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, 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 May 5, 1997 was 1,802,846.

                                       -1-

<PAGE>



                          Marion Capital Holdings, Inc.

                                    Form 10-Q

                                      Index

                                                                        Page No.
PART I.   FINANCIAL INFORMATION

Item 1.     Financial Statements                                             3

                  Consolidated Condensed Statement of 
                  Financial Condition as of
                  March 31, 1997 and June 30, 1996                           3

                  Consolidated Condensed Statement of 
                  Income for the three-month
                  period  ended March 31,  1997 and 1996 
                  and for the  nine-month
                  period ended March 31, 1997 and 1996.                      4

                  Consolidated Condensed Statement of 
                  Changes in Shareholders' Equity
                  for the nine months ended March 31, 1997                   5

                  Consolidated Condensed Statement of 
                  Cash Flows for the nine months
                  ended March 31, 1997 and 1996                            6-7

                  Notes to Consolidated Condensed 
                  Financial Statements                                       8

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

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings                                               15

Item 6.     Exhibits and Reports on Form 8-K                                15

SIGNATURES                                                                  16







                                       -2-


<PAGE>



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

             CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION


<TABLE>
<CAPTION>
                                                                 March 31,        June 30,
                                                                   1997             1996
                                                              -------------    -------------
<S>                                                           <C>              <C>          
ASSETS
    Cash                                                      $   1,929,349    $   2,365,805
    Short-term interest bearing deposits                          3,653,657        5,154,518
                                                              -------------    -------------
        Total cash and cash equivalents                           5,583,006        7,520,323

    Investment securities available for sale                      2,960,625          999,750
    Investment securities held to maturity
        (market value $4,555,813 and $11,496,535)                 4,611,484       11,566,476
    Mortgage-backed securities (market value $442,067
        and $1,389,232)                                             445,570        1,491,246
    Loans receivable, net                                       147,399,206      143,164,641
    Real estate owned, net                                                0          182,959
    Premises and equipment                                        1,512,706        1,446,025
    Stock in Federal Home Loan Bank (at cost which
        approximates market)                                        988,400          988,400
    Other assets                                                 10,914,418       10,406,755
                                                              -------------    -------------
        Total assets                                          $ 174,415,415    $ 177,766,575
                                                              =============    =============


LIABILITIES
    Deposits                                                  $ 121,140,153    $ 126,260,010
    Advances from FHLB                                            8,233,390        6,241,474
    Advances by borrowers for taxes and
        insurance                                                   359,253          392,278
    Other liabilities                                             4,480,876        3,361,739
                                                              -------------    -------------
        Total liabilities                                       134,213,672      136,255,501


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--1,828,242 and
            1,933,613 shares                                     11,712,034       13,814,937
    Retained earnings                                            28,716,566       28,128,458
    Unrealized gain (loss) on securities available for sale         (24,480)            (119)
    Unearned compensation                                          (202,377)        (432,202)
                                                              -------------    -------------
        Total shareholders' equity                               40,201,743       41,511,074
                                                              -------------    -------------
        Total liabilities and shareholders' equity            $ 174,415,415    $ 177,766,575
</TABLE>



                                       -3-


<PAGE>



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

<TABLE>
<CAPTION>

                                                              Three Months Ended              Nine Months Ended
                                                                   March 31,                        March 31,
                                                            -----------------------------------------------------------
                                                              1997           1996             1997             1996
Interest income
<S>                                                         <C>           <C>              <C>              <C>       
    Loans                                                   $3,243,805    $3,129,882       $9,630,046       $9,356,900
    Mortgage-backed securities                                   7,151        24,577           35,040           85,909
    Federal funds sold                                               0             0                0                0
    Interest-bearing deposits                                   74,853        87,256          217,190          199,855
    Investment securities                                      110,488       183,212          376,827          626,617
    Other interest and dividend income                          19,131        18,083           58,138           54,746
                                                             ---------       -------        ---------        ---------
       Total interest income                                 3,455,428     3,443,010       10,317,241       10,324,027

Interest expense
    Deposits                                                 1,532,083     1,592,905        4,720,537        4,746,469
    Advances from FHLB                                         125,671       114,002          334,768          348,088
    Securities sold under agreement to repurchase                    0         7,072                0           52,159
                                                             ---------       -------        ---------        ---------
       Total interest expense                                1,657,754     1,713,979        5,055,305        5,146,716
                                                             ---------       -------        ---------        ---------
Net interest income                                          1,797,674     1,729,031        5,261,936        5,177,311
    Provision for losses on loans                               37,250             0           47,199           24,243
                                                             ---------       -------        ---------        ---------
Net interest income after
    provision for losses on loans                            1,760,424     1,729,031        5,214,737        5,153,068
                                                             ---------       -------        ---------        ---------
Other income
    Net loan servicing fees                                     21,988        20,484           67,081           59,663
    Annuity and other commissions                               37,573        38,955          127,476          121,550
    Equity in losses of limited partnerships                   (60,000)      (53,829)        (180,000)        (149,482)
    Other income                                                21,663        17,763          110,751           73,573
                                                             ---------       -------        ---------        ---------
       Total other income                                       21,224        23,373          125,308          105,304
                                                             ---------       -------        ---------        ---------
Other expenses
    Salaries and employee benefits                             329,321       589,196        1,587,865        1,764,926
    Occupancy expense                                           54,460        41,602          135,225          117,917
    Equipment expense                                           16,576        16,260           44,898           43,827
    Deposit insurance expense                                   16,849        82,056          963,629          244,346
    Real estate operations, net                                (27,229)        3,144          (16,238)         (15,191)
    Other expenses                                             270,393       195,300          696,876          560,457
                                                             ---------       -------        ---------        ---------
       Total other expenses                                    660,370       927,558        3,412,255        2,716,282
                                                             ---------       -------        ---------        ---------
Income before income taxes                                   1,121,278       824,846        1,927,790        2,542,090

    Income tax expense                                         217,912      216,346           233,717          690,128
                                                             ---------       -------        ---------        ---------
Net income                                                    $903,366      $608,500       $1,694,073       $1,851,962
                                                             =========       =======        =========        =========
Per Share
    Net income                                                   $0.48         $0.29            $0.89            $0.89
    Dividends                                                    $0.20         $0.18            $0.60            $0.54
</TABLE>



                                       -4-


<PAGE>



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

       CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                 Common Stock                                          Unearned            Total
                                          -----------------------------  Retained   Unrealized gain   Compensation     Shareholders'
                                          Shares          Amount         Earnings     on Securities       RRP             Equity
                                         ---------       -----------    -----------     --------        ---------       -----------
<S>                                     <C>             <C>            <C>                <C>          <C>             <C>        
Balances, July 1, 1996                   1,933,613       $13,814,937    $28,128,458        ($119)       ($432,202)      $41,511,074

Stock repurchases                         (112,680)       (2,309,480)                                                    (2,309,480)

Exercise of stock options                    7,309            73,090                                                         73,090

Amortization of unearned
    compensation                                                                                          229,825           229,825

Net change in unrealized (loss) on
    securities available for sale                                                        (24,361)                           (24,361)

Net income for the nine months
  ended March 31, 1997                                                    1,694,073                                       1,694,073

Tax benefit on compensation plans                            133,487                                                        133,487

Cash dividends                                                           (1,105,965)                                     (1,105,965)
                                         ---------       -----------    -----------     --------        ---------       -----------
Balances, March 31, 1997                 1,828,242       $11,712,034    $28,716,566     ($24,480)       ($202,377)      $40,201,743
                                         =========       ===========    ===========     ========        =========       ===========
</TABLE>



                                       -5-


<PAGE>



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

                 CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                          Nine Months Ended
                                                               March 31,
                                                      ---------------------------
                                                          1997           1996

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                   <C>            <C>        
   Net income                                         $ 1,694,073    $ 1,851,962
   Adjustments to reconcile net income to
      net cash provided by operating activities:
         Provision for loan losses                         47,199         24,243
         Provision for real estate owned losses           (28,668)       (19,136)
         Equity in loss of limited partnerships           180,000        149,482
         Amortization of net loan origination fees       (204,957)      (168,474)
         Net amortization of investment
             securities' premiums and discounts            14,388         15,593
         Net amortization  of mortgage-
             backed securities and CMO premiums               750          5,978
         Amortization of unearned compensation            229,825        268,820
         Depreciation                                      61,104         58,035
         Deferred income tax                             (270,309)      (142,667)
         Origination of loans for sale                 (3,696,650)    (5,350,786)
         Proceeds from sale of loans                    3,696,650      5,350,786
         Change in:
             Interest receivable                              (98)       (40,895)
             Interest payable and other liabilities     1,119,137      1,034,528
             Cash value of insurance                     (540,337)       (85,000)
             Prepaid expense and other assets            (113,332)       105,520
                                                      -----------    -----------
         Net cash provided by operating
             activities                                 2,188,775      3,057,989
                                                      -----------    -----------

INVESTING ACTIVITIES
   Purchase of investment securities
      available for sale                               (3,002,125)    (1,984,528)
   Proceeds from maturity of investment
      securities available for sale                     1,000,000      2,984,528
   Purchase of investment securities
      held to maturity                                 (3,000,000)             0
   Proceeds from maturity of investment
      securities held to maturity                       9,937,161      6,000,000
   Contribution to limited partnership                   (130,000)      (290,000)
   Payments on mortgage-backed securities               1,044,926        689,091
   Net changes in loans                                (3,568,512)    (3,182,282)
   Proceeds from real estate owned sales                   30,722         36,850
   Purchases of premises and equipment                   (127,785)        20,655
   Premiums paid on life insurance                       (860,000)             0
   Death benefits received on life insurance            1,052,842              0
                                                      -----------    -----------
         Net cash used by investing
             activities                                 2,377,229      4,274,314
                                                      -----------    -----------
</TABLE>




                                       -6-


<PAGE>



           CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (continued)

                                                        Nine Months Ended
                                                            March 31,
                                                   -----------------------------
                                                     1997               1996

FINANCING ACTIVITIES 
   Net change in:
      Noninterest-bearing deposits, NOW
         passbook and money market savings
         accounts                                  (1,092,860)          745,728
      Certificates of deposit                      (4,026,997)        3,770,610
   Proceeds from FHLB advances                      5,000,000         3,000,000
   Repayment of FHLB advances                      (3,008,084)       (3,221,678)
   Proceeds from securities sold under                            
      agreement to repurchase                               0         2,771,346
   Repayment of securities sold under                             
      agreement to repurchase                               0        (2,771,346)
   Net change in advances by borrowers for                        
      taxes and insurance                             (33,025)          122,041
   Proceeds from exercise of stock options             73,090           268,820
   Stock repurchases                               (2,309,480)         (206,250)
   Dividends paid                                  (1,105,965)       (1,081,050)
                                                 ------------      ------------
         Net cash provided (used) by                              
             financing activities                  (6,503,321)        3,398,221
                                                 ------------      ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS            (1,937,317)       10,730,524
                                                                  
         CASH AND CASH EQUIVALENTS,                               
             BEGINNING OF PERIOD                    7,520,323         3,483,184
                                                 ------------      ------------
         CASH AND CASH EQUIVALENTS,                               
             END OF PERIOD                       $  5,583,006      $ 14,213,708
                                                 ============      ============
                                                                  
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY                           
   INFORMATION                                                    
   Interest paid                                 $  4,253,247      $  4,365,542
   Income tax paid                                    470,879           729,958
   Loan balances transferred to real                              
      estate owned                                    124,309           362,001
   Loans to finance the sale of real                              
      estate owned                                    292,000           458,500
                                                                















                                       -7-


<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,  1997,  results of  operations  for the three month and
nine month  periods  ended March 31, 1997 and 1996,  and cash flows for the nine
month periods ended March 31, 1997 and 1996.


NOTE B:  Dividends and Earnings Per Share

On February 17, 1997, the Board of Directors  declared a quarterly cash dividend
of $.20 per share.  This dividend was paid on March 14, 1997 to  shareholders of
record as of February 28, 1997.

The per  share  amounts  were  computed  based  on  average  common  and  common
equivalent  shares  outstanding for the three month and nine month periods ended
March 31, 1997 of 1,899,191 and 1,903,864, respectively. For the three month and
nine month  periods  ended March 31, 1996 average  common and common  equivalent
shares outstanding amounted to 2,078,977 and 2,074,370, respectively.


NOTE C:  Accounting For Mortgage Servicing Rights

The  Company  adopted  Statement  of  Accounting  Standards  ("SFAS")  No.  122,
Accounting for Mortgage  Servicing Rights, on July 1, 1996.  Mortgage  servicing
rights on originated  loans are  capitalized by allocating the total cost of the
mortgage  loans  between the  mortgage  servicing  rights and the loans based on
their  relative  fair  values.  Capitalized  servicing  rights are  amortized in
proportion to and over the period of estimated servicing revenues.  The adoption
of SFAS No.  122 did not  have a  material  effect  on the  Company's  financial
statements.

                                       -8-

<PAGE>



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

General:

The  Company's  total assets were $174.4  million at March 31, 1997  compared to
$177.8  million  at June 30,  1996.  Cash and cash  equivalents  decreased  $1.9
million or 25.8%, and investment securities decreased $6.0 million or 43.0% from
June 30, 1996 to March 31, 1997.  Loans  receivable were $147.4 million at March
31,  1997,  an increase  of $4.2  million,  or 3.0%,  from June 30,  1996.  This
increase is due, in part, to an origination of a $2.5 million  long-term loan to
another savings and loan holding  company.  Real estate owned decreased to $0 at
March 31, 1997, compared to $183,000 at June 30, 1996.

Deposits  decreased  to $121.1  million  at March 31,  1997  compared  to $126.3
million  at  June  30,  1996,  a  4.1%  decrease.  This  $5.1  million  decrease
represented a $1.1 million decrease in passbook and transaction  accounts and an
approximate  $4  million  decrease  in  certificate  of deposit  accounts.  This
decrease  in total  deposits  results  primarily  from an  outflow  of  existing
accounts to different market alternatives.

Other  liabilities  increased from $3.4 million at June 30, 1996 to $4.5 million
at March 31,  1997 as a result of normal  operational  increases.  The  increase
consists  primarily  in an increase of $797,000 in accrued  interest  payable on
deposits since a majority of the certificates of deposit compound  semi-annually
at June 30 and December 31.

Shareholders'  equity was $40.2  million at March 31,  1997,  compared  to $41.5
million at June 30, 1996.  This decrease was the result of  repurchasing  common
stock on the open market  during the nine months  ended March 31,  1997.  During
this period 112,680 shares were repurchased at a total cost of $2.3 million,  or
an average cost of $20.50 per share.  As of March 31,  1997,  the Company was in
the process of  repurchasing  an additional 5% of its  outstanding  shares.  The
current repurchase program was announced in February 1997 totaling 92,207 shares
of which 16,000 had been  repurchased  by March 31, 1997,  leaving an additional
76,207 to be repurchased under the current program.

Net income for the nine months ended March 31, 1997 of  $1,694,073  represents a
8.5%  decrease in income  reported  for the same period in the prior year.  This
decrease  in  earnings  is  attributable  directly to the signing of the omnibus
appropriations  bill  on  September  30,  1996,  which  imposed  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  assessment was payable  November 27, 1996. The
after-tax  effect on net income was $469,059 for the nine months ended March 31,
1997.  SAIF-insured  institutions  have experienced a reduction of FDIC premiums
beginning  January 1, 1997,  which have had a positive  effect on earnings since
that time.  For the nine months ended March 31, 1997,  the Bank made a provision
of $47,199 for general loan losses  compared to $24,243 in loss  provisions  for
the same period in the prior year.

                                       -9-

<PAGE>



Management  continues to review its current  portfolio to ensure that total loss
reserves remain adequate.

In April 1997, the Company  announced that it would open its second Grant County
office in the new Wal-Mart  SuperCenter  currently under construction in Marion,
Indiana.  The other branch  office is located in Decatur,  Indiana.  This second
Marion,  Indiana  location  will be 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 branch,  scheduled to open in October 1997, will operate
approximately 57 hours per week with an expected staff of 6-7  individuals.  The
Company  believes that the  long-term  prospects for growth from this new branch
location are excellent.

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

Net income for the three months ended March 31, 1997 was $903,366  compared with
$608,500 for the three  months ended March 31, 1996,  an increase of $294,866 or
48.5%.  During the quarter ended March 31, 1997, proceeds from key man insurance
resulted in additional income of $283,000.  Interest income for the three months
ended March 31, 1997  increased  $12,418 or 0.4%  compared to the same period in
the prior year, while interest expense for the three months ended March 31, 1997
decreased  $56,225 or 3.3%  compared to the same period in the prior year.  As a
result,  net interest  income for the three months ended March 31, 1997 amounted
to  $1,797,674 an increase of $68,643 or 4.0% compared to the same period in the
prior year.

A provision  of $37,250 for losses on loans was made for the three  months ended
March 31, 1997. No provision was made in the same period last year.

Total other  income  decreased  by $2,149 for the three  months  ended March 31,
1997,  compared  to the  same  period  in the  prior  year.  This  decrease  was
attributed to the increased loss from investments in a limited partnership.

Total other expenses decreased by $267,188,  or 28.8% for the three months ended
March 31,  1997,  compared to the same period in the prior  year.  Salaries  and
employee benefits  decreased  $259,875,  or 44.1 %, as the result of the key man
life  insurance  proceeds  of  $283,000  being  applied as a credit to  employee
benefits expense.

Real estate  operation  expense  decreased by $30,373 for the three months ended
March 31, 1997, compared to the same period in the prior year. Deposit insurance
expense  decreased  by $65,207 as a result of the lower FDIC  premium  effective
January 1, 1997. Other expense increases were normal operational increases.

 Income tax  expense  for the three  months  ended  March 31,  1997  amounted to
$217,912,  an increase of $1,566 over the three months ended March 31, 1996,  as
the result of increased income.  The Company's  effective tax rate for the three
months ended March 31, 1997 was 19.4% compared to

                                      -10-

<PAGE>



26.2% for the comparable  period in 1996.  The lower  effective rate for 1997 is
directly attributable to receiving the tax-free key man insurance proceeds.

Results of  Operations  Comparison of Nine Months Ended March 31, 1997 and March
31, 1996.

Net income for the nine months ended March 31, 1997 was $1,694,073 compared with
$1,851,962  for the nine months  ended March 31, 1996, a decrease of $157,889 or
8.5%.  This  decrease  is the  direct  result  of the  FDIC  special  assessment
previously  described.  Interest income for the nine months ended March 31, 1997
decreased  $6,786 or .1%  compared to the same  period in the prior year,  while
interest  expense for the nine months ended March 31, 1997 decreased  $91,411 or
1.8% compared to the same period in the prior year. These decreases  reflect the
repricing  of assets and  liabilities  to lower  rates and a decrease in deposit
balances outstanding. As a result, net interest income for the nine months ended
March 31, 1997 amounted to  $5,261,936,  an increase of $84,625 or 1.6% compared
to the same period in the prior year.

A $47,199  provision  for loss on loans for the nine months ended March 31, 1997
was made compared to a $24,243 provision reported in the same period last year.

Total other  income  increased  by $20,004  for the nine months  ended March 31,
1997,  compared to the same  period in the prior year,  in part as the result of
increased sales of annuity and security  products.  Annuity and security product
sales  commissions  were up $5,926,  or 4.9% for the nine months ended March 31,
1997,  compared to the same period in the prior year. Limited partnership losses
also increased by $30,518 over the prior year.

Total other  expenses  increased  by $695,973 or 25.6% for the nine months ended
March 31, 1997,  compared to the same period in the prior year. The FDIC special
assessment accounts for $776,717 of the increase. Salaries and employee benefits
decreased $177,061, or 10.0%, also as a result of crediting the $283,000 key man
insurance  proceeds against  employee  benefits.  Real estate operation  expense
decreased by $1,047 for the nine months  ended March 31,  1997,  compared to the
same period in the prior year. Other expense  increases were normal  operational
increases.

Income tax  expense  for the nine  months  ended  March 31,  1997,  amounted  to
$233,717,  a decrease of $456,411 from the nine months ended March 31, 1996 as a
result of reduced  income due to the FDIC special  assessment and as a result of
the tax-free key man insurance proceeds of $283,000 and other tax-free income.

Allowance for loan losses amounted to $2.0 million at March 31, 1997,  which was
unchanged from June 30, 1996 after  adjusting for  charge-offs  and  recoveries.
Management  considered  the  allowances for loan and real estate losses at March
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

                                      -11-

<PAGE>



to change over time. The following table  illustrates the changes  affecting the
allowance accounts for the nine months ended March 31, 1997.

<TABLE>
<CAPTION>
                                                       Allowance For         Allowance For        Total
                                                       Loan Losses           REO Losses           Allowances

<S>                                                   <C>                    <C>               <C>       
Balances at July 1, 1996............................   $2,009,250             $16,118           $2,025,368
Provision for losses................................       47,199             (28,669)              18,530
Recoveries..........................................            0              37,773               37,773
Loans and REO charged off...........................      (35,871)            (25,222)             (61,093)
                                                      -----------            --------          -----------

Balances at March 31, 1997..........................   $2,020,578            $      0           $2,020,578
                                                       ==========            ========           ==========
</TABLE>


The loan loss  reserves to total loans at March 31, 1997 equaled  1.35% of total
loans  outstanding,  compared  to 1.38% of total loans  outstanding  at June 30,
1996. Total  non-performing  assets decreased during the nine months ended March
31, 1997,  from $1.9 million at June 30, 1996 to $1.3 million at March 31, 1997.
Non-performing  assets at March 31, 1997 consisted  entirely of loans delinquent
greater than 90 days.

Total  non-performing loans totaled .88% of total loans outstanding at March 31,
1997 compared to 1.18% of total loans at June 30, 1996.

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.



                                      -12-

<PAGE>



                                           March 31,                  June 30,
                                             1996                      1996
                                                  (Dollars in Thousands)

Accruing loans delinquent
         more than 90 days..............   $     ---                $     ---
Non-accruing loans:
         Residential....................       1,243                    1,659
         Multi-family...................         ---                      ---
         Commercial.....................          45                       47
         Consumer.......................          31                       11
Troubled debt restructurings............         ---                      ---
                                            --------                 --------
         Total non-performing loans.....       1,319                    1,717
Real estate owned, net..................           0                      183
                                            --------                   ------
         Total non-performing assets....      $1,319                   $1,900
                                              ======                   ======

Non-performing loans to
         total loans, net...............        .88%                    1.18%
Non-performing assets to
         total assets...................        .76%                    1.07%

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
                                    -------------------------------------------------------------------------------
                                                   1997                                       1996
                                    ---------------------------------------     -----------------------------------
                                                               (Dollars in thousands)

                                    Average                       Average        Average                   Average
                                    Balance         Interest         Rate        Balance       Interest       Rate
<S>                                 <C>              <C>             <C>         <C>             <C>          <C>  
Total interest-
   earnings assets..............    $163,696         $3,455          8.44%       $165,372        $3,443       8.33%
Total interest-
   bearing liabilities..........     129,952          1,658          5.10%        129,413         1,714       5.30%

Net interest income/
Interest rate spread............                      1,797          3.34%                        1,729       3.03%
                                                      =====                                       =====
</TABLE>



                                      -13-

<PAGE>


<TABLE>
<CAPTION>
                                                           Nine Months Ended March 31
                                    ------------------------------------------------------------------------------
                                                   1997                                       1996
                                    ---------------------------------------      ---------------------------------
                                                               (Dollars in thousands)

                                    Average                       Average        Average                   Average
                                    Balance         Interest         Rate        Balance       Interest       Rate
<S>                                 <C>             <C>              <C>         <C>            <C>           <C>  
Total interest-
   earnings assets..............    $164,107        $10,317          8.38%       $164,717       $10,324       8.36%
Total interest-
   bearing liabilities..........     129,931          5,055          5.19%        128,673         5,147       5.33%

Net interest income/
Interest rate spread............                      5,262          3.19%                        5,177       3.03%
</TABLE>


Financial Condition

Shareholders' equity at March 31, 1997 was $40,201,743, a decrease of $1,309,331
or 3.2% from June 30, 1996.  The  Company's  equity to asset ratio was 23.05% at
March 31, 1997 compared to 23.35% at June 30, 1996. 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,  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...........................................      $34,191              $ 34,191                $35,606
As a percent of assets, as defined...............        20.3%                 20.3%                  31.6%
Required amount..................................        2,528                 5,057                  9,009
As a percent of assets, as defined...............         1.5%                  3.0%                   8.0%
Capital in excess of
    required amount..............................     $ 31,663              $ 29,134               $ 26,597
</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 March 31,  1997,  the Bank's
liquidity ratio was 9.4% of which 4.4% was comprised of short-term investments.



                                      -14-

<PAGE>



                            PART II OTHER INFORMATION

Item 1.  Legal Proceedings

Neither the Company nor the Bank were during the quarter  ended March 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 6.  Exhibits and Reports on Form 8-K

a)  Exhibits

         3(1)     The   Articles  of   Incorporation   of  the   Registrant   is
                  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  Registration  Statement on Form
                  S-1 (Registration No. 33-55052).

         11       Statement re computation of per share earnings

         27       Financial Data Schedule


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





                                      -15-

<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, 1997                            By: /s/ John M. Dalton
                                             -----------------------------------
                                             John M. Dalton,
                                             President



Date: May 7, 1997                            By: /s/ Larry G. Phillips
                                             -----------------------------------
                                             Larry G. Phillips, Vice President,
                                             Secretary and Treasurer







                                      -16-