SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ---------------

                                   FORM 10-QSB

(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
       SECURITIES EXCHANGE ACT OF 1934


               For the quarterly period ended September 30, 1998


                                       OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
       SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to ________


                        MONTGOMERY FINANCIAL CORPORATION
--------------------------------------------------------------------------------
              (Exact Name of Small Business Issuer in its Charter)        

              Indiana                                      35-1962246
--------------------------------------------------------------------------------
   (State or other jurisdiction of                    (I.R.S. Employer
   Incorporation or organization)                     Identification Number)

        119 East Main Street
      Crawfordsville, Indiana                                47933
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                   (Zip Code)

                                 (765) 362-4710
              (Registrant's telephone number, including area code)

         Check here whether the issuer (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 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 [ ]

     As of October 31, 1998,  there were  1,621,681  shares of the  Registrant's
common stock issued and outstanding.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


                                   Form 10-QSB

                                      Index
                                                                                

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Condensed Statement of Financial Condition
         As of September 30, 1998 and June 30, 1998                             

         Consolidated Condensed Statement of Income for the Three
         Months Ended September 30, 1998 and 1997                               

         Consolidated Condensed Statement of Cash Flows for the
         Three Months Ended September 30, 1998 and 1997                         

         Consolidated Condensed Statement of Changes in Stockholders'
         Equity for the Three Months Ended September 30, 1998                   

         Notes to Consolidated Condensed Financial Statements                   

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


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                      

Item 2.  Changes in Securities and Use of Proceeds                              

Item 3.  Defaults in Securities                                                 

Item 4.  Submission of Matters to a Vote of Security Holders                    

Item 5.  Other Information                                                      

Item 6.  Exhibits and Reports on Form 8-K                                       

Signatures                                                                      
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                   Consolidated Condensed Statement of Financial Condition
                                         (Unaudited)

                                                           September 30,          June 30,
                                                           -------------       -------------               
                                                                 1998               1998
                                                           -------------       -------------
<S>                                                        <C>                 <C>          
Assets
  Cash ..............................................      $     294,589       $     326,922
  Short-term interest-bearing deposits ..............          8,017,464          10,569,823
                                                           -------------       -------------
         Total cash and cash equivalents ............          8,312,053          10,896,745
  Interest-bearing deposits .........................            215,000             215,000
  Securities available for sale .....................            731,874             311,967
  Loans .............................................        104,578,380         100,395,554
  Allowance for loan losses .........................           (201,000)           (186,000)
                                                           -------------       -------------
       Net loans ....................................        104,377,380         100,209,554
      Real estate owned and held for development, net          1,306,829           1,468,199
  Premises and equipment ............................          2,257,620           2,001,544
  Federal Home Loan Bank stock ......................            963,100             921,500
  Interest receivable ...............................            851,275             843,799
  Other assets ......................................            326,326             294,324
                                                           -------------       -------------

         Total assets ...............................      $ 119,341,457       $ 117,162,632
                                                           =============       =============
Liabilities
  Deposits
      Noninterest bearing ...........................      $   2,121,751       $   1,864,658
         Interest bearing ...........................         80,911,995          82,117,324
                                                           -------------       -------------
                Total deposits ......................         83,033,746          83,981,982
  Federal Home Loan Bank advances ...................         14,260,715          11,260,715
  Interest payable ..................................            619,918             538,451
  Deferred tax liability ............................            368,605             371,197
  Other liabilities .................................            918,299             945,136
                                                           -------------       -------------

         Total liabilities ..........................         99,201,283          97,097,481
                                                           =============       =============

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                   Consolidated Condensed Statement of Financial Condition
                                         (Unaudited)

                                                           September 30,          June 30,
                                                           -------------       -------------               
                                                                 1998               1998
                                                           -------------       -------------
<S>                                                        <C>                 <C>          
Stockholders' Equity
    Preferred stock, $.01 par value
        authorized and unissued--2,000,000 shares
  Common stock, $.01 par value--8,000,000 shares
      authorized;  1,642,381 and 1,653,032 issued ...             16,424              16,530

  Paid-in capital ...................................         13,480,086          13,571,387
  Retained earnings - substantially restricted ......          7,921,374           7,782,192
   Unearned ESOP shares--121,968 and 123,080 ........         (1,208,550)         (1,230,802)
  Unearned compensation .............................           (119,559)           (128,507)
   Accumulated other comprehensive income ...........             50,399              54,351
                                                           -------------       -------------

         Total stockholders' equity .................         20,140,174          20,065,151
                                                           -------------       -------------

         Total liabilities and stockholders' equity .      $ 119,341,457       $ 117,162,632
                                                           =============       =============


</TABLE>

See notes to Consolidated Condensed Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                          Consolidated Condensed Statement of Income
                                         (Unaudited)

                                                                    Three Months Ended
                                                                       September 30,
                                                            --------------------------------
                                                                1998                 1997  
                                                            -----------          -----------
<S>                                                         <C>                  <C>        
Interest and Dividend Income
  Loans ...........................................         $ 2,100,016          $ 1,854,433
  Investment securities ...........................               3,497                  567
  Deposits with financial institutions ............             110,558              114,746
  Federal Home Loan Bank stock ....................              18,715               19,163
                                                            -----------          -----------
       Total interest and dividend income .........           2,232,786            1,988,909
                                                            -----------          -----------

Interest Expense
  Deposits ........................................           1,099,583              956,764
  Federal Home Loan Bank advances .................             166,173              145,160
                                                            -----------          -----------
       Total interest expense .....................           1,265,756            1,101,924
                                                            -----------          -----------

Net Interest Income ...............................             967,030              886,985
  Provision for losses on loans ...................              15,000                3,000
                                                            -----------          -----------

Net Interest Income After
  Provision for Losses on Loans ...................             952,030              883,985
                                                            -----------          -----------
Other Income
  Service charges on deposit accounts .............              10,618                7,238
  Net appraisal income (expense) ..................               1,405               (1,054)
  Other income ....................................               1,751                1,318
                                                            -----------          -----------
       Total other income .........................              13,774                7,502
                                                            -----------          -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                          Consolidated Condensed Statement of Income
                                         (Unaudited)
                                         (continued)

                                                                    Three Months Ended
                                                                       September 30,
                                                            --------------------------------
                                                                1998                 1997  
                                                            -----------          -----------
<S>                                                         <C>                  <C>        
Other Expenses
  Salaries and employee benefits ..................             283,915              275,858
  Net occupancy expense ...........................              27,529               26,186
  Equipment expense ...............................              46,557               35,333
  Data processing expense .........................              35,853               27,958
  Deposit insurance expense .......................              12,497               11,428
  Real estate operations, net .....................              (5,243)             (10,685)
  Advertising expense .............................              11,292                8,599
  Other expenses ..................................             123,876              114,183
                                                            -----------          -----------
           Total other expenses ...................             536,276              488,860
                                                            -----------          -----------

Income Before Income Tax ..........................             429,528              402,627
  Income tax expense ..............................             174,500              177,050
                                                            -----------          -----------

Net Income ........................................         $   255,028          $   225,577
                                                            ===========          ===========

Net Income Per Share
  Basic ...........................................         $      0.17          $      0.15
  Diluted .........................................                0.17                 0.15

Dividends Per Share ...............................               0.055                0.055


</TABLE>

See Notes to Consolidated Condensed Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                        Consolidated Condensed Statement of Cash Flows
                                         (Unaudited)


                                                                      Three Months Ended
                                                                         September 30, 
                                                               ------------------------------                      
                                                                   1998              1997 
                                                               -----------       -----------
<S>                                                            <C>               <C>            
Operating Activities

  Net income ............................................      $   255,028       $   225,577
  Adjustments to reconcile net income to net cash
      provided by operating activities
      Provision for loan losses .........................           15,000             3,000
      Depreciation ......................................           51,402            50,450

      ESOP stock amortization ...........................           25,149            19,837

      Amortization of unearned compensation .............            2,170
      Change in
          Interest receivable ...........................           (7,476)          (35,144)
          Interest payable ..............................           81,467            63,326
          Other assets ..................................          (32,002)          (26,265)
           Other liabilities ............................          (19,466)          136,418
                                                               -----------       -----------

          Net cash provided by operating activities .....          371,272           437,199
                                                               -----------       -----------

Investing Activities

  Proceeds from paydowns of securities
      available for sale ................................           10,805            10,087
  Purchase of securities available for sale .............         (437,258)
  Net change in loans ...................................       (4,295,017)       (3,682,301)
  Additions to real estate owned and held for investment           (21,785)          (39,824)
  Proceeds from real estate owned sales .................          286,722
  Purchases of premises and equipment ...................         (298,854)          (77,656)
  Purchase of FHLB of Indianapolis stock ................          (41,600)
                                                               -----------       -----------

          Net cash used by investing activities .........       (4,796,987)       (3,789,694)
                                                               -----------       -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                         MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                     Crawfordsville, Indiana

                         Consolidated Condensed Statement of Cash Flows
                                           (Continued)


                                                                      Three Months Ended
                                                                          September 30,
                                                                -------------------------------
                                                                     1998              1997
                                                                ------------       ------------
<S>                                                             <C>                <C>         
Financing Activities

  Net change in
       Noninterest-bearing, interest-bearing demand and
          savings deposits ...............................      $    890,453       $  1,472,058
      Certificates of deposit ............................        (1,838,689)          (330,481)
  Proceeds from FHLB advances ............................         4,000,000
   Repayment of FHLB advances ............................        (1,000,000)        (3,000,000)
  Stock purchase .........................................          (119,824)
  Dividends paid .........................................           (90,917)  
                                                                ------------       ------------

          Net cash provided (used) by financing activities         1,841,023         (1,858,423)
                                                                ------------       ------------



Net Change in Cash and Cash Equivalents ..................        (2,584,692)        (5,210,918)

Cash and Cash Equivalents, Beginning of Period ...........        10,896,745         11,594,772
                                                                ------------       ------------

Cash and Cash Equivalents, End of Period .................      $  8,312,053       $  6,383,854
                                                                ============       ============


Additional Cash Flow and Supplementary Information

  Interest Paid ..........................................      $  1,184,289       $  1,038,598
  Income Tax Paid ........................................           387,733            102,800
  Transfer from Loans to Other Real Estate Owned .........           112,191
  Cash Dividends Payable .................................           83,548             90,917



</TABLE>

See Notes to Consolidated Condensed Financial Statements
<PAGE>
<TABLE>
<CAPTION>
                                           MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                                       Crawfordsville, Indiana

                                 Consolidated Condensed Statement of Changes in Stockholders' Equity
                                                             (Unaudited)

                                                                                  
                                            Common Stock                   
                                      ----------------------       Paid-in       Comprehensive           Retained      Unearned    
                                        Shares       Amount        Capital           Income              Earnings     ESOP Shares  
                                      ---------    ---------    ------------      -----------          -----------    -----------
<S>                                   <C>          <C>          <C>               <C>                  <C>            <C>          
Balance July 1, 1998 ............     1,653,032    $  16,530    $ 13,571,387                           $ 7,782,192    $(1,230,802) 
                                                                                                                                   
Net income for the three months                                                                                                    
    ended September 30, 1998 ....                                                 $   255,028              255,028                 
                                                                                                                                   
Other comprehensive income,                                                                                                        
    net of tax                                                                                                                     
    Unrealized loss on securities                                                      (3,952)                                     
                                                                                  -----------                                      
Other comprehensive income ......                                                 $   251,076                                      
                                                                                  ===========                                      
Cash dividends ($.055 per share)                                                                          (83,548)                 
                                                                                                                                   
Stock purchase ..................       (10,651)        (106)        (87,420)                             (32,298)                 
                                                                                                                                   
ESOP shares earned ..............                                      2,897                                               22,252  
                                                                                                                                   
Amortization of unearned                                                                                                           
    compensation expense ........                                     (6,778)          
                                                                                                                                   
                                      ---------    ---------    ------------      -----------         -----------     ----------- 
Balance September 30, 1998 ......     1,642,381    $  16,424    $ 13,480,086                          $ 7,921,374     $(1,208,550) 
                                      =========    =========    ============      ===========         ===========     ===========  
</TABLE>
<PAGE>
<TABLE>   
<CAPTION> 
                     MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                 Crawfordsville, Indiana

           Consolidated Condensed Statement of Changes in Stockholders' Equity
                                       (Unaudited)


                                                        Accumulated           
                                                           Other  
                                      Unearned         Comprehensive      
                                     Compensation          Income             Total              
                                     ------------          ------             -----              
<S>                                    <C>                 <C>              <C>              
Balance July 1, 1998 ............      $(128,507)          $54,351          $20,065,151      
                                                                                          
Net income for the three months                                                           
    ended September 30, 1998 ....                                               255,028   
                                                                                          
Other comprehensive income,                                                               
    net of tax                                                                            
    Unrealized loss on securities                           (3,952)              (3,952)  
                                                                                          
Other comprehensive income ......                                                         
Cash dividends ($.055 per share)                                                (83,548)  
                                                                                          
Stock purchase ..................                                              (119,824)  
                                                                                          
ESOP shares earned ..............                                                25,149   
                                                                                          
Amortization of unearned                                                                  
    compensation expense ........          8,948                                  2,170
                                       ---------           -------          -----------  
                                                                                          
Balance September 30, 1998 ......      $(119,559)          $50,399          $20,140,174   
                                       =========           =======          ===========   
                                                                            
</TABLE>
  See Notes to Consolidated Condensed Financial Statement
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

              Notes to Consolidated Condensed Financial Statements

Basis of Presentation

The unaudited interim  consolidated  condensed financial  statements include the
accounts of Montgomery  Financial  Corporation  ("Montgomery"),  its subsidiary,
Montgomery   Savings,  A  Federal   Association  (the   "Association")  and  its
subsidiary, MSA SERVICE CORP.

The unaudited  interim  consolidated  condensed  financial  statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include  all  information  and  disclosures   required  by  generally   accepted
accounting  principles  for  complete  financial  statements.  In the opinion of
management,  the  financial  statements  reflect all  adjustments  necessary  to
present fairly Montgomery's financial position as of September 30, 1998, results
of operations  for the three month periods  ending  September 30, 1998 and 1997,
and cash flows for the three month  periods  ended  September 30, 1998 and 1997.
The results of  operations  for the three month period ended  September 30, 1998
are not  necessarily  indicative  of the  results  of  operations  which  may be
expected for the fiscal year ending June 30, 1999.


Net Income Per Share

Net income per share for the three month  periods  ended  September 30, 1998 and
1997,  are computed by dividing net earnings by the weighted  average  shares of
common stock outstanding during the period.
<TABLE>
<CAPTION>
For the Three Months Ended                    September 30, 1998                          September 30, 1997
                                     -------------------------------------       -------------------------------------
                                                  Weighted         Per                        Weighted          Per
                                                  Average         Share                       Average          Share
                                      Income       Shares         Amount          Income        Shares         Amount
                                     --------     ---------     ----------       --------     ---------     ----------
<S>                                  <C>          <C>           <C>              <C>          <C>           <C>       
Basic Net Income Per Share:
   Net Income Available
   to Common Stockholders ......     $255,028     1,519,870     $     0.17       $225,577     1,520,063     $     0.15
                                                                ==========                                  ==========
Effect of Dilutive Stock Options
   and Grants ..................            0        14,403                             0        16,047
                                     --------     ---------     ----------       --------     --------- 

Diluted Net Income Per Share:
   Net Income Available
   To Common Stockholders ......     $255,028     1,534,273     $     0.17       $225,577     1,536,110     $     0.15
                                     ========     =========     ==========       ========     =========     ==========
</TABLE>
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


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

          Forward-Looking  Statements.  When used in this Form  10-QSB or future
filings  by  Montgomery  with  the  Securities  and  Exchange   Commission,   in
Montgomery's  press releases or other public shareholder  communications,  or in
oral statements made with the approval of an authorized  executive officer,  the
words or phrases, "will likely result", "are expected to", "will continue",  "is
anticipated",  "estimate",  "project",  "believe",  or similar  expressions  are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private Securities  Litigation Reform Act of 1995.  Montgomery wishes to caution
readers not to place  undue  reliance  on any such  forward-looking  statements,
which  speak  only as of the date  made,  and to  advise  readers  that  various
factors, including regional and national economic conditions,  changes in levels
of market interest rates,  credit risks of lending  activities,  and competitive
and regulatory factors, could affect Montgomery" financial performance and could
cause  Montgomery's  actual results for future periods to differ materially from
those anticipated or projected.  Montgomery does not undertake, and specifically
disclaims any obligation,  to revise any  forward-looking  statements to reflect
the occurrence of anticipated or unanticipated events or circumstances after the
date of such statements.

          Financial Condition.  Montgomery's total assets were $119.3 million at
September 30, 1998,  an increase of $2.1  million,  or 1.9 percent from June 30,
1998.  During this three month period  interest-earning  assets  increased  $2.1
million,  or 1.9 percent.  Short-term  interest-earning  deposits decreased $2.6
million,  or 24.1  percent  primarily  due to the use of  liquidity to fund loan
growth.  Loans increased $4.2 million, or 4.2 percent,  which is the approximate
increase budgeted for the current year-to-date.  Deposits decreased $948,000, or
1.1 percent and FHLB advances increased $3.0 million, or 26.6 percent, causing a
net increase in  interest-bearing  liabilities  of 2.2 percent.  The increase in
borrowings was primarily used to fund loan growth.

          Capital and Liquidity. At September 30, 1998, stockholders' equity was
$20,140,000 or 16.9 percent of total assets,  compared with stockholders' equity
of $20,065,000,  or 17.1 percent, at June 30, 1998. The Association continues to
exceed all minimum regulatory capital  requirements.  At September 30, 1998, the
Association's  tangible  and core  capital was  $15,813,000,  or 13.4 percent of
tangible  assets,  $14,075,000  in excess of the 1.5  percent  minimum  required
tangible  capital and $11,097,000 in excess of the 4.0 percent minimum  required
core  capital.  Risk-based  capital  equaled  $15,097,000,  or 20.6  percent  of
risk-weighted  assets,  $9,233,000  more than the minimum 8.0 percent risk based
level  required.  The  director of the OTS is required to set minimum  liquidity
levels  between  four and 10 percent of assets.  Current  regulations  require a
minimum  liquidity level of five percent.  The  Association's  average liquidity
ratio for the three months ended September 30, 1998, was 8.9 percent.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


          Asset/Liability  Management.  The  Association,  like other  financial
institutions,  is  subject  to  interest  rate  risk  to  the  extent  that  its
interest-bearing   liabilities   reprice   on  a   different   basis   than  its
interest-bearing  assets. OTS regulations  provide a Net Portfolio Value ("NPV")
approach to the quantification of interest rate risk. In essence,  this approach
calculates the  difference  between the present value of  liabilities,  expected
cash flows from assets and cash flows from off balance  sheet  contracts.  Under
OTS regulations,  an  institution's  "normal" level of interest rate risk in the
event of an immediate and sustained 200 basis point change in interest  rates is
a decrease in the  institution's NPV in an amount not exceeding 2 percent of the
present  value of its assets.  Thrift  institutions  with greater than  "normal"
interest rate exposure must take a deduction from their total capital  available
to meet their risk-based  capital  requirement.  The amount of that deduction is
one-half of the  difference  between  (a) the  institution's  actual  calculated
exposure to the 200 basis point  interest rate  increase or decrease  (whichever
results in the greater pro forma  decrease in NPV) or (b) its "normal"  level of
exposure  which is 2% of the present value of its assets.  Regulations do exempt
all institutions  under $300 million in assets with risk-based  capital above 12
percent  from  reporting  information  to  calculate  exposure  and  making  any
deduction from  risk-based  capital.  At September 30, 1998,  the  Association's
total  assets were  $119.3  million  and risk based  capital  was 20.6  percent;
therefore the Association  would have been exempt from calculating or making any
risk-based   capital   reduction.    The   Association's   management   believes
interest-rate risk is an important factor and makes all reports necessary to OTS
to calculate interest-rate risk on a voluntary basis. At June 30, 1998, the most
recent date for which  information  available  from the OTS, 2.0% of the present
value of the  Association's  assets was approximately  $2.39 million,  which was
less than $3.46 million, the greatest decrease in NPV resulting from a 200 basis
point change in interest rates. As a result, the Association,  for OTS reporting
purposes,  would have been  required to make a deduction  from total  capital in
calculating its risk-based capital  requirement had this rule been in effect and
had the Association  not been exempt from reporting on such date.  Based on June
30,  1998 NPV  information,  the  amount  of the  Association's  deduction  from
capital,  had it been  subject  to  reporting,  would  have  been  approximately
$535,000.

          It has been and continues to be a priority of the Association's  Board
of Directors and  management to manage  interest rate risk and thereby limit any
negative  effect of changes in  interest  rates on the  Association's  NPV.  The
Association's Interest Rate Risk Policy,  established by the Board of Directors,
promulgates  acceptable  limits on the  amount  of  change in NPV given  certain
changes in interest  rates.  Specific  strategies  have included  shortening the
amortized  maturity of fixed-rate  loans and increasing the volume of adjustable
rate loans to reduce the average maturity of the Association's  interest-earning
assets.  FHLB advances are used in an effort to match the effective  maturity of
the Association's interest-bearing liabilities to its interest-earning assets.

        Presented  below,  as of June 30, 1998 and June 30, 1997, is an analysis
of the Association's  estimated interest rate risk as measured by changes in NPV
for instantaneous  and sustained  parallel shifts in interest rates, up and down
300 basis points in 100 point  increments,  compared to limits set by the Board.
Assumptions  used in  calculating  the  amounts  in this  table are  assumptions
utilized by the OTS in assessing  the interest risk of the thrifts it regulates.
Based upon these assumptions at June 30, 1998, and June 30, 1997, the NPV of the
Association was $18.9 million and $18.4 million, respectively. NPV is calculated
by the OTS for the purpose of interest  rate risk  assessment  and should not be
considered as an indicator of value of the Association.
<PAGE>
<TABLE>
<CAPTION>
                               MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                           Crawfordsville, Indiana


                                                At June 30, 1998                     At June 30,1997
      Assumed               Board
    Change in               Limit
  Interest Rates          % Change          $ Change          % Change           $ Change          % Change
  (Basis Points)            in NPV           in NPV            in NPV              in NPV            in NPV
  --------------            ------           ------            ------              ------            ------
                                              (Dollars in Thousands)
<S>                           <C>            <C>                  <C>              <C>                 <C>
        +300                  -60            -5,717               -30              -5,754              -43
        +200                  -50            -3,463               -18              -3,637              -31
        +100                  -30            -1,452                -8              -1,622              -20
           0                    0                 0                 0                   0                0
        -100                  -30            +1,020                +5                +988               +5
        -200                  -50            +1,761                +9              +1,237               +7
        -300                  -60            +2,782               +15              +1,347               +7
</TABLE>
 
          In the event of a 300 basis point  change in interest  rate based upon
estimates as of June 30, 1998, the Association  would  experience a 15% increase
in NPV in a declining  rate  environment  and a 30%  decrease in NPV in a rising
environment.  During periods of rising rates,  the value of monetary  assets and
liabilities decline.  Conversely,  during periods of falling rates, the value of
monetary assets and liabilities increase. However, the amount of change in value
of specific  assets and liabilities due to changes in rates is not the same in a
rising rate  environment as in a falling rate  environment  (i.e., the amount of
value  increase  under a specific rate decline may not equal the amount of value
decrease  under  an  identical  upward  rate  movement).   Based  upon  the  NPV
methodology,  the  decreased  level of  interest  rate risk  experienced  by the
Association  in  recent  periods  was  primarily  due to the  interest  rate  on
interest-earning   assets   increasing   more   than   the   interest   rate  on
interest-bearing  liabilities  due to the  increase  in fixed  rate  residential
mortgage loans and non-residential loans, which generally carry a higher rate of
interest than one year adjustable rate loans.

          Results of  Operations.  Montgomery's  net income for the three months
ended September 30, 1998, was $255,000 compared to $226,000 for the three months
ended September 30, 1997, an increase of $29,000.  Net interest income increased
$80,000,   or  9.0   percent,   primarily   due  to  an   increase   in  average
interest-earning   assets   of  $13.9   million,   or  14.2   percent.   Average
interest-earning assets were $111.2 million for the three months ended September
30, 1998 compared to $97.3 million for the 1997 period. Average interest-bearing
liabilities  increased  $13.6 million from $78.7 million to $92.3 million during
the comparable periods. Interest rate spread decreased from 2.58 percent for the
three months  ended  September  30,  1997,  to 2.54 percent for the three months
ended  September 30, 1998. Net interest  margin  decreased from 3.64 percent for
the three months ended  September  30, 1997 to 3.48 percent for the three months
ended  September 30, 1998. The provision for losses on loans was $15,000 for the
three months ended  September 30, 1998,  compared to $3,000 for the three months
ended September 30, 1997. Non-interest expense was $536,000 for the three months
ended  September 30, 1998 compared to $489,000 for the 1997 period,  an increase
of $47,000, or 9.7 percent,  primarily due to growth of the Association.  Income
before  income tax was $430,000 for the three months ended  September  30, 1998,
compared to $403,000 for the three months ended  September 30, 1997, an increase
of $27,000.  Income tax for the three  months  ended  September  30,  1998,  was
$175,000 compared to $177,000 for the three months ended September 30, 1997.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


          Interest  Income.  Montgomery's  total  interest  income for the three
months ended September 30, 1998, was $2.2 million,  an increase of $244,000,  or
12.3 percent,  compared to interest  income for the three months ended September
30,  1997.  This  increase  was  primarily  caused  by an  increase  in  average
interest-earning  assets from $97.3 million for the three months ended September
30, 1997,  to $111.2  million for the three months ended  September 30, 1998, an
increase of $13.9 million,  or 14.3 percent.  Average loans increased from $88.9
million  for the 1997  period to $101.7  million for the 1998 period and average
interest-earning  deposits  increased  from $7.5  million  to $8.3  million  and
average  investment  securities  increased  from  $35,000  to  $302,000  for the
respective  periods.  The  average  yield on  interest-earning  assets  was 8.03
percent for the three months ended September 30, 1998,  compared to 8.17 percent
for the three  months ended  September  30, 1997.  This  decrease was  primarily
caused by a decrease  in the  average  yield on loans from 8.35  percent to 8.26
percent for the current three month period.

          Interest  Expense.   Interest  expense  for  the  three  months  ended
September  30,  1998,  was $1.3  million  compared to $1.1  million for the 1997
period,  an increase of  $164,000,  or 14.9  percent.  Average  interest-bearing
liabilities increased $13.6 million, or 17.3 percent, from $78.7 million for the
three months ended  September  30, 1997,  to $92.3  million for the three months
ended  September 30, 1998. The average cost of funds decreased from 5.60 percent
to 5.49  percent for the  comparable  periods  and the average  cost of deposits
decreased  from 5.51 percent to 5.41 percent.  In addition,  the average rate on
FHLB  advances  decreased  from 6.22 percent to 6.00 percent for the  comparable
periods.

          Provision  for Losses on Loans.  The provision for losses on loans was
$15,000 for the three months ended  September  30, 1998,  compared to $3,000 for
the three months ended September 30, 1997.  Provision or adjustment  entries are
made based on the Internal Loan and Asset Review  Policy.  A review is performed
at least quarterly to determine the adequacy of the current balance in allowance
for loss accounts.  Based on the most recent review,  to comply with the current
review policy, it was necessary to make the $15,000 provision.  Both the $15,000
and the $3,000 provisions for losses were made,  primarily due to increased loan
growth.  Loans  delinquent  ninety days or more were  $417,000 at September  30,
1998,  compared to $724,000 at June 30, 1998 and $640,000 at September 30, 1997.
Non-performing  loans to total loans at  September  30,  1998,  was 0.40 percent
compared to 0.72  percent at June 30,  1998 and 0.71  percent at  September  30,
1997. The allowance for loan losses to non-performing  loans was 48.2 percent at
September 30, 1998 compared to 25.7 percent at June 30, 1998 and 28.6 percent at
September  30, 1997.  The allowance to total loans was 0.19 percent at September
30, 1998,  0.19 percent at June 30, 1998 and 0.20 percent at September 30, 1997.
Montgomery  is  continually  re-evaluating  the level of the  allowance for loan
losses  as the  amount  of  non-residential  mortgage  loans  and other new loan
products are offered.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


         Non-Interest  Income.  Montgomery's  other  income for the three months
ended  September  30, 1998,  totalled  $14,000  compared to $8,000 for the three
months ended September 30, 1997, an increase of $6,000, or 83.6 percent.  During
the comparable periods, service charges on deposit accounts increased $4,000 due
to an increase in the number of demand  deposit  accounts and  appraisal  income
increased $2,000.

         Non-Interest Expense.  Montgomery's other expenses for the three months
ended September 30, 1998, totalled $536,000,  compared to $489,000 for the three
months  ended  September  30,  1997,  an increase of  $47,000,  or 9.7  percent.
Salaries and employee benefits  increased $8,000 primarily due to an increase in
personnel to accommodate  growth.  Equipment  expense increased $11,000 and data
processing expense increased $8,000. These increases are generally reflective of
Montgomery's  growth.  Real estate  operations  net income for the three  months
ended September 30, 1998, was $5,000 compared to $11,000 for the 1997 comparable
period,  a decrease of $6,000.  This was due to a decrease in net rental income.
Advertising  expense  increased  $3,000,  or 31.3  percent  due to an  increased
marketing  effort to attract  new loan and  deposit  customers.  Other  expenses
increased  $10,000,  or 8.5 percent,  for the three months ended  September  30,
1998, compared to the same 1997 period, primarily due to Montgomery's growth.

         Income Tax Expense  (Benefit).  Income tax expense for the three months
ended September 30, 1998, was $175,000 compared to $177,000 for the three months
ended September 30, 1997, due to the change in taxable income.

         Impact of the Year  2000.  Montgomery  has  conducted  a  comprehensive
review of its computer systems to identify  applications  that could be affected
by the "Year 2000" issue,  and has developed an  implementation  plan to address
the issue.  Montgomery's  data  processing  is  performed  primarily  by outside
venders. Montgomery has already contacted each vendor to request time tables for
year  2000  compliance  and  expected  costs,  if any,  to be  passed  along  to
Montgomery.  To date,  Montgomery  anticipates that its primary service provider
will complete all reprogramming  efforts by March 31, 1999; however,  Montgomery
will  pursue  other  options if it appears  that any  vendors  will be unable to
comply.  Management does not expect these costs to have a significant  impact on
its  financial  position  or results  of  operations,  however,  there can be no
assurance  that the vendors  systems will be Year 2000  compliant,  consequently
Montgomery  could incur  incremental  costs to convert to another vendor or move
data  processing in house.  Montgomery  has  established a budget of $75,000 for
testing and remediation relating to the Year 2000 issue.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


Part II.  OTHER INFORMATION


Item 1.  Legal Proceedings    None.

Item 2.  Changes in Securities and Use of Proceeds    None.

Item 3.  Defaults Upon Senior Securities    None.

Item 4.  Submission of Matters to a Vote of Security Holders    None.

Item 5.  Other Information    None.

Item 6.  Exhibits and Reports on Form 8-K

     (a)   Exhibits

               27.  Financial Data Schedule

     (b)   Reports on Form 8-K

               None


<PAGE>
                    MONTGOMERY SAVINGS, A FEDERAL ASSOCIATION
                             Crawfordsville, Indiana


                                   SIGNATURES

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


                                         Montgomery Financial Corporation



Date:  November 10, 1998             By: /s/Earl F. Elliot
                                         -----------------
                                                
                                         Earl F. Elliott, President and Chief
                                         Executive Officer



Date:  November 10, 1998             By: /s/J. Lee Walden
                                         ----------------                  
                                                
                                         J. Lee Walden, Vice President and Chief
                                         Financial Officer