U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB


(Mark One)

____X______       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                  EXCHANGE ACT OF 1934

                  For Quarterly Period Ended September 30, 1997.



__________        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                  EXCHANGE ACT

                  For the transition period from __________ to __________.


Commission File No. 0-3366

                             BRYAN STEAM CORPORATION
        (Exact name of small business issuer as specified in its charter)

                              NEW MEXICO 35-0202050
      (State or other jurisdiction of (I.R.S. Employer Identification No.)
                         incorporation or organization)

                               POST OFFICE BOX 27
                                 PERU, IN 46970
          (Address of principal executive offices, including area code)

                                 (765) 473-6651
                (Issuer's telephone number, including area code)


         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                Yes ____X______          No __________

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.

             COMMON STOCK                       191,284
           (Title of class)          (Number of shares outstanding
                                          November 11, 1997)


<PAGE>


                          PART. I FINANCIAL INFORMATION


Item 1.          Financial Statements


                             BRYAN STEAM CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENT


<TABLE>
<CAPTION>
                                                        Unaudited         Unaudited
                                                                 For the
                                                            Three Months Ended
                                                        9/30/9            9/30/96
                                                     (Current Year)   (Preceding Year)
                                                     ---------------------------------
<S>                                                    <C>               <C>       
Gross sales less
      discounts, returns
      and allowances                                   $7,283,485        $6,713,222
                                                       ----------        ----------
Cost and expenses --

Cost of goods sold                                     $4,753,514        $4,359,934
Selling, general and
      administrative expenses                           1,426,953         1,494,840
                                                       ----------        ----------
Total cost and expenses                                $6,180,467        $5,854,774
                                                       ----------        ----------
Operating income                                       $1,103,018        $  858,448
                                                       ----------        ----------
Other income and (expense)
      Interest income                                  $    9,380        $   16,578
      Freight income                                       44,077            24,880
      Interest expense                                     (1,606)          (37,613)
                                                       ----------        ----------
Total other income and (expense)                       $   51,851        $    3,845
                                                       ----------        ----------
Income (or loss) before
      taxes on income and
      extraordinary items                              $1,154,869        $  862,293

Provisions for taxes
      on income                                           483,293           316,334
                                                       ----------        ----------
Net income (or loss)                                   $  671,576        $  545,959
                                                       ==========        ==========
Earnings per share*                                    $     3.51        $     2.85
                                                       ==========        ==========
Dividends per share                                    $     2.00        $     1.50
                                                       ==========        ==========
</TABLE>



* Based on 191,284 shares of Common Stock issued and
      outstanding throughout the periods involved.


<PAGE>

                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                              Unaudited         Unaudited
                                                             September 30        30-Jun
                                                                1997               1997
                                                             -----------        -----------
ASSETS
<S>                                                          <C>                <C>        
CURRENT ASSETS
      Cash and cash equivalents                              $   616,983        $   368,879
      Investment securities                                    1,317,750          1,466,686
      Accounts receivable (net)                                5,071,527          4,814,745
      Due from employees                                          18,368                 --
      Prepaid expenses                                           381,804            282,644
      Prepaid income taxes                                            --             27,528
      Inventory                                                4,309,921          4,479,203
                                                             -----------        -----------
            TOTAL CURRENT ASSETS                             $11,716,353        $11,439,685
                                                             -----------        -----------

FIXED ASSETS
      Land, buildings, equipment                             $ 8,990,303        $ 8,976,634
      Accumulated depreciation                                 3,494,094          3,400,512
                                                             -----------        -----------
            TOTAL FIXED ASSETS                               $ 5,496,209        $ 5,576,122
                                                             -----------        -----------
OTHER ASSETS
      Noncompete agreement (net of amortization)             $   165,000        $   180,000
      Other amortizable assets (net of amortization)              20,453             21,791
      Deposits                                                     5,171              5,171
                                                             -----------        -----------
            TOTAL OTHER ASSETS                               $   190,624        $   206,962
                                                             -----------        -----------
TOTAL ASSETS                                                 $17,403,186        $17,222,769
                                                             ===========        ===========

LIABILITIES AND NET WORTH

CURRENT LIABILITIES
      Accounts payable - trade                               $   264,123        $   851,512
      Capital lease obligations                                   48,802              8,632
      Line of credit - Norwest Bank                               45,400             45,400
      Accrued commissions                                      1,033,830            807,617
      Accrued property taxes                                     281,737            254,251
      Accrued taxes & other expenses                             162,221            365,624
      Accrued federal income tax                                 365,416                 --
      Accrued state income tax                                    84,837              4,837
      Current portion of long-term debt                            1,855             24,300
      Deferred federal income tax                                 70,071             70,071
      Deferred state income tax                                   16,085             16,085
                                                             -----------        -----------
            TOTAL CURRENT LIABILITIES                        $ 2,374,377        $ 2,448,329
                                                             -----------        -----------
LONG-TERM LIABILITIES
      Capital lease obligations                              $    45,272        $    45,272
      Long-term debt                                               8,187             44,968
      Deferred federal income tax                                229,926            229,926
      Deferred state income tax                                   50,609             50,609
      Dividends payable                                           13,922             11,834
                                                             -----------        -----------
            TOTAL LONG-TERM LIABILITIES                      $   347,916        $   382,609
                                                             -----------        -----------
TOTAL LIABILITIES                                            $ 2,722,293        $ 2,830,938
                                                             -----------        -----------
NET WORTH
      Capital stock                                          $   810,272        $   810,272
      Treasury stock, at cost                                    (28,727)           (28,727)
      Retained earnings                                       13,899,348         13,610,286
                                                             -----------        -----------
            TOTAL NET WORTH                                  $14,680,893        $14,391,831
                                                             -----------        -----------
TOTAL LIABILITIES AND NET WORTH                              $17,403,186        $17,222,769
                                                             ===========        ===========
</TABLE>


<PAGE>

                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                CONSOLIDATED COMPARATIVE STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 Unaudited         Unaudited
                                                                July 01, 1997     July 01, 1996
                                                                     to                to
                                                                Sept. 30, 1997    Sept. 30, 1996
                                                                --------------    --------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                <C>              <C>      
      Net income                                                   $ 671,576        $ 545,959
      Non-cash items included in net income
            Amortization                                              16,338           15,887
            Depreciation                                              93,582          113,597
            Changes in:
                 Inventory                                           169,282          (54,943)
                 Accounts receivable                                (275,150)         111,977
                 Prepaid expenses                                    (99,160)         (28,026)
                 Prepaid income taxes                                     --           44,350
                 Accounts payable                                   (587,389)        (288,888)
                 Accrued liabilities                                  50,296          135,042
                 Federal income taxes payable                        392,944          225,295
                 State income taxes payable                           80,000           39,389
                                                                   ---------        ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                          $ 512,319        $ 859,639
                                                                   ---------        ---------
CASH FLOW FROM INVESTING ACTIVITIES
      Deposits with utilities                                      $      --        $   1,581
      Noncompetition payments                                             --               --               
      Purchases of plant and equipment                               (13,669)        (179,076)
      Redemptions of investment securities                           148,936          197,298
                                                                   ---------        ---------
NET CASH (USED) BY INVESTING ACTIVITIES                            $ 135,267        $  19,803
                                                                   ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES
      New short-term borrowings                                    $      --        $  17,000
      Payments on short-term debt                                         --           (1,636)
      Payments on long-term debt                                     (19,056)        (379,153)
      Dividends paid                                                (380,426)        (284,257)
                                                                   ---------        ---------
NET CASH (USED) BY FINANCING ACTIVITIES                            $(399,482)       $(648,046)
                                                                   ---------        ---------
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS                      $ 248,104        $ 231,396
                                                                   =========        =========

CASH & CASH EQUIVALENTS
      July 01,                                                     $ 368,879        $ 304,739
      September 30,                                                  616,983          536,135
                                                                   ---------        ---------
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS                      $ 248,104        $ 231,396
                                                                   =========        =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid during the period for:
            Interest (Net of amount capitalized)                   $   1,606        $  37,613

            Income taxes                                           $  10,349        $   7,300
</TABLE>


<PAGE>

Item 1.           FINANCIAL STATEMENTS (CONTINUED)

                  The unaudited  interim  consolidated  financial  statements to
                  which this  management's  discussion  and analysis is attached
                  reflect  all   adjustments   which  are,  in  the  opinion  of
                  management,  necessary to a fair  statement of the results for
                  the interim period  presented.  All such  adjustments are of a
                  normal, recurring nature.

                  The accompanying consolidated financial statements include the
                  accounts of Bryan Steam  Corporation  and of its  wholly-owned
                  subsidiary   (collectively,   the   "Company").   Intercompany
                  transactions    and   balances   have   been   eliminated   in
                  consolidation.

                  Pension  benefits  are based on taxable  earnings and years of
                  service.  The Company's policy is to fund at least the minimum
                  amounts required by Federal law and regulation.

                  The Company's  policy  regarding  investment  securities is to
                  classify  them  as  current  assets.  None  of the  investment
                  securities are considered to be  available-for-sale or trading
                  securities by the Company.  Gross unrealized holding gains and
                  losses on investment securities classified as held to maturity
                  at  September  30, 1997 are not  material to the  accompanying
                  consolidated   financial   statements  and  are  not  reported
                  therein.


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

                  Net income for the first  quarter of  $671,576  is up (23.01%)
                  from the net income of $545,959 for the corresponding  quarter
                  last  year.  The  increase  in net  income  results  from  the
                  $152,986 increase in the net income of Bryan Steam Corporation
                  ("Bryan").   Bryan's  increase  in  net  income  results  from
                  improved sales and decreases in interest and pension expense.

                  Sales for the quarter  increased 8.49% from the  corresponding
                  quarter  last  year,  and  cost  of  goods  sold  increased  a
                  corresponding  9.03%  from the same  quarter a year  ago.  The
                  $570,263  increase in sales for the quarter  resulted  despite
                  the  fact  that  Monticello   Exchange  &  Manufacturing   Co.
                  ("M.E.M.C.O.")  contributed  $20,874 less to the  consolidated
                  sales this quarter than during the corresponding  quarter last
                  year. Bryan and Wendland  Manufacturing  Company  ("Wendland")
                  contributed  $499,577  and  $91,560,  respectively,  more this
                  quarter  to  total   consolidated   sales   than   during  the
                  corresponding  quarter last year.  This increase  results from
                  Bryan having shipped more boilers  during the current  quarter
                  than during the same quarter a year ago. Selling,  general and
                  administrative expenses decreased 4.54% from the corresponding
                  quarter a year ago.  Bryan,  Wendland and  M.E.M.C.O.  reduced
                  selling,  general and administrative expenses $49,693 (4.02%),
                  $14,746  (9.24%) and $3,448  (3.53%),  respectively,  from the
                  corresponding quarter last year.




<PAGE>



The  Company's  working  capital ratio at September 30, 1997 of 4.93 to 1, is up
from 4.67 to 1 at year-end,  and is down  slightly from the 4.96 ratio of a year
ago.  Consolidated  cash and equivalents are up $248,104 (67.26%) from year-end,
and up $80,848 (15.08%) from the same quarter a year ago. Investment  securities
decreased  $148,936 (10.15%) from year-end,  and decreased $101,486 (7.15%) from
the same quarter a year ago.  Accounts  receivable are up $256,782  (5.33%) from
year-end,  and up (8.33%)  over the same  quarter a year ago, as a result of the
increased  sales.  The  Company's  inventory  decreased  $169,282  (3.78%)  from
year-end as the result of lower stocks of finished goods and  work-in-process on
hand and  increased  $52,968  (0.12%)  over the same  quarter a year ago, as the
Company  finished  more stock  boilers to be  available  for quick  shipment  to
customers.  Trade accounts payable decreased $587,389 (68.98%) to a historically
customary level from year-end.  Accrued commissions  increased $226,213 (28.01%)
from year-end as a result of an increase in sales,  and are up (25.14%) from the
same  quarter a year  ago,  as a result of having  shipped  more  units  through
manufacturers'  representatives,  who charge Bryan a commission.  Accrued income
taxes  increased  $445,416 from year-end as a result of greater net income,  and
are up $185,569  (70.11%) from the same quarter last year,  because of increased
tax  liabilities for the prior year and the increased tax due on the greater net
income of the current period.

Production  continues at near capacity.  Bryan's  backlog of orders at September
30, 1997, was  $5,010,909,  down (8.63%) from year-end,  and down (5.23%) from a
year ago.  The plant is  operating a first shift of 146  employees  and a second
shift of 32 employees.  Both shifts  operate on a 43 hour work week.  Wendland's
backlog at  September  30,  1997 was normal for this time of year.  The plant is
operating  with 27  employees  on a 40 hour work week.  M.E.M.C.O.'s  backlog at
September  30, 1997 was  $206,354.  M.E.M.C.O.  is currently  operating  with 10
employees on a 36 hour work week. 

The Company has $1,000,000  available on its $1,000,000 revolving line of credit
and $500,000 available on its $500,000 operating line of credit.

Planned capital expenditures this year of up to $450,000 (of which approximately
$73,000 has been utilized), primarily for manufacturing equipment, will continue
to be funded internally.


<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused
this  report to be  signed on its  behalf  by the  undersigned  there  unto duly
authorized.


                                       BRYAN STEAM CORPORATION



                                       By:   /s/ H. Jesse McVay
                                             --------------------------------
                                             H. Jesse McVay, President

                                       Date: November 13, 1997


                                       By:   /s/ Kurt Krauskopf
                                             --------------------------------
                                             Kurt Krauskopf, Secretary

                                       Date: November 13, 1997