UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q


                                Quarterly Report
     Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the quarter ended March 31, 1997             Commission File Number 0-13030
                      --------------                                    -------



                              TRANS FINANCIAL, INC.
             (Exact name of registrant as specified in its charter)



        Kentucky                                                  61-1048868
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)


500 East Main Street, Bowling Green, Kentucky                         42101
     (Address of principal executive offices)                      (Zip Code)


Registrant's telephone number, including area code: (502) 781-5000


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  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No _


The number of shares outstanding of the issuer's class of common stock 
on May 14, 1997: 11,430,801 shares.




<PAGE>


                         Part I - Financial Information




Item 1. Financial Statements
<TABLE>

 Consolidated Balance Sheets
 (Unaudited)
 In thousands, except share data 
                                                                   
<CAPTION>
                                                                   March 31    December 31      March 31
                                                                      1997          1996            1996
 Assets
<S>                                                             <C>            <C>            <C>        
 Cash and due from banks ....................................   $    60,746    $    75,054    $    61,128
 Interest-bearing deposits with banks .......................            98             98             98
 Mortgage loans held for sale ...............................        70,215         67,999         59,225
 Securities available for sale (amortized
    cost of $256,732 as of  March 31, 1997;
    $285,264 as of December 31, 1996;
    and $294,380 as of  March 31, 1996) .....................       254,718        285,155        292,762
 Loans, net of unearned income ..............................     1,448,765      1,450,999      1,295,338
 Less allowance for loan losses .............................        19,010         18,065         16,051
                                                                -----------    -----------    -----------
    Net loans ...............................................     1,429,755      1,432,934      1,279,287
 Premises and equipment, net ................................        37,670         37,377         42,685
 Mortgage servicing rights ..................................        43,466         41,866         41,004
 Other assets ...............................................        41,274         63,469         39,876
                                                                ===========    ===========    ===========
    Total assets ............................................   $ 1,937,942    $ 2,003,952    $ 1,816,065
                                                                ===========    ===========    ===========

 Liabilities and Shareholders' Equity
Liabilities:
 Deposits:
    Non-interest bearing ....................................   $   205,414    $   231,717    $   201,080
    Interest bearing ........................................     1,311,540      1,347,500      1,231,095
                                                                -----------    -----------    -----------
    Total deposits ..........................................     1,516,954      1,579,217      1,432,175
 Federal funds purchased and
    repurchase agreements ...................................        58,317         71,879         44,542
 Other short-term borrowings ................................        55,000         55,000         70,003
 Long-term debt .............................................       140,796        140,903        116,379
 Other liabilities ..........................................        32,517         25,637         21,472
                                                                -----------    -----------    -----------
    Total liabilities .......................................     1,803,584      1,872,636      1,684,571
 Shareholders' equity:
    Common stock, no par value. Authorized
       50,000,000 shares; issued and
       outstanding 11,318,770; 11,293,291;
       and 11,284,604 shares, respectively ..................        21,408         21,324         21,197
    Additional paid-in capital ..............................        45,294         44,745         43,990
    Retained earnings .......................................        71,401         67,790         70,081
    Unrealized net loss on
       securities available for sale,
       net of tax ...........................................        (1,395)           (92)          (936)
    Employee Stock Ownership Plan shares
       purchased with debt ..................................        (2,350)        (2,451)        (2,838)
                                                                -----------    -----------    -----------
    Total shareholders' equity ..............................       134,358        131,316        131,494
                                                                -----------    -----------    -----------
    Total liabilities
      and shareholders' equity ..............................   $ 1,937,942    $ 2,003,952    $ 1,816,065
                                                                ===========    ===========    ===========

 See accompanying notes to consolidated financial statements 
</TABLE>



<PAGE>



 Consolidated Statements of Income
 (Unaudited)
 In thousands, except per share data
 For the three months ended March 31  
                                                              1997         1996

 Interest income
  Loans, including fees ....................................   $33,608   $30,001
  Federal funds sold and resale
    agreements .............................................      --           2
  Securities available for sale ............................     3,820     4,041
  Mortgage loans held for sale .............................     1,229       781
  Interest-bearing deposits with banks .....................         2         4
                                                               -------   -------
  Total interest income ....................................    38,659    34,829
Interest expense
  Deposits .................................................    15,505    14,343
  Federal funds purchased
    and repurchase agreements ..............................       591       592
  Long-term debt and other
    borrowings .............................................     3,263     2,350
                                                               -------   -------
  Total interest expense ...................................    19,359    17,285
                                                               -------   -------
Net interest income ........................................    19,300    17,544
  Provision for loan losses ................................     1,950     1,221
                                                               -------   -------
Net interest income after
  provision for loan losses ................................    17,350    16,323
Non-interest income
  Service charges on deposit accounts ......................     2,495     2,236
  Mortgage banking income ..................................     2,757     2,653
  Gains (losses) on sales of securities
    available for sale, net ................................       221        15
  Trust services ...........................................       561       461
  Brokerage income .........................................       710       661
  Other ....................................................     1,175     1,209
                                                               -------   -------
  Total non-interest income ................................     7,919     7,235
Non-interest expenses
  Compensation and benefits ................................     8,608     9,233
  Net occupancy expense ....................................     1,150     1,204
  Furniture and equipment expense ..........................     1,566     1,667
  Deposit insurance ........................................       103       244
  Professional fees ........................................       666       696
  Postage, printing & supplies .............................       980       977
  Processing fees ..........................................       495       389

  Communications ...........................................       658       569
  Other ....................................................     2,813     3,140
                                                               -------   -------
  Total non-interest expenses ..............................    17,039    18,119
                                                               -------   -------
Income before income taxes .................................     8,230     5,439
Income tax expense .........................................     2,682     1,703
                                                               =======   =======
Net income .................................................   $ 5,548   $ 3,736
                                                               =======   =======
Primary earnings per share .................................   $  0.48   $  0.33
Fully-diluted earnings per share ...........................   $  0.48   $  0.33
                                                               =======   =======

See accompanying notes to consolidated financial statements 




<PAGE>



 Consolidated Statements of Changes in Shareholders' Equity
 (Unaudited)
 In thousands
 For the three months ended March 31            1997        1996

Balance January 1 .......................   $ 131,316    $ 129,767
  Net income ............................       5,548        3,736
  Issuance of common stock ..............         633          140
  Cash dividends declared on common stock      (1,937)      (1,807)
  Change in net  unrealized loss on
    securities available for sale,
    net of taxes ........................      (1,303)        (533)
  ESOP debt reduction ...................         101          191
                                             =========    =========
Balance March 31 ........................   $ 134,358    $ 131,494
                                             =========    =========

 See accompanying notes to consolidated financial statements.



<PAGE>

<TABLE>


 Consolidated Statements of Cash Flows
 (Unaudited)
 In thousands
 For the three months ended March 31 
 <CAPTION>
                                                                         1997        1996

 Cash flows from operating activities:
<S>                                                                  <C>          <C>     
Net income/(loss) ................................................   $   5,548    $  3,736
Adjustments to reconcile net income to cash
  provided by operating activities:
    Provision for loan losses ....................................       1,950       1,221
    Deferred tax expense .........................................        (472)       (281)
    Gain on sale of securities available for sale ................        (221)        (15)
    Gain on sale of mortgage loans held for sale .................        (980)     (1,888)
    Gain on sale of premises and equipment .......................          (6)       --
    Depreciation and amortization of fixed assets ................       1,215       1,516
    Amortization of intangible assets ............................         323         343
    Amortization of premium on securities
      and loans, net .............................................         199         300
    Amortization of mortgage servicing rights ....................       1,460       1,012
Decrease in accrued interest receivable ..........................       1,984         615
Decrease  in other assets ........................................      20,345      15,301
Increase (decrease)  in accrued interest payable .................       1,585        (410)
Increase (decrease) in other liabilities .........................       5,897        (598)
Sale of mortgage loans held for sale .............................     187,861      64,594
Originations of mortgage loans held for sale .....................    (189,097)    (60,519)
                                                                     ---------    --------
  Net cash provided by operating activities ......................      37,591      24,927

Cash flows from investing activities:
Net decrease in interest-bearing deposits
  with banks .....................................................        --            99
Proceeds from sale of securities available for sale ..............       2,154          16
Proceeds from prepayment and call of securities available for sale       2,295      24,314
Proceeds from maturities of securities available for sale ........      24,335       8,015
Purchase of securities available for sale ........................        (231)    (28,128)
Net decrease (increase)  in loans ................................         838     (53,315)
Purchase and origination of mortgage servicing rights ............      (3,060)     (5,013)
Proceeds from sale of foreclosed assets ..........................         407       1,326
Purchases of premises and equipment ..............................      (1,713)     (2,794)
Proceeds from disposal of premises and equipment .................         211          51
                                                                     ---------    --------
  Net cash  provided in /(used in) investing activities ..........      25,236     (55,429)

Cash flows from financing activities:
Net decrease in deposits .........................................     (62,263)    (12,308)
Net decrease in federal funds purchased
  and repurchase agreements ......................................     (13,562)    (31,052)
Net increase in other short-term borrowings ......................        --        24,989
Proceeds from issuance of long-term debt .........................        --        30,000
Repayment of long-term debt ......................................          (6)        (35)
Proceeds from issuance of common stock ...........................         633         140
Dividends paid ...................................................      (1,937)     (1,807)
                                                                     ---------    --------
Net cash  provided in /(used in) financing activities ............     (77,135)      9,927
                                                                     ---------    --------
Net decrease in cash and cash equivalents ........................     (14,308)    (20,575)
Cash and cash equivalents at beginning of year ...................      75,054      81,703
                                                                     ---------    --------
Cash and cash equivalents at end of period .......................   $  60,746    $ 61,128
                                                                     =========    ========

 See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>



 Notes to Consolidated Financial Statements

 (1) Summary of Significant Accounting Policies
     The  accounting  and reporting  policies of Trans  Financial,  Inc. and its
subsidiaries (the "company") conform to generally accepted accounting principles
and general  practices within the banking industry.  The consolidated  financial
statements  include the accounts of Trans  Financial,  Inc. and its wholly-owned
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated in  consolidation.  A  description  of other  significant  accounting
policies is presented in the 1996 annual report on Form 10-K.
     In the opinion of management,  all  adjustments  (consisting of only normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
reflected in the accompanying unaudited financial statements. Results of interim
periods are not  necessarily  indicative  of results to be expected for the full
year.

(2) Allowance for Loan Losses
     An analysis of the changes in the allowance for loan losses follows:

 In thousands
 For the three months ended March 31              1997       1996

Balance beginning of period ................   $ 18,065    $ 15,779
  Provision for loan losses ................      1,950       1,221

  Loans charged off ........................     (1,132)     (1,121)
  Recoveries of loans previously charged off        127         172
                                               --------    --------
  Net charge-offs ..........................     (1,005)       (949)
                                               --------    --------

Balance March 31 ...........................   $ 19,010    $ 16,051
                                               ========    ========

(3) Impaired Loans
     The  company's  recorded   investment  in  loans  considered   impaired  in
accordance with Statement of Financial  Accounting Standards No. 114, Accounting
by Creditors for Impairment of a Loan ("SFAS 114"),  was $4,258,000 at March 31,
1997.  Of that amount,  $1,715,000  represents  loans for which an allowance for
loan losses, in the amount of $590,000, has been established under SFAS 114. The
average recorded investment of impaired loans was $4,436,000 and $12,599,000 for
the three months ended March 31, 1997 and 1996,  respectively.  Interest  income
recognized on impaired  loans  totaled  $22,000 for the three months ended March
31, 1997, and $14,000 for the first quarter of 1996.

 (4) New Accounting Standard
     During the first quarter of 1997, the Financial  Accounting Standards Board
issued Statement of Financial  Accounting  Standards No. 128, Earnings per Share
("SFAS  128"),   which   establishes  new  standards  for  the  calculation  and
presentation  of earnings  per share ("EPS") in  financial statements. SFAS 128,
which will become  effective in the fourth quarter of 1997 and cannot be adopted
earlier, replaces primary EPS with basic EPS, and fully-diluted EPS with diluted
EPS. Basic EPS for the company will be slightly  higher than primary EPS because
common stock  equivalents  will not be considered in basic EPS;  diluted EPS for
the company will be essentially the same as  fully-diluted  EPS. When adopted in
the fourth quarter of 1997, all prior periods will be restated to conform to the
SFAS 128 presentation.
     Under SFAS 128,  basic  earnings  per share would have been $0.49 and $0.33
for the quarters ended March 31, 1997 and 1996,  respectively.  Diluted earnings
per share would have been $0.48 and $0.33, respectively, for those same periods.


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

General
         Trans  Financial,  Inc. ("the  company") is a bank and savings and loan
holding  company  registered  under the Bank Holding Company Act of 1956 and the
Home  Owners'  Loan  Act,  which  has two  commercial  bank  subsidiaries--Trans
Financial  Bank,  National  Association  ("TFB-KY")  and  Trans  Financial  Bank
Tennessee,  National  Association --and one thrift  subsidiary--Trans  Financial
Bank,  F.S.B.  In addition,  the company  operates as  subsidiaries  of TFB-KY a
full-service securities broker/dealer--Trans Financial Investment Services, Inc.
("TFIS")--and  a mortgage  banking  company--Trans  Financial  Mortgage  Company
("TFMC"). Collectively, the thrift and the two bank subsidiaries are referred to
in this report as "the banks."

Results of Operations
Overview
     For the three months ended March 31, 1997, the company  recorded net income
of $5.5  million,  or $0.48 per  common  share,  compared  to net income of $3.7
million,  or $.33 per common share,  in the same period of 1996. This represents
an increase of 49% over first quarter  1996.  Results for the first three months
of 1997 produced an annualized return on average assets of 1.16% and a return on
average  common equity of 16.75%,  compared  with  returns of 0.85% and  11.49%,
respectively, for the comparable period of 1996.


Net Interest Income
     Net interest income on a tax-equivalent  basis totaled $19.7 million in the
first three months of 1997,  compared with $18.0 million in the comparable  1996
period - a 9.0% increase.  For the first three  months of 1997, the net interest
margin (net interest income as a percentage of average  interest-earning assets)
on a  tax-equivalent  basis  decreased  5 basis  points,  from  4.49% to  4.44%,
compared to the same period for 1996. The net interest margin decreased 11 basis
points in the first  quarter of 1997 as compared to the quarter  ended  December
31, 1996, due to a seasonal decline in non-interest  bearing  deposits.  Most of
this decline resulted from year-end  payouts of escrow deposits  associated
with mortgage loans serviced by Trans Financial Mortgage Company.
     Approximately  $628 million of the company's  commercial and consumer loans
are tied to the prime rate.  The prime rate increased to 8.25% in February 1996,
and remained constant through the remainder of 1996 and through most of the
first quarter of 1997. During this time, the company's funding costs continued
to rise, as the company placed greater reliance on wholesale funding sources, 
such as brokered deposits and other borrowed funds. As a result, the company's
net interest-rate spread (the difference between the gross yield on interest-
earning assets and the rate paid on interest-bearing  liabilities) decreased,
negatively impacting the net interest margin. This negative impact was partially
offset during 1996 by increased interest income due to loan growth.  As loan
growth slowed during the first quarter of 1997,  the net interest-rate spread 
dropped ten basis points as compared to the first quarter of 1996, and the net
interest margin fell five basis points when comparing the first quarter of 1997
to the same period in 1996. The prime rate increased twenty-five basis points to
8.50% near the end of the first quarter  of 1997, which is expected to have a 
slight positive impact on net interest income in the second quarter of 1997.
     The following tables show, for the three-month periods ended March 31, 1997
and 1996, the relationship between interest income and expense and the levels of
average  interest-earning assets and average interest-bearing  liabilities.  The
tables  also   reflect  the  general   increase  in  interest   rates  on  total
interest-bearing liabilities over the past year, and increased volumes of loans,
certificates of deposit, and borrowed funds.


<PAGE>


<TABLE>

 Average Consolidated Balance Sheets and Net Interest Analysis

 For the Three Months Ended March 31
 Dollars in thousands
<CAPTION>

                                                       1997                                      1996
                                       Average                      Average        Average                   Average
                                       Balance       Interest         Rate         Balance       Interest      Rate
 Assets:
 Interest-earning assets:
<S>                                   <C>          <C>              <C>         <C>          <C>              <C>  
  Loans, net of unearned income ....  $1,453,965   $   33,689 *     9.40%       $1,269,829   $   30,115*      9.54%
                                                                                                                                   
  Securities .......................     271,685        4,100 *     6.12%          293,206        4,347*      5.96%
  Mortgage loans held for sale .....      68,545        1,229       7.27%           46,200          781       6.80%
  Federal funds sold
    and other interest income ......          98            2       8.28%              283            6       8.53%
                                      ----------    -----------                 ----------    -----------
Total interest-earning assets /
  interest income ..................   1,794,293       39,020       8.82%        1,609,518       35,249       8.81%
                                                    -----------                               -----------
Non-interest-earning assets:
  Cash and due from banks ..........      49,593                                    66,046
  Premises and equipment ...........      37,608                                    42,169
  Other assets .....................      66,433                                    56,373
                                     =============                              =============
Total assets .......................  $1,947,927                                $1,774,106                    
                                     =============                              =============
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
  Interest-bearing deposits:
    Interest-bearing demand (NOW) ..  $   33,883   $      255       3.05%        $ 246,292   $  1,713         2.80%
    Savings deposits ...............     104,144          687       2.68%          120,550        791         2.64%
    Money market accounts ..........     270,391        2,140       3.21%           40,853        315         3.10%
    Certificates of deposit ........     833,443       11,293       5.50%          737,470     10,299         5.62%
    Other time deposits ............      83,404        1,130       5.49%           87,349      1,225         5.64%
                                       ---------   -------------                -----------   ---------
    Total interest-bearing deposits    1,325,265       15,505       4.74%        1,232,514     14,343         4.68%
Federal funds purchased
  and repurchase agreements ........      47,932          591       5.00%           49,886        592         4.77%
Long-term debt and
  and other borrowings .............     213,728        3,263       6.19%          153,004      2,350         6.18%
                                        --------  -------------                 -----------  ----------
  Total borrowed funds .............     261,660        3,854       5.97%          202,890      2,942         5.83%
                                        --------  ------------                  -----------  ----------
Total interest-bearing liabilities /
  interest expense .................   1,586,925       19,359       4.95%        1,435,404     17,285         4.84%
                                                  ------------                               -----------
Non-interest-bearing liabilities:
  Non-interest-bearing deposits ....     201,759                                  190,993
  Other liabilities ................      24,921                                   16,902
                                      -----------                               -----------
  Total liabilities ................   1,813,605                                 1,643,299
Shareholders' equity ...............     134,322                                   130,807
                                      -----------                               -----------
Total liabilities
  and shareholders' equity .........  $1,947,927                                $1,774,106
                                     =============                              ===========
Net interest-rate spread ...........                                3.87%                                     3.97%
Impact of non-interest bearing
  sources and other changes in
  balance sheet composition ........                                0.57%                                     0.52%
                                                                  ---------                                 ---------
Net interest income /
  margin on interest-earning assets               $   19,661        4.44%                  $   17,964         4.49%
                                                   ==========     ==========              =============     ==========

 *Includes tax-equivalent adjustment

     Net interest margin is net interest income divided by average interest-
earning  assets.  For computational purposes, non-accrual loans are included in 
interest-earning  assets.     Net interest rate spread is the difference between 
the average rate of interest earnedon interest-earning assets and  the  average  
rate of  interest expensed on interest-bearing  liabilities.    Average balances
are based on daily balances.
</TABLE>



<PAGE>





Analysis of Changes in Net Interest Income
     Shown in the following  tables are changes in interest  income and interest
expense  resulting  from changes in volumes  (average  balances)  and changes in
interest rates for the  three-month  period ended March 31, 1997, as compared to
the same period in 1996.

 First Quarter 1997 vs. 1996               Increase (decrease)
                                       in interest income and expense
 In thousands                                due to changes in:

                                      Volume    Rate      Total
 Interest-earning assets:
Loans ............................   $ 4,280    $(706)   $ 3,574
Securities .......................      (324)      77       (247)
Mortgage loans held for sale .....       398       50        448
Federal funds sold
  and other interest income ......        (4)       0         (4)
                                     -------    -----    -------
Total interest-earning assets ....     4,350     (579)     3,771

Interest-bearing liabilities:
Interest-bearing demand (NOW) ....    (1,588)     130     (1,458)
Savings deposits .................      (108)       4       (104)
Money market accounts ............     1,816        9      1,825
Certificates of deposit ..........     1,308     (314)       994
Other time deposits ..............       (54)     (41)       (95)
                                     -------    -----    -------
  Total interest-bearing deposits      1,374     (212)     1,162
Federal funds purchased
  and repurchase agreements ......       (24)      23         (1)
Long-term debt and
  and other borrowings ...........       927      (14)       913
                                     -------    -----    -------
  Total borrowed funds ...........       903        9        912
                                     -------    -----    -------
Total interest-bearing liabilities     2,277     (203)     2,074
                                     -------    -----    -------
Increase (decrease)
  in net interest income .........   $ 2,073    $(376)   $ 1,697
                                     =======    =====    =======

 The  change in  interest  due to both rate and  volume  has been  allocated  to
changes in average  volume and  changes in average  rates in  proportion  to the
absolute dollar amounts of the change in each.


<PAGE>





Provision for Loan Losses
     The provision for loan losses was $2.0 million (0.54% of average loans,  on
an annualized basis, excluding mortgage loans held for sale) for the first three
months of 1997,  compared  with $1.2  million  (0.38% of average  loans) for the
comparable  period of 1996. Net loan  charge-offs were $1,005 thousand (0.28% of
average  loans) for the first three months of 1997,  compared with $949 thousand
(0.30% of average loans) for the first three months of 1996.
     The  provision  for loan  losses  and the level of the  allowance  for loan
losses  reflect the quality of the loan  portfolio and result from  management's
evaluation  of the risks in the loan  portfolio.  The increased  provision  also
provides for overall growth in the loan  portfolio.  Further  discussion on loan
quality and the  allowance  for loan  losses is  included  in the Asset  Quality
discussion later in this report.

Non-Interest Income
     Non-interest  income  for the first  three  months of 1997  increased  $684
thousand  over the first  three  months of 1996.  This  reflects  an increase in
service  charges  on  deposit  accounts  of  $259  thousand,  due in part to the
introduction of new transaction account products in April of 1996. The growth in
the mortgage servicing portfolio during the past year resulted in an increase of
$104 thousand of mortgage  banking  income.  An increase in trust and investment
services  income of $172  thousand  reflects the company's  expanding  trust and
brokerage services. Non-interest income for the first quarter of 1997 includes a
pre-tax  gain of $221  thousand  recognized  on the  sale  of  securities.  When
compared to fourth quarter 1996, non-interest income increased $163 thousand. An
improvement of $331 thousand from trust and investment  services  income was the
primary  source of the increase.  During the fourth quarter of 1996, the company
recognized  a  pre-tax  gain of $400  thousand  from  the  sale of its  merchant
servicing business.

Non-Interest Expenses
         Non-interest expenses decreased $1.1 million for the first three months
of 1997,  compared  to the first  three  months of 1996.  This  represents  a 6%
decrease  from first  quarter  1996.  This decrease is a result of an initiative
undertaken during the second quarter of 1996 to refocus the company's  resources
on its  core  financial  services,  reduce  operating  expenses  and  exit  from
less-profitable initiatives.  As of March 31,  1997,  the company has
accomplished the following goals of the initiative:
         -exited the venture capital and human resources consulting initiatives,
         -closed  the  Louisville,   Kentucky   office,   closed  mortgage  loan
          production offices in Chattanooga,  Jackson and Knoxville,  Tennessee,
         -sold the corporate aircraft, sold the travel agency,
         -sold a  newly-constructed  building  intended  to house the  company's
         corporate  headquarters and consolidated office space in Bowling Green,
         Kentucky, and
         -realized  additional  cost savings in the  company's  retail  delivery
         system of  approximately  $2.5 million on an annualized  pre-tax basis,
         primarily through the reduction of administrative personnel.
Based on a comparison of non-interest expenses for the first quarter of 1997 to
the second quarter of 1996 (excluding the $5.8 million of charges to implement 
the plan),  total operating expenses  have been reduced by more than $6 million 
on an annualized  pre-tax basis.  As a result  of  higher  revenues  and  lower
operating  expenses,  the efficiency ratio  (non-interest  expenses as a
percentage of net interest income plus non-interest income) decreased to 62.6%,
a substantial improvement over the 73.1% efficiency ratio in first quarter 1996.
         With  the  major  components  of the  refocus  initiative  in  place by
year-end 1996, management believes the non-interest expenses incurred in the
fourth quarter of 1996 and the first quarter of 1997 are representative of the 
company's ongoing non-interest expenses.

Income Taxes
     Income tax expense totaled $2.7 million for the first three months of 1997,
compared  with $1.7  million in the  comparable  1996  period.  These  represent
effective tax rates of 32.6% and 31.3%, respectively.


<PAGE>




Balance Sheet Review
Overview
     Assets at March 31,  1997  totaled  $1.938  billion,  compared  with $2.004
billion at December  31,  1996,  and $1.816  billion a year ago.  Average  total
assets for the first quarter  increased $174 million (10%) over the past year to
$1.948 billion. Average interest-earning assets increased $185 million to $1.794
billion.

Loans
     The company experienced moderate loan growth during the first quarter of 
1997.  Total loans, net of unearned income, averaged $1.454 billion in the first
quarter of 1997, excluding mortgage  loans held for sale of $68.5  million.  For
the  comparable  period in 1996,  loans averaged $1.270  billion,  excluding the
$46.2 million of mortgage loans held for sale.
     At March 31, 1997, loans net of unearned income  (excluding  mortgage loans
held for sale) totaled $1.449 billion,  compared with $1.451 billion at December
31, 1996, and $1.295 billion a year ago. The slower loan growth during the first
quarter of 1997 is  primarily  due to the  payoff of the  company's largest
commercial relationship which followed the customer's sale to a publicly
held company.  Excluding the payoff,  which had been expected,  annualized  loan
growth for the quarter was 5%. The company currently anticipates mid-single-
digit loan growth to continue through the remainder of 1997.
     As of March  31,  1997,  the  company's  47  largest  credit  relationships
consisted  of loans  and  loan  commitments  ranging  from $5  million  to $16.8
million, none of which was classified as non-performing. The aggregate amount of
these credit  relationships was $460 million.  These large credit  relationships
have been underwritten and structured to minimize the company's exposure to 
loss.  However, a significant deterioration in the financial condition of one or
more of these borrowers could result in an increase in the company's loan 
charge-offs.  In addition, the prepayment of one or more of these credits or 
their refinancing at another financial institution may have a negative impact 
on the company's future loan growth.

Asset Quality
     Non-performing  loans, which include non-accrual loans, accruing loans past
due 90 days or more and restructured loans, totaled $9.5 million as of March 31,
1997,  down $1.0 million from December 31, 1996,  and down $6.4 million from the
end of the first  quarter of 1996.  The ratio of  non-performing  loans to total
loans (net of unearned income) was 0.66% at March 31, 1997,  compared with 0.73%
at the end of 1996 and 1.23% a year ago.  Non-performing  assets,  which include
non-performing  loans,  foreclosed  real estate and other  foreclosed  property,
totaled $11.1 million as of March 31,1997, as compared to $20.1 million at March
31, 1996. The ratio of non-performing  assets to total assets decreased to 0.57%
at March 31, 1997, from 1.11% a year ago.
     The following table presents information concerning  non-performing assets,
including  non-accrual and restructured loans.  Management classifies commercial
and commercial  real estate loans as  non-accrual  when principal or interest is
past due 90 days or more and the loan is not  adequately  collateralized  and in
the process of collection,  or when, in the opinion of management,  principal or
interest  is  not  likely  to be  paid  in  accordance  with  the  terms  of the
obligation.  Consumer loans are charged off after 120 days of delinquency unless
adequately  secured and in the process of collection.  Non-accrual loans are not
reclassified  as accruing  until  principal  and  interest  payments are brought
current and future payments appear reasonably certain.  Loans are categorized as
restructured  if the  original  interest  rate,  repayment  terms,  or both were
restructured due to a deterioration in the financial condition of the borrower.


<PAGE>


<TABLE>

 Non-performing Assets
 Dollars in thousands

<CAPTION>
                                                         March 31  December 31  March 31
                                                           1997      1996        1996

<S>                                                      <C>        <C>        <C>    
Non-accrual loans ....................................   $ 5,528    $ 4,717    $12,394
Accruing loans which are contractually
  past due 90 days or more ...........................     3,388      5,863      3,548
Restructured loans ...................................       633          4         10
                                                         -------    -------    -------
  Total non-performing and restructured loans ........     9,549     10,584     15,952
Foreclosed real estate ...............................     1,328      1,608      3,328
Other foreclosed property ............................       175        184        847
                                                         -------    -------    -------
  Total non-performing and restructured loans and
  foreclosed property ................................   $11,052    $12,376    $20,127
                                                         =======    =======    =======

Non-performing and restructured loans
  as a percentage of net loans, net of unearned income      0.66%      0.73%      1.23%
Total non-performing and restructured loans and
 foreclosed property as a percentage of total assets .      0.57%      0.62%      1.11%
</TABLE>

         Three commercial credit relationships account for $2.6 million, or 47%,
of the  company's  non-accrual  loans  at  March  31,  1997.  An  allowance  for
loan losses in the amount of $200  thousand has been  established  for these
credits in accordance with Statement of Financial Accounting Standards No.  114,
Accounting  by Creditors  for the  Impairment  of a Loan.  The  remaining  non-
accrual  balance consists of various commercial and consumer loans, with no
single loan exceeding $500,000.
     Foreclosed  real  estate  consists  of several  properties,  with no single
property  exceeding  $350,000.  Based  upon  appraisals  of the  properties  and
previous sales  experience,  management does not anticipate any significant loss
to be incurred on disposition of the properties.
     As of March 31, 1997,  the company had $7.0 million of loans which were not
included in the past due, non-accrual or restructured categories,  but for which
known  information  about possible  credit  problems  caused  management to have
serious  doubts as to the  ability of the  borrowers  to comply with the present
loan repayment terms. Based on management's evaluation, including current market
conditions, cash flow generated and recent appraisals, no significant losses are
anticipated  in  connection  with  these  loans.  These  loans  are  subject  to
continuing  management  attention and are considered in determining the level of
the allowance for loan losses.
     The allowance represents an amount which, in management's judgment, will be
adequate to absorb probable losses on existing loans.The adequacy of the 
allowance  for loan losses is determined on an ongoing basis through analysis of
the overall size and quality of the loan portfolio, historical loan loss
experience, loan delinquency trends and current and projected economic
conditions.  Additional allocations of the allowance are based on specifically
identified potential loss situations.  The potential loss situations are
identified by account officers' evaluations of their own portfolios as well as 
by an independent  loan  review  function.
     The allowance for loan losses is  established  through a provision for loan
losses charged  to  expense. At March 31,1997,  the allowance was $19.0 million,
up from $18.1 million at December 31, 1996, and $16.1 million at March 31, 1996.
The ratio of the allowance for loan losses to total loans (excluding mortgage 
loans held for sale) at March 31,1997, was 1.31%, compared with 1.25% at
December 31, 1996, and 1.24% at March 31, 1996. These increaes from March 31,
1996 reflect in part management's review of the growth in the loan portfolio,
the continuing concentrations of credit among the company's largest credit 
relationships, and anticipated general econcomic conditions in the company's
markets. The allowance as a percentage of non-performing loans increased to 199%
at March 31, 1997, from 171% at year-end 1996 and 101% at March 31, 1996.  The
increase in the allowance as a percentage of non-performing loans from March 31,
1996, to March 31, 1997, is in part the result of the company's placement of one
significant loan into non-performing loans at year-end 1995, thus reducing the 
ratio of the allowance to non-performing loans.  That borrower's financial 
condition, along with the financial condition of two other significant credits,
deteriorated in the second quarter of 1996, resulting in partial charge-offs 
totalling $7.0 million of these loans in the second quarter of 1996.  As a
result of net loan charge-offs of $11.7 million since March 31, 1996, and 
provisions for loan losses of $14.6 million during that period (including the
$8.4 million provision in the second quarter of 1996), the ratio of the 
allowance for loan losses to non-performing loans has increased to 199% at
March 31, 1997.     

Securities Available for Sale
     Securities,  including  those  classified as held to maturity and available
for sale,  decreased  from $293  million  at March 31,  1996 to $285  million at
year-end  1996,  and then  decreased to $255  million at March 31,  1997.  Funds
provided by the reduction in securities from March 31, 1997 to December 31, 1996
were utilized to fund growth in the loan  portfolio.  The decrease in securities
from December 31, 1996 to March 31, 1997 partially funded the seasonal decrease
in deposits during that quarter. The seasonal decline in deposits resulted from
the year-end payouts of escrow deposits associated with the mortgage loans
serviced by Trans Financial Mortgage Company.

Deposits and Borrowed Funds
     Total  deposits  averaged  $1.527  billion in the first quarter of 1997, an
increase  of $104  million,  or 7%, from the  comparable  1996  period.  Average
interest-bearing  accounts increased $92.8 million in the first quarter of 1997,
compared to the same period in 1996, while average non-interest-bearing accounts
increased  $10.8  million.  Of the $92.8  million  increase in  interest-bearing
accounts,  87% represents  brokered  certificates of deposit issued to fund loan
growth.  As of March  31,  1997  and  1996,  brokered  certificates of  deposit
comprised $105 million and $30 million, respectively, of the company's deposits.
The increase in brokered deposits results from the company's use of this source
of funds to provide for the loan growth experienced from the  first   quarter of
1996 through the first quarter of 1997.  These  brokered  deposits  have various
maturities ranging from three months to five years.
     During 1996 the company implemented a program that sweeps excess funds from
targeted  interest-bearing  demand  accounts  into money market  accounts.  This
program has significantly  reduced the Federal Reserve Bank reserve requirements
for the company.
     Long-term  debt totaled $141 million at March 31, 1997,  an increase of $24
million from March 31, 1996. In order to support growth in the loan  portfolio, 
TFB-KY issued in the second quarter of 1996 $25 million of four-year notes, 
under a $250 million senior bank note program. Bank notes issued to date bear
interest  at fixed  rates of  6.32%,  6.48%,  and  7.13%,respectively.  Certain
of the notes  have  been  effectively  converted  to floating rate  instruments 
through the use of interest rate swap  transactions.  Under  these swap 
agreements,  TFB-KY  pays  interest  at the prime  rate,  and receives a fixed
rate of 8.60%.  An additional $175 million of bank notes may be issued from time
to time under this  book-entry  program in  maturities  varying from 30 days to
30 years.

Capital Resources and Liquidity
     The  company's  capital  ratios at March 31, 1997,  December 31, 1996,  and
March 31, 1996  (calculated in accordance  with regulatory  guidelines)  were as
follows:

                          March 31,    December 31,    March 31,
                              1997          1996         1996
Tier 1 risk based .....          8.08%       7.68%       8.51%
     Regulatory minimum          4.00        4.00        4.00
Total risk based ......         11.41       10.87       11.93
     Regulatory minimum          8.00        8.00        8.00
Leverage ..............          6.52        6.12        6.72
     Regulatory minimum          3.00        3.00        3.00

     The decrease in these  capital  ratios during 1996 was primarily associated
with the $5.8  million in charges and an  increased  loan loss provision,  both
taken during the second quarter of 1996,  and a $2.7  million charge associated
with the SAIF recapitalization, taken during the third quarter of  1996.  The
improvement  in  these  ratios  in 1997 is due to the  company's increased
earnings  combined  with a decline in total assets from  December 31,
1996.  Capital  ratios  of all of the  company's  subsidiaries  are in excess of
applicable minimum regulatory capital ratio requirements at March 31, 1997.
         To  maintain a desired  level of  liquidity,  the  company  has several
sources of funds available.   The company's primary investing activities include
purchases of securities and loan originations, offset by maturities, prepayments
and sales of securities, and loan payments.  The company  primarily  relies upon
net inflows of cash from financing  activities, supplemented by net inflows of
cash from operating activities, to provide cash used in these investing 
activities. As is typical of most banking  companies,  significant  financing 
activities include issuance of common stock and long-term debt, deposit
gathering,  and the use of short-term  borrowing  facilities, such as federal
funds purchased,  repurchase agreements,  FHLB advances and lines of credit.   
When compared to retail deposits attracted through a branch network, wholesale 
funding sources are generally more sensitive to changes in interest rates and 
volatility in the capital markets and are more likely to be compared by the 
investor to competing investments.  In addition, brokered deposits may be more
sensitive to significant changes in the financial condition of the company.  As 
a result of the company's use of wholesale funding sources, significant changes
in the prevailing interest rate environment, in the availability of alternative
investments for individual and institutional investors or in the company's 
financial condition, among other factors, could affect the company's liquidity
and results of operations.

Asset/Liability Management
         Managing  interest rate risk is fundamental  to the financial  services
industry. The company's policies are designed to manage the inherently different
maturity and repricing  characteristics  of the lending and  deposit-acquisition
lines of  business  to achieve a desired  interest-sensitivity  position  and to
limit exposure to interest rate risk. The maturity and repricing characteristics
of  the   company's   lending   and  deposit   activities   create  a  naturally
asset-sensitive  structure.  By using a combination of on- and off-balance-sheet
financial  instruments,  the company  manages  interest rate  sensitivity  while
optimizing  net  interest  income  within the  constraints  of  prudent  capital
adequacy,  liquidity  needs,  the  interest  rate and economic  outlook,  market
opportunities and customer requirements.
         The company uses an earnings  simulation  model to monitor and evaluate
the impact of changing interest rates on earnings.  The simulation model used by
the company is designed to reflect the dynamics of all interest-earning  assets,
interest-bearing   liabilities  and  off-balance-sheet   financial  instruments,
combining  the  various  factors  affecting  rate  sensitivity  into a  two-year
earnings  outlook.  Among the  factors  the model  utilizes  are  rate-of-change
differentials,  such as  federal  funds  rates  versus  savings  account  rates;
maturity effects, such as calls on securities; and rate barrier effects, such as
caps or floors on loans.  It also  captures  changing  balance  sheet levels and
floating-rate  loans that may be tied or related to prime,  Treasury  Notes,  CD
rates or other rate indices,  which do not necessarily move identically as rates
change.  In addition,  it captures  leads and lags that occur as rates move away
from current levels,  and the effects of prepayments on various assets,  such as
residential mortgages, mortgage-backed securities and consumer loans.
         The model is updated  monthly for  multiple  interest  rate  scenarios,
projected changes in balance sheet categories and other relevant assumptions. In
developing multiple rate scenarios, an econometric model is employed to forecast
key rates, based on the cyclical nature and historic  volatility of those rates.
A stochastic view of net interest income is derived once probabilities have been
assigned to those key rates.
         By  forecasting  a most  likely  rate  environment,  the effects on net
interest  income of  adjusting  those rates up or down can reveal the  company's
approximate  interest  rate  risk  exposure  level.  As of March 31,  1997,  the
company's most likely rate environment  assumed the federal funds rate and prime
lending  rate at 5.50% and  8.50%,  respectively,  rising  to 5.75%  and  8.75%,
respectively,  by March of 1998.  The following  illustrates  the effects on net
interest  income of an immediate  shift in market interest rates compared to the
most likely rate assumptions used in the company's model:

                                                                      
   Basis-point change ..................     +200 bp  +100 bp  -100 bp  -200 bp
                                                                      
   Increase (decrease) in net interest income  5.03%   2.48%   (1.60)%   (2.33)%
                                                                      

         As of March 31, 1997,  management  believes the company's balance sheet
was in an  asset-sensitive  position,  as the repricing  characteristics  of the
balance sheet were such that an increase in interest rates would have a positive
effect on earnings and a decrease in interest rates would have a negative effect
on earnings.  It should be noted that some of the assumptions made in the use of
the simulation  model will inevitably not materialize and  unanticipated  events
and  circumstances  will occur; in addition,  the simulation model does not take
into account any future  actions  which could be undertaken to reduce an adverse
impact if there were a change in  interest  rate  expectations  or in the actual
level of interest rates.
         A second interest rate  sensitivity tool utilized by the company is the
quantification of market value changes for all assets and liabilities,  given an
increase or decrease in interest  rates.  This  approach  provides a longer-term
view of interest rate risk, capturing all expected future cash flows. Assets and
liabilities with option  characteristics  are valued based on numerous  interest
rate path valuations using statistical rate simulation techniques.
         To assist in achieving a desired level of interest rate sensitivity the
company has entered into off-balance-sheet interest rate swap transactions which
partially  neutralize  the asset  sensitive  position  which is  inherent in the
balance  sheet.  The  company  pays a  variable  interest  rate on each swap and
receives a fixed rate.  In a higher  interest-rate  environment,  the  increased
contribution   to  net  interest  income  from   on-balance-sheet   assets  will
substantially  offset any negative  impact on net interest  income from interest
rate swap transactions.  Conversely,  if interest rates decline,  the swaps will
mitigate  the  company's  exposure  to reduced  net  interest  income.  Interest
rate swap  transactions as of March 31, 1997, are as follows:



<PAGE>


Interest Rate Swaps
As of March 31, 1997
 Dollars in thousands
                             Notional   Fixed Rate    Floating
                                                        Rate
                              Amount    (Receiving)   (Paying)         Maturity
                            ---------    ---------   ---------        --------- 
                             $ 50,000      8.33%    8.50%(Prime)      June, 1997
                               50,000      8.50%    8.50% Prime)      July, 1997
                               20,000      8.60%    8.50%(Prime)   October, 1997
                               30,000      8.23%    8.50%(Prime)     March, 1998
                               70,000      8.50%    8.50%(Prime)      June, 1998
                               30,000      8.60%    8.50%(Prime)   October, 1998
                               25,000      8.74%    8.50%(Prime)  December, 1999
                            ---------     ------
 Total / weighted average    $275,000      8.48%    8.50%            March, 1998
                             ========                               ============



     As shown in the table, $150 million of these interest rate swaps will 
mature within twelve months.  As these interest rate swaps mature, management
will evaluate whether new interest rate swap transactions are appropriate, given
the company's interest rate sensitivity position at that time.  The company
requires all off-balance-sheet transactions be employed solely with respect to 
asset/liability  management or for hedging specific transactions or positions,
rather than for speculative trading activity.

Subsequent Transactions
     During the first quarter of 1997, the company entered into contracts to 
sell its Lebanon and Sparta, Tennessee offices.  These transactions were 
consummated during April 1997.


This report contains  forward-looking  statements  under the Private  Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. Although the
company believes that the forward-looking  statements are based upon reasonable
assumptions, there  can  be no  assurance  that  the  forward-looking statements
will prove to be  accurate.  Factors that could  cause actual results to differ
from the results anticipated in the forward-looking statements include, but are 
not limited to: economic  conditions  (both generally and more specifically in
the  markets  in which  the  company  and its  banks  operate); competition for
the  company's  customers  from other  providers  of  financial services;
government legislation and regulation (which changes from time to time and over
which the company has no control); changes in interest rates; delays in, 
customer  reactions to, and other unforeseen complications  with respect to, the
implementation of the cost containment measures; and other risks detailed in the
company's filings with the Securities  and Exchange  Commission,  all of which
are difficult to predict and many of which are beyond the control of the
company. The company undertakes no obligation to republish revised forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.


<PAGE>


                           Part II - Other Information

Item 1. Legal Proceedings
      In the  ordinary  course  of  operations,  the  company  and the banks are
defendants in various legal proceedings. In the opinion of management,  there is
no proceeding pending or, to the knowledge of management,  threatened,  in which
an  adverse   decision  could  result  in  a  material  adverse  change  in  the
consolidated financial condition or results of operations of the company.
       On August 22, 1996, two former  employees of the company and three former
employees of TFB-KY filed suit in Jefferson Circuit Court, Louisville, Kentucky,
against  the  company.  The five  plaintiffs  claim  wrongful  termination,  sex
discrimination,  age discrimination,  breach of contract and libel in connection
with the  termination of their  employment in June 1996.  The  plaintiffs  seek,
among other things,  compensatory  damages in an unspecified  amount, to include
the  value  of back  pay and  benefits;  the  value of  certain  stock  options;
reinstatement  as employees or  alternatively  the value of future  earnings and
benefits;  and punitive  damages.  Management is currently  negotiating with the
parties to settle this mattter and believes that the litigation  will not result
in a  material  adverse  change  in the  consolidated  financial condition or 
results of operations of the company.

Item 4. Submission of Matters to a Vote of  Security Holders
      The  registrant's  1997 Annual Meeting of Shareholders  was held April 28,
1997.  Proxies were solicited by the registrant's board of directors pursuant to
Regulation  14  under  the  Securities  Exchange  Act  of  1934.  There  was  no
solicitation  in  opposition  to the  board's  nominees  as  listed in the proxy
statement, and all of the nominees were elected by vote of the
shareholders.  Voting results for each nominee were as follows:

                      Votes For  Votes Withheld
Vince A. Berta ....   8,949,940   67,812
C. C. Howard Gray .   8,952,485   65,267
Carroll  F. Knicely   8,952,485   65,267
C. Cecil Martin ...   8,937,006   80,745

     A proposal (Proposal II) to approve the Trans Financial,  Inc. Consolidated
Stock  Option Plan was approved by a majority of the  outstanding  shares of the
registrant's  common stock.  A total of 7,874,226  shares were voted in favor of
the proposal;  751,117 shares were voted against;  and 392,398 shares  abstained
(including  broker  non-votes).  The total  number  of  shares  of common  stock
outstanding  as of February  21,1997,  the record date of the Annual  Meeting of
Shareholders, was 11,399,494.


Item 6. Exhibits and Reports on Form 8-K
   (a) Exhibits
       The exhibits listed on the Exhibit Index on page 18 of this Form 10-Q are
filed as a part of this report.

   (b) Reports on Form 8-K
       There were no reports on Form 8-K filed during the quarter.



<PAGE>


                                   SIGNATURES

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

                                                           Trans Financial, Inc.
                                                                 (Registrant)



                                                    Principal Executive Officer:

Date:  ______________                               /s/  Vince A. Berta
                                                         Vince A. Berta
                                                         President and
                                                         Chief Executive Officer


                                                    Principal Financial Officer:

Date: _____________________                          /s/ Edward R. Matthews
                                                         Edward R. Matthews
                                                         Chief Financial Officer


<PAGE>







                                    Exhibits
                                                                   Sequentially
                                                                  Numbered Pages


   10      1996  Consolidated  Stock Option Plan is incorporated by reference to
           the  registrant's  Proxy  Statement  dated February 28, 1997, for the
           April 28, 1997 Annual Meeting of Shareholders.*

   11      Statement of Computation of Per Share Earnings....................19

   27      Financial Data Schedule (for SEC use only)


   *   Denotes a management  contract or compensatory plan or arrangement of the
       registrant  required to be filed as an exhibit  pursuant to Item 601 (10)
       (iii) of Regulation S-K.