnership                         0          (130,000)
   Payments on mortgage-backed securities                228,717         1,044,926
   Cash received in branch acquisition                11,544,302                 0
   Net change in loans                               (11,608,444)       (3,568,512)
   Proceeds from real estate owned sales                       0            30,722
   Purchases of premises and equipment                  (463,552)         (127,785)
   Premiums paid on life insurance                             0          (860,000)
   Death benefits received on life insurance             553,793         1,052,842
                                                    ------------      ------------

     Net cash provided by investing
       activities                                      2,864,816         2,377,229
                                                    ------------      ------------
</TABLE>
<PAGE>

           CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (continued)

                                                    Nine Months Ended
                                                         March 31,
                                               ----------------------------
                                                   1998             1997
                                               -----------      -----------
FINANCING ACTIVITIES
   Net change in:
     Noninterest-bearing deposits, NOW
       passbook and money market savings
       accounts                                  3,159,127       (1,092,860)
     Certificates of deposit                    (4,371,150)      (4,026,997)
   Proceeds from FHLB advances                   6,656,000        5,000,000
   Repayment of FHLB advances                   (4,195,907)      (3,008,084)
   Net change in advances by borrowers for
     taxes and insurance                           152,125          (33,025)
   Proceeds from exercise of stock options         238,453           73,090
   Stock repurchases                              (501,000)      (2,309,480)
   Dividends paid                               (1,176,670)      (1,105,965)
                                               -----------      -----------

     Net cash used by
       financing activities                        (39,022)      (6,503,321)
                                               -----------      -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS          5,335,968       (1,937,317)

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

     Cash and Cash Equivalents,
       End of Period                           $ 8,958,707      $ 5,583,006
                                               ===========      ===========

ADDITIONAL CASH FLOWS AND
   SUPPLEMENTARY INFORMATION
   Interest paid                               $ 4,464,777      $ 4,253,247
   Income tax paid                                 596,139          470,879
   Loan balances transferred to real
     estate owned                                1,141,907          124,309
   Loans to finance the sale of real
     estate owned                                1,248,715          292,000



                                                                 5

<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 March 31,  1998,  results of  operations  for the three month and
nine month  periods  ended March 31, 1998 and 1997,  and cash flows for the nine
month periods ended March 31, 1998 and 1997.

NOTE B:  Dividends and Earnings Per Share

On February 18, 1998, the Board of Directors  declared a quarterly cash dividend
of $.22 per share.  This dividend was paid on March 13, 1998 to  shareholders of
record as of February 27, 1998.

Earnings per share (EPS) were computed as follows:

<TABLE>
<CAPTION>
                                              Nine Months Ended                      Nine Months Ended
                                               March 31, 1998                         March 31, 1997
                              ---------------------------------------      ----------------------------------------

                                             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       $1,683,556       1,765,161    $    .95       $1,694,073     1,816,267     $    .93

Effect of dilutive securities
   RRP program                                    3,324                                      6,012
   Stock options                                 41,086                                     47,342
                                                 ------                                     ------

Diluted earnings per share
   Income available to
   common shareholders
   and assumed
   conversions               $1,683,556       1,809,571    $    .93       $1,694,073     1,869,621     $    .91
                              ---------       ---------    --------        ---------     ---------     --------
</TABLE>

                                                         6

<PAGE>




<TABLE>
<CAPTION>

                                            Three Months Ended                  Three Months Ended
                                               March 31, 1998                      March 31, 1997
                              ---------------------------------------      ----------------------------------------
                                             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         $520,745       1,770,586    $    .29         $903,366     1,812,982     $    .50

Effect of dilutive securities
   RRP program                                    3,102                                      5,792
   Stock options                                 36,595                                     47,292
                                              ---------                                  ---------
Diluted earnings per share
   Income available to
   common shareholders
   and assumed
   conversions                 $520,745       1,810,283   $     .29         $903,366     1,866,066     $    .48
                                -------       ---------   ---------          -------     ---------     --------
</TABLE>

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

General:

The  Company's  total assets were $192.5  million at March 31, 1998  compared to
$173.3  million  at June 30,  1997.  Cash and cash  equivalents  increased  $5.3
million and investment  securities decreased $2.8 million or 35.5% from June 30,
1997 to March 31, 1998.  Loans receivable were $160.0 million at March 31, 1998,
an increase of $12.0 million, or 8. 1%, 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 $184,734 at March 31, 1998. The
Company held no real estate acquired by foreclosure at June 30, 1997.

Investment in limited  partnerships  increased by $3.5 million at March 31, 1998
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 $133.3  million  at March 31,  1998  compared  to $121.8
million  at  June  30,  1997,  a 9.5%  increase.  This  $11.5  million  increase
represented a $7,603,000  increase in passbook and  transaction  accounts and an
approximate  $3,938,000  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.


                                                         7

<PAGE>

Note payable was  increased to $3.6 million at March 31, 1998.  The note payable
is for amounts due under a limited  partnership  agreement  entered  into by the
Company on a low income multi-family  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  increased from $4.0 million at June 30, 1997 to $5.0 million
at March 31, 1998 as a result of normal operational increases.

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 $39.6  million at March 31,  1998,  compared  to $39.1
million at June 30, 1997.  As of March 31, 1998,  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
19,000  shares had been  repurchased  by March 31, 1998.  An  additional  26,900
shares have been repurchased subsequent to March 31, 1998.

Net income for the nine months ended March 31, 1998 of  $1,683,556  represents a
0.6%  decrease  in income  reported  for the same  period  in the prior  year of
$1,694,073.  Earnings for the nine months  ended March 31, 1997  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 nine months ended March 31,  1997.  The  after-tax  effect on net income was
$469,059 for the nine months ended March 31,  1997.  SAIF-insured  institutions,
like  the  Company,  are  also  benefiting  from a  reduction  of FDIC  premiums
beginning  January 1, 1997.  Earnings  for the nine months  ended March 31, 1998
reflected  lower  earnings  than the  earnings  in the prior  period  due to the
following three areas.  First,  during the nine months ended March 31, 1997, the
Company  received  $283,000  additional  income  from  key  man  life  insurance
proceeds.  This income is not taxable to the company and,  therefore,  increased
net income by $283,000 in the prior period. Second, during the nine months ended
March 31, 1998, the Company experienced increased real estate operations expense
as it operated a nursing home  facility  that it acquired by  voluntary  deed in
lieu of foreclosure during the quarter ended December 31, 1997. The property was
sold in February 1998, at a small gain, but the

                                                         8

<PAGE>

Company  incurred  additional  expense,  prior  to the  sale,  to  maintain  the
continued operations of the facility,  since the cash flow from the nursing home
was  insufficient  to meet all  operational  expenses.  Third,  the  Company has
experienced  increased  operational  expenses  as the  result of  operating  two
additional branch locations established in the quarter ended December 31, 1997.

For the nine months ended March 31,  1998,  the Bank made a provision of $23,088
for general  loan losses  compared  to $47,199 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.

Results of Operations  Comparison of Three Months Ended March 31, 1998 and March
31, 1997

Net interest income for the quarter ended March 31, 1998, equaled $1,807,115, an
increase of 0.5% over the quarter ended March 31, 1997 of $1,797,674. Net income
for the three months ended March 31, 1998 of $502,745 was a 44.3%  decrease from
the three months ended March 31, 1997 of $903,366. The decrease in net income is
primarily  related to three  areas.  First,  during the quarter  ended March 31,
1997,  the  Company  received  $283,000  additional  income  from  key man  life
insurance  proceeds.  This income is not taxable to the company and,  therefore,
increased net income by $283,000 in the prior period. Second, during the quarter
ended March 31, 1998, the Company  experienced real estate operations expense of
$86,000 as it operated a nursing  home  facility  that it acquired by  voluntary
deed in lieu of  foreclosure  during the quarter  ended  December 31, 1997.  The
property was sold in February  1998, at a small gain,  but the Company  incurred
additional expense,  prior to the sale, to maintain the continued  operations of
the facility, since the cash flow from the nursing home was insufficient to meet
all operational  expenses.  The after-tax effect for the quarter ended March 31,
1998, of these additional expenses was approximately $51,600. Third, the Company
has experienced  increased  operational  expenses as the result of operating two
additional branch locations  established in the quarter ended December 31, 1997.
Increase in operating  expenses  occurred in the following  areas:  salaries and
employee  benefits,  occupancy  expense,  equipment  expense,  deposit insurance
expense and data processing  expenses.  Expenses in these  categories  increased
$92,500 for the  quarter  ended March 31,  1998,  compared to the quarter  ended
March 31,  1997.  The-after  tax-effect  for the  quarter  ended  March 31, 1998
amounts to approximately $55,500.

A provision  of $7,534 for losses on loans was made for the three  months  ended
March 31, 1998, compared to a $37,250 provision in the same period last year.

Total other  income  decreased  by $227,901 for the three months ended March 31,
1998,  compared  to the  same  period  in the  prior  year.  This  decrease  was
attributed to receiving  $283,000  additional income from key man life insurance
proceeds for the three-month period ended March 31, 1997.

Total other expenses increased by $222,456,  or 22.6% for the three months ended
March 31,  1998,  compared  to the same  period in the prior  year.  Real estate
operations  expense  increased  $112,821 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

                                                         9

<PAGE>




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  March 31,  1998  amounted  to
$189,333,  a decrease of $28,579 over the three months ended March 31, 1997,  as
the result of decreased income.  The Company's  effective tax rate for the three
months  ended  March 31,  1998 was 26.7%  compared  to 19.4% for the  comparable
period in 1997.

Results of  Operations  Comparison of Nine Months Ended March 31, 1998 and March
31, 1997

Net income for the nine months ended March 31, 1998 was $1,683,556 compared with
$1,694,073  for the nine months  ended March  31,1997,  a decrease of $10,517 or
0.6%.  Net income for the nine months  ended March 31,  1997,  included the FDIC
special  assessment  previously  described.  Interest income for the nine months
ended March 31, 1998  increased  $276,331 or 2.7% compared to the same period in
the prior year,  while interest expense for the nine months ended March 31, 1998
increased  $212,945 or 4.2%  compared to the same period in the prior year. As a
result, net interest income for the nine months ended March 31, 1998 amounted to
$5,325,322,  an increase  of $63,386 or 1.2%  compared to the same period in the
prior year.

A $23,088  provision  for loss on loans for the nine months ended March 31, 1998
was made compared to $47,199 provision reported in the same period last year.

Total other  income  decreased  by $395,482  for the nine months ended March 31,
1998,  compared  to the same  period in the prior  year.  The prior year  period
included  $343,000 of death  benefits  received on key man  insurance  policies.
Annuity and security product sales  commissions were down $33,004,  or 25.9% for
the nine months ended March 31,  1998,  compared to the same period in the prior
year.

Total other  expenses  decreased  by $666,507 or 16.9% for the nine months ended
March 31, 1998,  compared to the same period in the prior year. The FDIC special
assessment accounts for $776,717 of the decrease. Salaries and employee benefits
decreased $226,060, or 10.6%,  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 $232,610 for the
nine months ended March 31, 1998,  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 nine  months  ended  March 31,  1998,  amounted  to
$602,756,  an increase of $369,039 from the nine months ended March 31,1997 as a
result of increased taxable income before income taxes.

Allowance for loan losses amounted to $2.0 million at March 31, 1998,  which was
unchanged from June 30, 1997 after  adjusting for  charge-offs  and  recoveries.
Management considered the allowances

                                                        10

<PAGE>




for loan and real  estate  losses at March 31,  1998,  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 nine months ended March 31,
1998.

<TABLE>
<CAPTION>
                                             Allowance for              Allowance for            Total
                                               Loan Losses               REO Losses            Allowances
                                               -----------               ----------            ----------
<S>                                             <C>                  <C>                        <C>       
Balances at July 1, 1997..................      $2,031,535           $            0             $2,031,535
Provision for losses......................          23,088                      857                 23,945
Recoveries................................           8,218                   23,573                 31,731
Loans and REO charged off.................         (19,854)                    (857)               (20,711)
                                                ----------             -------------            -----------

Balances at March 31, 1998................      $2,042,987               $   23,512             $2,066,500
                                                ==========               ==========             ==========
</TABLE>


The loan loss  reserves to total loans at March 31, 1998 equaled  1.26% of total
loans  outstanding,  compared  to 1.35% of total loans  outstanding  at June 30,
1997. Total  non-performing  assets decreased during the nine months ended March
31, 1998,  from $1.4 million at June 30, 1997 to $1.9 million at March 31, 1998.
Non  performing  assets at March 31, 1998  consisted  of $185,000 in real estate
owned and loans delinquent greater than 90 days of $1.7 million.

Total non-performing loans totaled 1.07% of total loans outstanding at March 31,
1998 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.

                                                        11

<PAGE>


                                     March 31,   June 30,
                                      1998        1997
                                     ------      ------
                                   (Dollars in thousands)

Accruing loans delinquent
     more than 90 days .........     $   --      $   --
Non-accruing loans:
     Residential ...............      1,702       1,238
     Multi-family ..............         --          --

     Commercial ................          6         139
     Consumer ..................         27          34
Troubled debt restructurings ...         --          --
                                     ------      ------
     Total non-performing loans       1,735       1,411
Real estate owned, net .........        185           0
                                     ------      ------
     Total non-performing assets     $1,920      $1,411
                                     ======      ======

Non-performing loans to total
     loans, ....................       1.07%        .94%
Non-performing assets to
     total assets ..............       1.00%        .81%


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 March 31
                                                  1998                                        1997
                                  --------------------------------------      -------------------------------------
                                                                 (Dollars in thousands)

                                  Average                        Average       Average                     Average
                                  Balance          Interest       Rate         Balance        Interest      Rate
                                  -------          --------       ----         -------        --------      ----
<S>                               <C>                <C>            <C>        <C>             <C>            <C>  
Total interest-                                                                                           
   earning assets                 $175,316           $3,610         8.24%      $163,696        $3,455         8.44%
Total interest-                                                                                           
   bearing liabilities             143,532            1,803         5.02%       129,952         1,658         5.10%
                                                     ------                                    ------     
Net interest income/                                                                                      
Interest rate spread                                 $1,807        3.22%                       $1,797         3.34%
                                                     ======                                    ======     
</TABLE>                              


                                                        12

<PAGE>

<TABLE>
<CAPTION>
                                                             Nine Months Ended March 31
                                                  1998                                        1997
                                    -----------------------------------        ------------------------------------
                                                                  (Dollars in thousands)

                                  Average                        Average       Average                     Average
                                  Balance          Interest       Rate         Balance        Interest      Rate
                                  -------          --------       ----         -------        --------      ----
<S>                               <C>               <C>             <C>        <C>              <C>         <C>  
Total interest-
   earning assets                 $169,202          $10,593         8.35%      $164,107         $10,317     8.38%
Total interest-
   bearing liabilities             135,768            5,268         5.17%       129,931           5,055     5.19%
                                                    -------                                     -------
Net interest income/
Interest rate spread                                $ 5,325         3.18%                       $ 5,262     3.19%
                                                    =======                                     =======
</TABLE>


Financial Condition

Shareholders' equity at March 31, 1998 was $39,565,417,  an increase of $499,598
or 1.3% from June 30, 1997.  The  Company's  equity to asset ratio was 20.55% at
March 31, 1998 compared to 22.54% at June 30, 1997. All fully phased-in  capital
requirements  are  currently  met. The  following  table depicts the amounts and
ratios of the Bank's capital as of March 31, 1998 (in  thousands)  under each of
the three regulatory capital requirements  (tangible,  core, and fully phased-in
risk based):

                                  Tangible      Core       Risk-Based
                                  Capital      Capital       Capital
                                  -------      -------       -------

Amount ......................     $33,870      $33,870      $35,427
As a percent of assets, as
   defined ..................        18.5%        18.5%        28.6%
Required amount .............       2,745        5,490        9,925
As a percent of assets, as
  defined ...................         1.5%         3.0%         8.0%
Capital in excess of required
  amount ....................     $31,125      $28,380      $25,502


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 March 31,  1998,  the Bank's
liquidity ratio was 10.4% of which 7.5% was comprised of short-term investments.



                                                        13

<PAGE>


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 expensed over the next two-to-three year period to have a
material effect on its financial  position or results of operations.  The amount
expensed in 1997 was 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).




                                                        14

<PAGE>


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 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 85% 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 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,
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 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 70 of the present value of its assets.

Presented below, as of December 31, 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 December 31, 1997,

                                                        15

<PAGE>

2% of the present  value of the Bank's  assets was  approximately  $3.8 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 $.9 million at December 31, 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.

This data is  presented  as of December 31, 1997 since data from the most recent
quarter (March 31, 1998) is not yet available from the OTS.  Management believes
there had been no  significant  change in the interest rate risk measures  since
December 31, 1997.

<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>  
+400 bp           37,389            -2,401             -6%            20.28%        -41 bp
+300 bp           38,724            -1,066             -3%            20.70%         -1 bp
+200 bp           39,686             - 103             -0%            20.96%        +27 bp
+100 bp           39,081               291             +1%            20.97%        +28 bp
   0 bp           39,790                                              20.69%
-100 bp           39,138             - 652             -2%            20.26%       - 43 bp
-200 bp           38,936             - 853             -2%            20.01%       - 68 bp
-300 bp           39,064             - 726             -2%            19.90%       - 79 bp
-400 bp           39,468             - 322             -1%            19.90%       - 79 bp
</TABLE>

As with any method of measuring  interest  rate risk,  certain short comings 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 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

                                                        16

<PAGE>




mortgages  at  approximately  4.0%  above  the  origination  rate.  The  Company
considers all of these factors in monitoring its exposure to interest rate risk.


                            PART II OTHER INFORMATION

Item 1.           Legal Proceedings

Neither the Company nor the Bank were during the quarter  ended March 31,  1998,
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 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(1)    Financial Data Schedule for Period Ended March 31, 1998

         27(2)    Restated  Financial  Data  Schedule for Period Ended March 31,
                  1997

b)       Reports on Form 8-K

         The Company filed no reports on Form 8-K during the quarter ended March
31, 1998.



                                                        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: May 7, 1998                        By: /s/ John M. Dalton
                                             -----------------------------------
                                             John M. Dalton, President



Date: May 7, 1998                        By: /s/ Larry G. Phillips
                                             -----------------------------------
                                             Larry G. Phillips, Vice President,
                                             Secretary and Treasurer