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, 1996.



__________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)

                                 (317) 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 6, 1996)


                                        1


<PAGE>


                          PART. I FINANCIAL INFORMATION


Item 1.         Financial Statements


                             BRYAN STEAM CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENT


                                                Unaudited         Unaudited
                                                          For the
                                                      Three Months Ended
                                               9/30/96           9/30/95
                                              (Current         (Preceding
                                                Year)             Year)
                                               ----------      ----------
Gross sales less
      discounts, returns
      and allowances                           $6,713,222      $5,968,396

Cost and expenses --

Cost of goods sold                             $4,359,934      $3,895,832
Selling, general and
      administrative expenses                   1,494,840       1,367,286
                                               ----------      ----------
Total cost and expenses                        $5,854,774      $5,263,118
                                               ----------      ----------
Operating income                               $  858,448      $  705,278
                                               ----------      ----------
Other income and (expense)
      Interest income                          $   16,578      $        -
      Freight income                               24,880               -
      Interest expense                            (37,613)              -
                                               ----------      ----------
Total other income and (expense)               $    3,845      $        -
                                               ----------      ----------
Income (or loss) before
      taxes on income and
      extraordinary items                      $  862,293      $  705,278

Provisions for taxes
      on income                                   316,334         316,281
                                               ----------      ----------
Net income (or loss)                           $  545,959      $  388,997
                                               ==========      ==========
Earnings per share*                            $     2.85      $     2.03
                                               ==========      ==========
Dividends per share                            $     1.50      $     1.40
                                               ==========      ==========


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

                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                                Unaudited       Unaudited
                                                               September 30      June 30
                                                                  1996             1996
                                                              -----------      -----------
ASSETS

CURRENT ASSETS
<S>                                                           <C>              <C>        
      Cash and cash equivalents                               $   536,135      $   304,739
      Investment securities                                     1,419,256        1,616,554
      Accounts receivable (net)                                 4,681,686        4,793,663
      Prepaid expenses                                            363,209          335,183
      Prepaid income taxes                                         40,064           84,414
      Inventory                                                 4,256,953        4,202,010
                                                              -----------      -----------
           TOTAL CURRENT ASSETS                               $11,297,303      $11,336,563
                                                              -----------      -----------
FIXED ASSETS
      Land, buildings, equipment                              $ 7,677,733      $ 7,498,657
      Less:  Depreciation accumulated                           3,044,034        2,930,437
                                                              -----------      -----------
           TOTAL FIXED ASSETS                                 $ 4,633,699      $ 4,568,220
                                                              -----------      -----------
OTHER ASSETS
      Noncompete agreement (Net of amortization)              $   225,000      $   240,000
      Other amortizable assets (net of amortization)               27,172           28,058
      Deposits                                                      3,590            5,171
                                                              -----------      -----------
           TOTAL OTHER ASSETS                                 $   255,762      $   273,229
                                                              -----------      -----------
TOTAL ASSETS                                                  $16,186,764      $16,178,012
                                                              ===========      ===========

LIABILITIES AND NET WORTH

CURRENT LIABILITIES
      Accounts payable - trade                                $   264,191      $   553,079
      Loans payable                                               371,719          664,293
      Accrued commissions                                         826,170          621,882
      Accrued property taxes                                      260,128          224,006
      Accrued taxes & other expenses                              217,718          323,086
      Accrued federal income tax                                  225,295               --
      Accrued state income tax                                     39,389               --
      Deferred federal income tax                                  60,678           60,678
      Deferred state income tax                                    13,963           13,963
                                                              -----------      -----------
           TOTAL CURRENT LIABILITIES                          $ 2,279,251      $ 2,460,987
                                                              -----------      -----------
LONG-TERM LIABILITIES
      Loans payable                                           $   166,992      $   238,207
      Deferred federal income tax                                 308,816          308,816
      Deferred state income tax                                    70,845           70,845
      Dividends payable                                            12,685           10,016
                                                              -----------      -----------
           TOTAL LONG-TERM LIABILITIES                        $   559,338      $   627,884
                                                              -----------      -----------
TOTAL LIABILITIES                                             $ 2,838,589      $ 3,088,871
                                                              -----------      -----------
NET WORTH
      Capital stock                                           $   810,272      $   810,272
      Treasury stock, at cost                                     (28,727)         (28,727)
      Retained earnings                                        12,566,630       12,307,596
                                                              -----------      -----------
           TOTAL NET WORTH                                    $13,348,175      $13,089,141
                                                              -----------      -----------
TOTAL LIABILITIES AND NET WORTH                               $16,186,764      $16,178,012
                                                              ===========      ===========
</TABLE>



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

<TABLE>
<CAPTION>


                                                         Unaudited                Unaudited
                                                       July 01, 1996            July 01, 1995
                                                             to                      to
                                                      Sept. 30, 1996            Sept. 30, 1995
                                                      --------------            --------------
                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES                                         
<S>                                                      <C>                    <C>        
      Net income                                         $ 545,959              $   388,997
      Non-cash items included in net income                                  
           Amortization                                     15,887                    8,500
           Depreciation                                    113,597                  104,264
           Changes in:                                                       
                Inventory                                  (54,943)                 142,630
                Accounts receivable                        111,977               (2,110,620)
                Prepaid expenses                           (28,026)                  42,360
                Prepaid income taxes                        44,350                       --
                Accounts payable                          (288,888)                (110,344)
                Commissions payable                        204,288                  262,796
                Accrued county property taxes               36,122                   40,500
                Accrued taxes & other expenses            (105,368)                  41,862
                Federal income taxes payable               225,295                  131,707
                State income taxes payable                  39,389                   65,714
                                                         ---------              ----------- 
NET CASH PROVIDED BY OPERATING ACTIVITIES                $ 859,639              $  (991,634)
                                                         ---------              ----------- 
CASH FLOW FROM INVESTING ACTIVITIES                                          
      Deposits with utilities                            $   1,581              $        --
      Noncompetition payments                                   --                 (300,000)
      Purchases of plant and equipment                    (179,076)                (878,182)
      Redemptions of investment securities                 197,298                  421,722
                                                         ---------              ----------- 
NET CASH (USED) BY INVESTING ACTIVITIES                  $  19,803              $  (756,460)
                                                         ---------              ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES                                         
      New short-term borrowings                          $  17,000              $    50,000
      Payments on short-term debt                           (1,636)                      --
      Payments on long-term debt                          (379,153)                      --
      Dividends paid                                      (284,257)                (265,864)
                                                         ---------              ----------- 
NET CASH (USED) BY FINANCING ACTIVITIES                  $(648,046)             $  (215,864)
                                                         ---------              ----------- 
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS            $ 231,396              $(1,963,958)
                                                         =========              =========== 
                                                                             
CASH & CASH EQUIVALENTS                                                      
      July 01,                                           $ 304,739              $ 2,192,946
      September 30,                                        536,135                  228,988
                                                         ---------              ----------- 
NET INCREASE (DECREASE) IN CASH & EQUIVALENTS            $ 231,396              $(1,963,958)
                                                         =========              =========== 
                                                                             
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                           
      Cash paid during the period for:                                       
           Interest (Net of amount capitalized)          $  37,613              $    22,886
                                                                             
           Income taxes                                  $   7,300              $   119,582
</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 the Company  and of its  wholly-owned  subsidiary.
                  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, 1996 are not  material to the  accompanying
                  consolidated   financial   statements  and  are  not  reported
                  therein.



                                       (5)


<PAGE>

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

Net income for the first  quarter of $545,959 is up (40.35%) from the net income
of $388,997 for the corresponding  quarter last year. The increase in net income
results primarily from the $492,435 net income of Bryan. Bryan's increase in net
income results from improved sales and decreases in interest expense,  group and
workers'  compensation   insurance,   advertising,   catalogs  &  printing,  and
professional services.

Sales for the quarter increased 12.48% from the corresponding quarter last year,
and cost of goods sold increased a corresponding  11.91% from the same quarter a
year ago.  The  $744,826  increase  in sales for the  quarter  results  from two
causes. Wendland and M.E.M.Co. contributed $119,919 and $313,078,  respectively,
more this  quarter to total  consolidated  sales than  during the  corresponding
quarter last year.  Bryan's  sales for the quarter  increased  $311,829 over the
corresponding quarter last year. This increase results from Bryan having shipped
more large  boilers  during the current  quarter  than during the same quarter a
year ago. This increase in large boiler  shipments is a result of gaining market
share from a major  competitor  which is  experiencing  financial  difficulties.
Bryan was able to meet the demand for these  large  boilers by having  added the
second  shift  two  months  earlier  than is  customary.  Selling,  general  and
administrative  expenses  increased 9.33% from the corresponding  quarter a year
ago,   primarily   from  the  addition  of  $97,722  in  selling,   general  and
administrative expenses from M.E.M.Co.

The  Company's  working  capital ratio at September 30, 1996 of 4.96 to 1, is up
from  4.61 to 1 at  year-end,  and is the same as the 4.96  ratio of a year ago.
Consolidated cash and equivalents are up $231,396 (75.93%) from year-end, and up
$307,147  (134.13%)  from the same  quarter  a year ago.  Investment  securities
decreased  $197,298  (12.20%) from year- end, and decreased $87,426 (5.80%) from
the same quarter a year ago.  Accounts  receivable are down $11,977 (2.34%) from
year-end,  and down  (8.44%)  over the same  quarter a year ago,  as a result of
having  shipped more units directly to  manufacturers'  reps, who typically take
advantage of cash discount  terms.  The Company's  inventory  increased  $54,943
(1.31%) from  year-end and  increased  $218,070  (5.40%) 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  $288,888 (52.23%) to a
historically  customary level from year-end, and increased $54,463 (25.97%) from
the same quarter last year as a result of greater  material  purchases.  Accrued
commissions  increased  $204,288  (32.85%)  from  year-  end as a  result  of an
increase in sales,  and are down (13.73%) from the same quarter a year ago, as a
result  of  having  shipped  more  units  directly  to  certain   manufacturers'
representatives  to whom Bryan does not pay a commission.  Accrued  income taxes
increased $264,684 from year-end as a result of greater net income, and are down
$87,920  (24.93%)  from the same  quarter last year,  because of  increased  tax
deposits prior to year-end.



                                       (6)




<PAGE>

Production  continues at near capacity.  Bryan's  backlog of orders at September
30, 1996, was $5,287,224, up (14.94%) from year-end, and up (12.18%) from a year
ago. The plant is operating a first shift of 114 employees and a second shift of
35 employees.  Both shifts operate on a 56 hour work week. Wendland's backlog at
September 30, 1996 was normal for this time of year. The plant is operating with
24 employees on a 40 hour work week.  M.E.M.Co.'s backlog at September 30, 1996
was $566,948.  M.E.M.Co. is currently operating with 1 1 employees on a 51 hour
work week.

The Company has $539,696  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 $850,000 (of which approximately
$155,000  has  been  utilized),  primarily  for  manufacturing  equipment,  will
continue to be funded internally.



                           PART II. OTHER INFORMATION



Item 6. EXHIBITS AND REPORTS ON FORM 8-K

         A.  Exhibits 
                 Exhibit 27 - Financial Data Schedule

         B.  Form 8-K - None to be reported.



                                       (7)
<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:      _____________________________
                                                   H. Jesse McVay, President

                                          Date:    _____________________________


                                          By:      _____________________________
                                                   Kurt Krauskopf, Secretary

                                          Date:    _____________________________


                                       (8)