SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
         DECEMBER 31, 1996 OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
         __________________ TO _________________

                         Commission file number: 0-21108

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


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

                              100 West Third Street
                                  P.O. Box 367
                              Marion, Indiana 46952
                    (Address of principal executive offices,
                               including Zip Code)

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

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

The  number of shares of the  Registrant's  common  stock,  without  par  value,
outstanding as of February 7, 1997 was 1,844,142.


<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 December 31, 1996 and June 30, 1996                3

          Consolidated Condensed Statement of Income for 
          the three-month periods ended December 31, 1996 and 1995           4

          Consolidated Condensed Statement of Changes in 
          Shareholders' Equity for the three months ended 
          December 31, 1996                                                  5

          Consolidated Condensed Statement of Cash Flows 
          for the three months ended December 31, 1996 and 1995            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                                                 14

Item 6.   Exhibits and Reports on Form 8-K                                  14

SIGNATURES                                                                  15

                                                        -2-

<PAGE>



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

             CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>

                                                             December 31,         June 30,
                                                                 1996               1996
                                                            -------------       -------------
<S>                                                         <C>                 <C>          
ASSETS
    Cash                                                    $   2,211,874       $   2,365,805
    Short-term interest bearing deposits                        2,754,738           5,154,518
                                                            -------------       -------------
        Total cash and cash equivalents                         4,966,612           7,520,323

    Investment securities available for sale                    1,007,500             999,750
    Investment securities held to maturity
        (market value $8,578,213 and $11,496,535)               8,615,029          11,566,476
    Mortgage-backed securities (market value $623,755
        and $1,389,232)                                           629,684           1,491,246
    Loans receivable, net                                     146,804,984         143,164,641
    Real estate owned, net                                         23,936             182,959
    Premises and equipment                                      1,492,121           1,446,025
    Stock in Federal Home Loan Bank (at cost which
        approximates market)                                      988,400             988,400
    Other assets                                               11,277,454          10,406,755
                                                            -------------       -------------
        Total assets                                        $ 175,805,720       $ 177,766,575
                                                            =============       =============


LIABILITIES
    Deposits                                                $ 123,911,566       $ 126,260,010
    Advances from FHLB                                          8,233,390           6,241,474
    Advances by borrowers for taxes and
        insurance                                                 199,703             392,278
    Other liabilities                                           3,490,377           3,361,739
                                                            -------------       -------------
        Total liabilities                                     135,835,036         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--1,843,942 and
            1,933,613 shares                                   12,053,034          13,814,937
    Retained earnings                                          28,182,049          28,128,458
    Unrealized (gain) on securities available for sale                545                (119)
    Unearned compensation                                        (264,944)           (432,202)
                                                            -------------       -------------
        Total shareholders' equity                             39,970,684          41,511,074
                                                            -------------       -------------
        Total liabilities and shareholders' equity          $ 175,805,720       $ 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            Six Months Ended
                                                            December 31,                 December 31,
                                                    --------------------------    --------------------------
                                                        1996           1995           1996           1995
                                                    -----------    -----------    -----------    -----------
Interest income
<S>                                                 <C>            <C>            <C>            <C>        
    Loans                                           $ 3,202,867    $ 3,136,955    $ 6,386,241    $ 6,227,018
    Mortgage-backed securities                           11,202         29,081         27,889         61,332
    Federal funds sold                                        0              0              0              0
    Interest-bearing deposits                            69,794         71,364        142,337        112,599
    Investment securities                               127,295        208,336        266,339        443,405
    Other interest and dividend income                   19,504         18,331         39,007         36,663
                                                    -----------    -----------    -----------    -----------
       Total interest income                          3,430,662      3,464,067      6,861,813      6,881,017

Interest expense
    Deposits                                          1,574,216      1,573,157      3,188,454      3,153,564
    Advances from FHLB                                  109,064        114,892        209,097        234,086
    Securities sold under agreement to repurchase             0         32,363              0         45,087
                                                    -----------    -----------    -----------    -----------
       Total interest expense                         1,683,280      1,720,412      3,397,551      3,432,737
                                                    -----------    -----------    -----------    -----------
Net interest income                                   1,747,382      1,743,655      3,464,262      3,448,280
    Provision for losses on loans                         5,759         24,243          9,949         24,243
                                                    -----------    -----------    -----------    -----------
Net interest income after
    provision for losses on loans                     1,741,623      1,719,412      3,454,313      3,424,037
                                                    -----------    -----------    -----------    -----------
Other income
    Net loan servicing fees                              22,886         20,001         45,093         39,179
    Annuity and other commissions                        45,387         38,189         89,903         82,595
    Equity in losses of limited partnerships            (60,000)       (51,427)      (120,000)       (95,653)
    Gain on sale of other assets                         51,376              0         51,376              0
    Other income                                         19,120         18,129         37,712         55,810
                                                    -----------    -----------    -----------    -----------
    Total other income                                   78,769         24,892        104,084         81,931
                                                    -----------    -----------    -----------    -----------
Other expenses
    Salaries and employee benefits                      572,941        585,205      1,258,544      1,175,730
    Occupancy expense                                    36,816         37,020         80,765         76,315
    Equipment expense                                    14,021         14,531         28,322         27,567
    Deposit insurance expense                            85,129         81,532        946,780        162,290
    Real estate operations, net                           2,881        (19,800)        10,991        (18,335)
    Other expenses                                      209,370        175,445        426,483        365,157
                                                    -----------    -----------    -----------    -----------
       Total other expenses                             921,158        873,933      2,751,885      1,788,724
                                                    -----------    -----------    -----------    -----------
Income before income taxes                              899,234        870,371        806,512      1,717,244

    Income tax expense                                  236,015        232,737         15,805        473,782
                                                    -----------    -----------    -----------    -----------

Net income                                          $   663,219    $   637,634    $   790,707    $ 1,243,462
                                                    ===========    ===========    ===========    ===========
Per Share
    Net income                                      $      0.35    $      0.31    $      0.42    $      0.60
    Dividends                                       $      0.20    $      0.18    $      0.40    $      0.36
</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                   (96,680)      (1,965,480)                                                        (1,965,480)

Exercise of stock options             7,009           70,090                                                             70,090

Amortization of unearned
    compensation                                                                                       167,258          167,258

Net change in unrealized 
    (gain) on securities 
    available for sale                                                                   664                                664

Net income for the 
  six months ended 
  December 31, 1996                                                   790,707                                           790,707

Tax benefit on 
  compensation plans                                 133,487                                                            133,487

Cash dividends                                                       (737,116)                                         (737,116)
                                  ---------      -----------      -----------           ----         ---------      -----------
Balances, December 31, 1996       1,843,942      $12,053,034      $28,182,049           $545         ($264,944)     $39,970,684
                                  =========      ===========      ===========           ====         =========      ===========
</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>

                                                           Six Months Ended
                                                              December 31,
                                                      --------------------------
                                                          1996           1995
                                                      -----------    -----------
<S>                                                   <C>            <C>        
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                         $   790,707    $ 1,243,462
   Adjustments to reconcile net income to
      net cash provided by operating activities:
         Provision for loan losses                          9,949         24,243
         Provision for real estate owned losses                 0        (20,070)
         Equity in loss of limited partnerships           120,000         95,653
         Amortization of net loan origination fees       (131,683)      (103,687)
         Net amortization (accretion) of investment
             securities' premiums and discounts            10,317         10,705
         Net amortization (accretion) of mortgage-
             backed securities and CMO premiums               750          4,421
         Amortization of unearned compensation            167,258        172,192
         Depreciation                                      39,021         38,493
         Deferred income tax                             (147,260)      (108,221)
         Origination of loans for sale                 (3,696,650)    (2,637,808)
         Proceeds from sale of loans                    3,696,650      2,637,808
         Change in:
             Interest receivable                          (50,796)       (99,324)
             Interest payable and other liabilities       128,638        135,290
             Cash value of insurance                     (214,762)       (55,000)
             Prepaid expense and other assets              61,942        (59,278)
         Net cash provided by operating
             activities                                   784,081      1,278,879
                                                      -----------    -----------
INVESTING ACTIVITIES
   Purchase of investment securities
      available for sale                               (1,007,031)    (1,984,528)
   Proceeds from maturity of investment
      securities available for sale                     1,000,000      1,000,000
   Purchase of investment securities
      held to maturity                                 (3,000,000)             0
   Proceeds from maturity of investment
      securities held to maturity                       5,937,161      1,000,000
   Payments on mortgage-backed securities                 860,812        240,267
   Net changes in loans                                (3,385,417)    (2,400,352)
   Proceeds from real estate owned sales                   30,722         24,000
   Purchases of premises and equipment                    (85,117)       (17,987)
   Premiums paid on Life Insurance                       (860,000)             0
   Death benefits received on life insurance              352,687              0
                                                      -----------    -----------
         Net cash used by investing
             activities                                  (156,183)    (2,138,600)
                                                      -----------    -----------
</TABLE>

                                       -6-

<PAGE>



           CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (continued)

<TABLE>
<CAPTION>

                                                           Six Months Ended
                                                              December 31,
                                                      --------------------------
                                                          1996           1995
                                                      -----------    -----------
<S>                                                   <C>            <C>        
FINANCING ACTIVITIES Net change in:
      Noninterest-bearing deposits, NOW
         passbook and money market savings
         accounts                                        (473,687)       530,784
      Certificates of deposit                          (1,874,757)       718,549
   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      2,520,389
   Repayment of securities sold under               
      agreement to repurchase                                   0     (1,000,000)
   Net change in advances by borrowers for          
      taxes and insurance                                (192,575)        (8,881)
   Proceeds from exercise of stock options                 70,090        151,990
   Stock repurchases                                   (1,965,480)             0
   Dividends paid                                        (737,116)      (718,678)
                                                      -----------    -----------
         Net cash provided (used) by                
             financing activities                      (3,181,609)     1,972,475
                                                      -----------    -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS                (2,553,711)     1,112,754
                                                    
         CASH AND CASH EQUIVALENTS,                 
             BEGINNING OF PERIOD                        7,520,323      3,483,184
                                                      -----------    -----------
         CASH AND CASH EQUIVALENTS,                 
             END OF PERIOD                            $ 4,966,612    $ 4,595,938
                                                      ===========    ===========
                                                    
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY             
   INFORMATION                                      
   Interest paid                                      $ 3,392,443    $ 3,436,148
   Income tax paid                                        305,879        444,958
   Loan balances transferred to real                
      estate owned                                         96,896        148,029
   Loans to finance the sale of real                
      estate owned                                        210,000        359,500
</TABLE>

                                                    
                                            

                                                                -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 December 31, 1996,  results of operations for the three month and
six month periods ended  December 31, 1996 and 1995,  and cash flows for the six
month periods ended December 31, 1996 and 1995.

NOTE B:           Dividends and Earnings Per Share

On November 18, 1996, the Board of Directors  declared a quarterly cash dividend
of $.20 per share.  This dividend was paid on December 13, 1996 to  shareholders
of record as of November 29, 1996.

The per  share  amounts  were  computed  based  on  average  common  and  common
equivalent  shares  outstanding  for the three month and six month periods ended
December 31, 1996 of 1,899,692 and 1,906,115,  respectively. For the three month
and six month  periods  ended  December  31,  1995  average  common  and  common
equivalent shares outstanding amounted to 2,073,567 and 2,072,067, 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.

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

General:

The Company's  total assets were $175.8 million at December 31, 1996 compared to
$177.8  million  at June 30,  1996.  Cash and cash  equivalents  decreased  $2.6
million or 34.0% and investment  securities were decreased $2.9 million or 23.4%
from June 30, 1996 to December 31, 1996. Loans receivable were $146.8 million at
December 31, 1996,  an increase of $3.6  million,  or 2.5%,  from June 30, 1996.
This  increase is due  primarily  to an  origination  of a $2.5  million loan to
another savings and loan holding  company over a seven year period.  Real estate
owned decreased to $24,000 at December 31, 1996, compared to $183,000 at June 30
1996.



                                                        -8-

<PAGE>



Deposits  decreased to $123.9  million at December  31, 1996  compared to $126.3
million  at  June  30,  1996,  a  1.9%  decrease.  This  $2.4  million  decrease
represented  a $474,000  decrease in passbook  and  transaction  accounts and an
approximate  $1,875,000  decrease  in  certificate  of  deposit  accounts.  This
decrease  in total  deposits  results  primarily  from an  outflow  of  existing
accounts to different market alternatives. The Bank continues to pay competitive
rates on its savings  products  compared to other financial  institutions in its
market area.

Other  liabilities  increased from $3.4 million at June 30, 1996 to $3.5 million
at December 31, 1996 as a result of normal operational increases.

Shareholders'  equity was $40.0 million at December 31, 1996,  compared to $41.5
million  at June 30,  1996.  This  decrease  was the result of  completing  a 5%
repurchase of common stock on the open market during July, 1996.

Net income for the six months ended  December 31, 1996 of $790,707  represents a
36.4%  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 six
months ended December 31, 1996.  The  assessment was payable  November 27, 1996.
The  after-tax  effect on net  income  was  $469,059  for the six  months  ended
December 31, 1996.  SAIF-insured  institutions  will likely incur a benefit from
reduction  of FDIC  premiums  beginning  January 1, 1997,  which  should  have a
positive effect on earnings in future periods. For the six months ended December
31,  1996,  First  Federal  made a provision  of $10,000 for general loan losses
compared  to $24,000 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  December 31, 1996 and
December 31, 1995

Net income for the three  months ended  December 31, 1996 was $663,219  compared
with  $637,634  for the three months  ended  December  31, 1995,  an increase of
$25,585 or 4.0%.  During the quarter ended  December 31, 1996, a gain of $51,376
was recognized on the sale of other assets. Interest income for the three months
ended December 31, 1996 decreased $33,405 or 1.0% compared to the same period in
the prior year,  while interest  expense for the three months ended December 31,
1996 decreased $37,132 or 2.2% compared to the same period in the prior year.

As a result,  net interest  income for the three months ended  December 31, 1996
amounted  to  $1,747,382,  an  increase  of $3,727 or 0.2%  compared to the same
period in the prior year.

A provision  of $6,000 for losses on loans was made for the three  months  ended
December 31, 1996, compared to a $24,000 provision in the same period last year.

Total other income  increased by $53,877 for the three months ended December 31,
1996,  compared  to the  same  period  in the  prior  year.  This  increase  was
attributed to a gain on the sale of other assets of $51,376.

Total other  expenses  increased by $47,225,  or 5.4% for the three months ended
December 31, 1996,  compared to the same period in the prior year.  Salaries and
employee  benefits  decreased  $12,264,  or 2.1%. Real estate operation  expense
increased by $22,681 for the three months ended  December 31, 1996,  compared to
the  same  period  in the  prior  year.  Other  expense  increases  were  normal
operational increases.

Income tax expense for the three  months  ended  December  31, 1996  amounted to
$236,015,  an increase of $3,278 over the three months ended  December 31, 1995,
as the result of increased  income.  The  Company's  effective  tax rate for the
three  months  ended  December  31,  1996 was  26.2%  compared  to 26.7% for the
comparable period in 1995.


                                                        -9-

<PAGE>



Results of  Operations  Comparison  of Six Months  Ended  December  31, 1996 and
December 31, 1995

Net income for the six months ended December 31, 1996 was $790,707 compared with
$1,243,462 for the six months ended December 31, 1995, a decrease of $452,755 or
36.4%.  This  decrease  is the  direct  result  of the FDIC  special  assessment
previously described. Interest income for the six months ended December 31, 1996
decreased  $19,204 or .3%  compared to the same period in the prior year,  while
interest expense for the six months ended December 31, 1996 decreased $35,186 or
1.0% 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 six months ended
December  31,  1996  amounted  to  $3,464,262,  an  increase  of $15,982 or 0.5%
compared to the same period in the prior year.

A $10,000 provision for loss on loans for the six months ended December 31, 1996
was made compared to a $24,000 provision reported in the same period last year.

Total other income  increased  by $22,153 for the six months ended  December 31,
1996,  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 $7,308, or 8.8% for the six months ended December 31,
1996, compared to the same period in the prior year.

Total other  expenses  increased  by $963,161 or 53.8% for the six months  ended
December  31,  1996,  compared to the same  period in the prior  year.  The FDIC
special assessment accounts for $776,717 of the increase.  Salaries and employee
benefits increased $82,814,  or 7.0%. Real estate operation expense increased by
$29,326 for the six months ended December 31, 1996,  compared to the same period
in the prior year. Other expense increases were normal operational increases.

Income tax expense  for the six months  ended  December  31,  1996,  amounted to
$15,805, a decrease of $457,977 from the six months ended December 31, 1995 as a
result of reduced income due to the FDIC special assessment.

Allowance for loan losses  amounted to $2.0 million at December 31, 1996,  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 December
31, 1996, to be adequate to cover estimated  losses inherent in those portfolios
at that date,  and its  consideration  included  probable  losses  that could be
reasonably  estimated.  Such belief is based upon an analysis of loans currently
outstanding,   real  estate  owned,  past  loss  experience,   current  economic
conditions  and other  factors  and  estimates  which are subject to change over
time.  The  following  table  illustrates  the changes  affecting  the allowance
accounts for the six months ended December 31, 1996.


<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......................           9,949                 0              9,949
Recoveries................................               0            31,871             31,871
Loans and REO charged off.................          (6,523)          (19,025)           (25,548)
                                                ----------           -------         ----------
Balances at December 31, 1996.............      $2,012,676           $28,964         $2,041,640
</TABLE>



The loan loss  reserves  to total loans at December  31, 1996  equaled  1.35% of
total loans  outstanding,  compared to 1.38% of total loans  outstanding at June
30, 1996.  Total  non-performing  assets  increased  during the six months ended
December  31,  1996,  from $1.9  million  at June 30,  1996 to $2.3  million  at
December 31, 1996. Non-

                                                       -10-

<PAGE>



performing assets at December 31, 1996 consisted of $24,000 in real estate owned
and loans delinquent greater than 90 days of $2.3 million.

Total  non-performing loans totaled 1.54% of total loans outstanding at December
31, 1996 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.


                                             December 31,         June 30,
                                                 1996              1996
                                               ---------        ---------
                                                  (Dollars in Thousands)

Accruing loans delinquent
    more than 90 days....................            ---        $     ---
Non-accruing loans:
    Residential..........................          1,927            1,659
    Multi-family.........................            ---              ---
    Commercial...........................            112               47
    Consumer.............................            257               11
Troubled debt restructurings.............            ---              ---
                                                --------         --------
    Total non-performing loans...........          2,296            1,717
Real estate owned, net...................             24              183
                                                 -------          -------
    Total non-performing assets..........        $ 2,320          $ 1,900
                                                 =======          =======

Non-performing loans to
    total loans, net.....................          1.54%            1.18%
Non-performing assets to
    total assets.........................          1.32%            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.


                                      -11-

<PAGE>


<TABLE>
<CAPTION>

                                                             Three Months Ended December 31
                                                      1996                                      1995
                                     -----------------------------------        ----------------------------------
                                                                  (Dollars in thousands)

                                    Average                     Average         Average                   Average
                                    Balance       Interest        Rate          Balance      Interest        Rate
                                    -------       --------        ----          -------      --------        ----
<S>                                 <C>             <C>            <C>          <C>           <C>             <C>  
Total interest-
   earnings assets.............     $163,623        $3,430         8.39%        $164,942      $3,464          8.40%
Total interest-
   bearing liabilities.........      129,603         1,683         5.19%         129,004       1,720          5.33%

Net interest income/
Interest rate spread...........                      1,747         3.20%                       1,744          3.07%
                                                     =====                                     =====

</TABLE>


<TABLE>
<CAPTION>
                                                               Six Months Ended December 31
                                                      1996                                      1995
                                     -----------------------------------        ----------------------------------
                                                                 (Dollars in thousands)


                                    Average                      Average        Average                   Average
                                    Balance       Interest        Rate          Balance      Interest        Rate
                                    -------       --------        ----          -------      --------        ----
<S>                                 <C>             <C>            <C>          <C>           <C>             <C>  
Total interest-
   earning assets..............     $164,215        $6,862         8.36%        $164,034      $6,881          8.39%
Total interest-
   bearing liabilities.........      129,242         3,398         5.26%         128,374       3,433          5.35%

Net interest income/
Interest Rate Spread...........                      3,464         3.10%                       3,448          3.04%
</TABLE>



                                      -12-

<PAGE>



Financial Condition

Shareholders'  equity at  December  31,  1996 was  $39,970,684,  a  decrease  of
$1,540,390 or 3.7% from June 30, 1996.  The Company's  equity to asset ratio was
22.74% at December  31,  1996  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 December 31, 1996, 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....................................     $ 36,507                $ 36,507               $ 37,925
As a percent of assets, as defined........        21.2%                   21.2%                  33.6%
Required amount...........................        2,580                   5,160                  9,029
As a percent of assets, as defined........         1.5%                    3.0%                   8.0%
Capital in excess of
   required amount........................     $ 33,927                $ 31,347               $ 28,896
</TABLE>


Liquidity and Capital Resources

The standard measure of liquidity for savings  associations is the ratio of cash
and eligible  investments to a certain  percentage of net  withdrawable  savings
accounts  and  borrowings  due within one year.  The minimum  required  ratio is
currently set by the Office of Thrift Supervision  regulation at 5%, of which 1%
must be comprised of short-term  investments.  At December 31, 1996,  the Bank's
liquidity ratio was 10.8% of which 4.4% was comprised of short-term investments.



                                      -13-

<PAGE>



                            PART II OTHER INFORMATION

Item 1.  Legal Proceedings

Neither  the  Company  nor the Bank were  during the  three-month  period  ended
December 31, 1996, 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)  Exhibit 27 is the Financial Data Schedule

b)  The Company filed no reports on Form 8-K during the quarter ended 
    December 31, 1996.


                                                       -14-

<PAGE>


                                   Signatures


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

                                        MARION CAPITAL HOLDINGS, INC.



Date:  February 14, 1997                By:  /s/ John M. Dalton
                                             -----------------------------------
                                             John M. Dalton,
                                             President



Date:  February 14, 1997                By:  /s/ Larry G. Phillips
                                             -----------------------------------
                                             Larry G. Phillips, Vice President,
                                             Secretary and Treasurer











                                      -15-