U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 March 31, 1997.


                                       OR


                  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 zip 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
                                                   May 5, 1997)



                                       -1-

<PAGE>
                          PART I. FINANCIAL INFORMATION

Item 1.         Financial Statements

                             BRYAN STEAM CORPORATION
                     CONDENSED CONSOLIDATED INCOME STATEMENT

<TABLE>
<CAPTION>
                                     Unaudited        Unaudited        Unaudited       Unaudited
                                              For the                           For the
                                         Nine months Ended:               Fiscal Quarter Ended
                                     31-Mar-97        31-Mar-96        31-Mar-97       31-Mar-96
                                     (Current        (Preceding         (Current      (Preceding
                                       Year)            Year)             Year)          Year)
                                       --               -----             -----          -----
<S>                                 <C>             <C>             <C>             <C>         
Gross sales less
   discounts, returns
   and allowances                   $ 19,403,679    $ 16,920,316    $  5,492,926    $  4,749,693
                                    ------------    ------------    ------------    ------------

Cost and expenses --

Cost of goods sold                  $ 12,745,873    $ 11,067,879    $  3,713,942    $  3,149,728
Selling, general and
   administrative expenses             4,949,672       4,403,611       1,727,148       1,494,434
                                       ---------       ---------       ---------       ---------

Total cost and expenses             $ 17,695,545    $ 15,471,490    $  5,441,090    $  4,644,162
                                    ------------    ------------    ------------    ------------

Operating income                    $  1,708,134    $  1,448,826    $     51,836    $    105,531
                                    ------------    ------------    ------------    ------------

Other income and (expense)
   Interest income                  $     68,498              $-    $     29,890    $         --
   Freight income                         64,143              --          16,620              --
   Interest expense                      (71,463)        (66,520)        (20,274)        (16,164)
                                         -------         -------         -------         ------- 
Total other income and (expenses)   $     61,178    $    (66,520)   $     26,236    $    (16,164)
                                    ------------    ------------    ------------    ------------ 

Income (or loss) before
   taxes on income and
   extraordinary items              $  1,769,312    $  1,382,306    $     78,072    $     89,367

Provisions for taxes
   on income                             672,210         558,049          11,352           3,367
                                         -------         -------          ------           -----

Net income (or loss)                $  1,097,102    $    824,257    $     66,720    $     86,000
                                    ============    ============    ============    ============


Earnings per share*                 $       5.74    $       4.31    $        0.3    $       0.45
                                    ============    ============    ============    ============

Dividends per share                 $       1.50    $       1.40    $        1.5    $       1.40
                                    ============    ============    ============    ============
</TABLE>






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



                                      (2)
<PAGE>
                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                             Unaudited       Unaudited
ASSETS                                                       March 31,        June 30,
                                                               1997             1996
                                                               ----             ----
CURRENT ASSETS
<S>                                                       <C>             <C>         
         Cash and cash equivalents                        $    568,558    $    304,739
         Investment securities                               1,423,104       1,616,554
         Accounts receivable (net)                           3,995,436       4,793,663
         Prepaid expenses                                      520,158         335,183
         Inventory                                           3,764,101       4,202,010
         Prepaid federal income tax                              5,640          84,414
         Prepaid state income tax                               11,939              --
                                                                ------                
            TOTAL CURRENT ASSETS                          $ 10,288,936    $ 11,336,563
                                                          ------------    ------------

FIXED ASSETS
         Land, buildings, equipment                       $  8,773,993    $  7,498,657
         Less:  Depreciation accumulated                     3,276,566       2,930,437
                                                             ---------       ---------
            TOTAL FIXED ASSETS                            $  5,497,427    $  4,568,220
                                                          ------------    ------------

OTHER ASSETS
         Noncompete agreement (Net of amortization)       $    195,099    $    240,000
         Other amortizable assets (Net of amortization)         28,301          28,058
         Deposits                                                5,171           5,171
                                                                 -----           -----
            TOTAL OTHER ASSETS                            $    228,571    $    273,229
                                                          ------------    ------------
TOTAL ASSETS                                              $ 16,014,934    $ 16,178,012
                                                          ============    ============

LIABILITIES AND NET WORTH

CURRENT LIABILITIES
         Accounts payable - trade                         $    323,274    $    553,079
         Loans payable                                          99,879         664,293
         Accrued commissions                                   653,306         621,882
         Accrued property taxes                                314,171         224,006
         Accrued taxes & other expenses                        228,424         323,086
         Deferred federal income tax                            60,678          60,678
         Deferred state income tax                              13,963          13,963
                                                                ------          ------
            TOTAL CURRENT LIABILITIES                     $  1,693,695    $  2,460,987
                                                          ------------    ------------
LONG-TERM LIABILITIES
         Loans payable                                    $     29,576    $    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                   $    421,922    $    627,884
                                                          ------------    ------------
TOTAL LIABILITIES                                         $  2,115,617    $  3,088,871
                                                          ------------    ------------

NET WORTH
         Capital stock                                    $    810,272    $    810,272
         Treasury stock, at cost                               (28,727)        (28,727)
         Retained earnings                                  13,117,772      12,307,596
                                                            ----------      ----------
            TOTAL NET WORTH                               $ 13,899,317    $ 13,089,141
                                                          ------------    ------------
TOTAL LIABILITIES AND NET WORTH                           $ 16,014,934    $ 16,178,012
                                                          ============    ============
</TABLE>
                                      (3)
<PAGE>
                             BRYAN STEAM CORPORATION
                                  PERU, INDIANA
                COMPARATIVE CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              Unaudited      Unaudited
                                                            July 1, 1996    July 1, 1995
                                                                 to             to
                                                           Mar. 31, 1997   Mar. 31, 1996
                                                           -------------   -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                         <C>            <C>        
         Net income                                         $ 1,097,102    $   824,257
         Non-cash items included in net income
            Amortization                                         44,658         16,492
            Depreciation                                        346,129        329,352
            Changes in:
                Inventory                                       437,909        236,724
                Accounts receivable                             798,227       (188,988)
                Prepaid expenses                               (184,975)       (68,957)
                Prepaid federal income tax                       78,774             --
                Prepaid state income tax                        (11,939)            --
                Accounts payable                               (229,805)      (222,263)
                Commissions payable                              31,424       (201,313)
                Accrued county property tax                      90,165         46,567
                Accrued taxes & expenses                        (94,662)        (6,934)
                Federal income tax payable                           --        (39,694)
                State income tax payable                             --        (27,489)
                                                            -----------    ----------- 

NET CASH PROVIDED BY OPERATING ACTIVITIES                   $ 2,403,007    $   697,754
                                                            -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES
         Noncompete payments                                $         -    $  (300,000)
         Redemptions (purchases) of investment securities       193,450        302,889
         Purchases of plant and equipment                    (1,275,336)    (1,294,639)
                                                             ----------     ---------- 

NET CASH (USED) BY INVESTING ACTIVITIES                     $(1,081,886)   $(1,291,750)
                                                            -----------    ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES
         Payments on long-term debt                         $  (773,045)   $  (342,203)
         Dividends paid                                     $  (284,257)   $  (242,117)
                                                            -----------    ----------- 

NET CASH (USED) BY FINANCING ACTIVITIES                     $(1,057,302)   $  (584,320)
                                                            -----------    ----------- 

NET INCREASE (DECREASE) IN CASH                             $   263,819    $(1,178,316)
                                                            ===========    =========== 

CASH & CASH EQUIVALENTS
         July 1                                             $   304,739    $ 2,192,946
         March 31                                           $   568,558    $ 1,014,630
                                                            -----------    -----------

NET INCREASE (DECREASE) IN CASH                             $   263,819    $(1,178,316)
                                                            ===========    =========== 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
         Cash paid during the period for:
            Interest (Net of amount capitalized)            $    71,463    $    66,520
            Income taxes                                    $   498,451    $   389,036
</TABLE>




                                      (4)
<PAGE>
Item 1.           CONSOLIDATED 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  subsidiaries.
                  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  March  31,  1997  are  not  material  to the  accompanying
                  consolidated   financial   statements  and  are  not  reported
                  therein.


                                       (5)

<PAGE>

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

                  Consolidated  net income  for the third  quarter of $66,720 is
                  down   (22.42%)  from  the  net  income  of  $86,000  for  the
                  corresponding  quarter last year. The decrease in consolidated
                  net income results  primarily from the $85,281 decrease in net
                  income  of  Bryan  Steam  Corporation  (the  Parent)  for  the
                  quarter, as compared to the corresponding quarter of the prior
                  fiscal  year.  The  Parent's  decrease  in net income  results
                  primarily  from an expected  increase in selling,  general and
                  administrative expenses.

                  Consolidated  sales for the quarter  increased 15.65% from the
                  corresponding quarter last year, and increased 14.68% over the
                  same  year to date  period  last  year.  Cost  of  goods  sold
                  increased a corresponding  17.91% from the same quarter a year
                  ago, and increased 15.16% over last year for the year to date.
                  The $743,233  increase in  consolidated  sales for the quarter
                  results   from   two   causes.    Monticello   Exchanger   and
                  Manufacturing Company, an indirect subsidiary, formed in March
                  of 1996,  contributed $495,912 to total consolidated sales for
                  the quarter,  and the Parent's sales for the quarter increased
                  $393,403  over  the  corresponding  quarter  last  year.  This
                  increase  results  from the Parent  having  shipped more large
                  boilers  during the current  quarter than during both the same
                  quarter a year ago, and the same nine-month  period last year.
                  Consolidated  selling,  general  and  administrative  expenses
                  increased  12.40% from the  corresponding  quarter a year ago,
                  and 15.57% for the year to date,  primarily  from the addition
                  of  the  Subsidiary's  selling,   general  and  administrative
                  expenses.

                  The  consolidated  working  capital ratio at March 31, 1997 of
                  6.07 to 1, is up from 4.61 to 1 at year-end, and down from the
                  8.71  to  1  ratio  of  a  year  ago.  Consolidated  cash  and
                  equivalents are up $263,819  (86.57%) from year-end,  and down
                  $446,072   (43.96%)   from  the  same   quarter  a  year  ago.
                  Consolidated investment securities decreased $193,450 (11.97%)
                  from year-end,  and decreased  $202,411 (12.45%) from the same
                  quarter a year ago. Accounts receivable are down (16.65%) from
                  year-end, and up (25.18%) from the same quarter a year ago, as
                  a result of having shipped more large boiler units than during
                  the same period last year.

                                       (6)
<PAGE>

          Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
                  CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS (CONTINUED)


                  Inventory  dropped  $437,909  (10.42%)  from  year-end as more
                  work-in-progress was brought to finished,  saleable condition,
                  and decreased slightly (4.58%) from a year ago.

                  Consolidated   trade  accounts  payable   decreased   $229,805
                  (41.55%) to a historically  customary level from year-end, but
                  increased  $225,465  from a year ago, as a result of increased
                  materials   purchases.    Consolidated   accrued   commissions
                  decreased  (5.05%)  from  year-end  as a  result  of  expected
                  collections of accounts receivable.

                  Production  continues  at  near  capacity.   The  consolidated
                  backlog  of orders  at March  31,  1997,  was  $5,356,414,  up
                  (5.38%) from year-end.  The plants are operating  first shifts
                  totaling  147  production  employees  on a 40 hour work  week.
                  Twenty-two workers are on layoff. . 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 $1,250,000 (of
                  which approximately  $1,100,000 has been utilized),  primarily
                  for a building  addition at the Parent's plant,  will continue
                  to be funded internally.



                                       (7)
<PAGE>

                           PART II. OTHER INFORMATION


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


                  (a)  The following exhibit is filed as a part of this report:

                              (27)      Financial  Data  Schedule  (nine  months
                                        ended March 31, 1997)

                  (b) No reports on Form 8-K were filed during the quarter ended
                  March 31, 1997.



                                   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 thereunto duly authorized.



                                     BRYAN STEAM CORPORATION


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

                                     Date: May 20, 1997
                                           ---------------------------


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

                                     Date: May 20, 1997
                                           --------------------------



                                       (8)