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 March 31, 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 April 30, 1998,  there were 1,653,032  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 March 31, 1998 and June 30, 1997                                 

         Consolidated Condensed Statement of Income for the Three
         And Nine Months Ended March 31, 1998 and 1997                          

         Consolidated Condensed Statement of Cash Flows for the
         Nine Months Ended March 31, 1998 and 1997                              

         Consolidated Condensed Statement of Changes in Stockholders'
         Equity for the Nine Months Ended March 31, 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                                                  

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)

                                                              March 31,          June 30,
                                                                1998               1997
                                                           -------------      -------------
<S>                                                        <C>                <C>
Assets
  Cash ...............................................     $     381,210      $     221,456
  Short-term interest-bearing deposits ...............         4,537,143         11,373,316
                                                           -------------      -------------
         Total cash and cash equivalents .............         4,918,353         11,594,772
  Interest-bearing deposits ..........................           195,000            100,000
  Securities available for sale ......................           335,727             42,494
  Loans ..............................................        98,686,104         87,088,294
  Allowance for loan losses ..........................          (183,000)          (180,000)
                                                           -------------      -------------
       Net loans .....................................        98,503,104         86,908,294
  Real estate owned and held for development, net ....         1,436,255          1,301,734
  Premises and equipment .............................         1,745,977          1,620,885
  Federal Home Loan Bank Stock .......................           921,500            921,500
  Interest receivable ................................           794,910            684,479
  Other assets .......................................           283,434            225,147
                                                           -------------      -------------

         Total assets ................................     $ 109,134,260      $ 103,399,305
                                                           =============      =============
Liabilities
  Deposits
      Noninterest bearing ............................     $   1,253,808      $   1,165,223
      Interest bearing ...............................        76,973,917         70,100,001
                                                           -------------      -------------
         Total deposits ..............................        78,227,725         71,265,224
  Federal Home Loan Bank advances ....................         9,067,771         11,428,373
  Interest payable ...................................           463,615
                                                                                    423,305
  Deferred tax liability .............................           405,216            360,156
  Dividends payable ..................................            90,917
  Other liabilities ..................................           956,412            555,669
                                                           -------------      -------------

         Total liabilities ...........................        89,211,656         84,032,727
                                                           -------------      -------------

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

                   Consolidated Condensed Statement of Financial Condition
                                         (Unaudited)
                                        (continued)

                                                              March 31,          June 30,
                                                                1998               1997
                                                           -------------      -------------
<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;  1,653,032 Issued ..................            16,530             16,530
  Paid-in capital ....................................        13,564,860         13,547,619
  Retained earnings - substantially restricted .......         7,545,693          7,136,492
   Unearned ESOP shares - 126,162 and 132,250 ........        (1,261,616)        (1,322,500)
   Unearned compensation .............................           (11,563)           (11,563)
  Net unrealized gain on securities available for sale            68,700         
                                                           -------------      -------------

         Total stockholders' equity ..................        19,922,604         19,366,578
                                                           -------------      -------------

         Total liabilities and stockholders' equity ..     $ 109,134,260      $ 103,399,305
                                                           =============      =============
</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               Nine Months Ended
                                                       March 31,                         March  31,          
                                             -----------------------------      ----------------------------
                                                  1998            1997             1998             1997
                                             ------------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>             
Interest and Dividend Income
  Loans .................................     $ 2,028,082      $ 1,719,626      $ 5,823,466      $ 5,114,885
                                              -----------      -----------      -----------      -----------
  Investment securities .................           1,885              744            3,019           10,212
  Deposits with financial institutions ..          72,354           89,144          261,646          186,622
  Dividend Income .......................          18,177           14,517           55,921           44,115
                                              -----------      -----------      -----------      ----------- 
       Total interest and dividend income       2,120,498        1,824,031        6,144,052        5,355,834
                                              -----------      -----------      -----------      ----------- 

Interest Expense
  Deposits ..............................       1,008,740          977,006        2,958,806        2,874,601       
Federal Home Loan Bank advances .........         131,567          163,496          402,575          466,895       
Total interest expense ..................       1,140,307        1,140,502        3,361,381        3,341,496

Net Interest Income .....................         980,191          683,529        2,782,671        2,014,338
  Provision for losses on loans .........          13,000            3,000           13,000
                                              -----------      -----------      -----------      ----------- 

Net Interest Income After
  Provision for Losses on Loans .........         980,191          670,529        2,779,671        2,001,338
                                              -----------      -----------      -----------      ----------- 
Other Income
  Service charges on deposit accounts ...           8,836            6,151           24,787           18,461
  Net appraisal expense .................          (2,203)          (4,132)          (3,146)            (682)
  Other income ..........................             966            1,346            3,347            2,125
                                              -----------      -----------      -----------      -----------  
       Total other income ...............           7,599            3,365           24,988           19,904
                                              -----------      -----------      -----------      ----------- 
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                               MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                           Crawfordsville, Indiana

                                  Consolidated Condensed Statement of Income
                                                 (Unaudited)
                                                 (continued)


                                                   Three Months Ended               Nine Months Ended
                                                       March 31,                         March  31,          
                                             -----------------------------      ----------------------------
                                                  1998            1997             1998             1997
                                             ------------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>             
Other Expenses
  Salaries and employee benefits ........         308,048          243,227          901,540          692,216
  Net occupancy expense .................          29,215           27,132           80,589           78,464
  Equipment expense .....................          46,975           36,117          119,794          106,572
  Data processing expense ...............          32,550           27,275           89,901           72,270
  Deposit insurance expense .............          12,021           11,269           35,227          511,424
  Real estate operations, net ...........          (5,690)         (19,413)         (18,094)         (60,094)
Advertising expense .....................           9,628            6,177           28,497           23,965   
Other expenses ..........................         119,853           94,352          370,846          313,060
                                              -----------      -----------      -----------      ----------- 
           Total other expenses .........         552,600          426,156        1,608,300        1,737,877
                                              -----------      -----------      -----------      ----------- 

Income Before Income Tax ................         435,190          247,738        1,196,359          283,365
  Income tax expense ....................         178,582          101,200          514,407          120,318
                                              -----------      -----------      -----------      ----------- 

Net Income ..............................     $   256,608      $   146,538      $   681,952      $   163,047
                                              ===========      ===========      ===========      =========== 

Net Income Per Share:
      Basic .............................     $      0.17      $      0.32      $      0.45      $      0.35
      Diluted ...........................     $      0.17      $      0.32      $      0.44      $      0.35

Dividends Per Share .....................     $     0.055      $     0.054      $     0.165      $     0.161

</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)

                                                                   Nine Months Ended
                                                                        March 31,
                                                             ------------------------------
                                                                 1998              1997  
                                                             ------------      ------------
<S>                                                          <C>               <C>
Operating Activities

  Net income ...........................................     $    681,952      $    163,047
  Adjustments to reconcile net income to net cash
      provided by operating activities
      Provision for loan losses ........................            3,000            13,000
      Depreciation .....................................          153,539           155,457
      Gain (loss) on sale of real estate owned .........          (22,023)
      Deferred income tax
                                                                                     11,983
      ESOP stock amortization ..........................           78,125
      Change In
          Interest receivable ..........................         (110,431)          (77,432)
          Interest payable .............................           40,310            (8,837)
          Other assets .................................          (58,287)          (41,678)
          Other liabilities ............................          400,743           (49,583)
                                                             ------------      ------------

             Net cash provided by operating activities .        1,188,951           143,934
                                                             ------------      ------------


Investing Activities

   Purchase of interest-bearing deposits ...............          (95,000)
  Proceeds from paydowns of
      securities available for sale ....................           20,527           269,199
   Purchase of securities available for sale ...........         (200,000)
  Net change in loans ..................................      (11,719,727)       (4,028,202)
  Additions to real estate owned and held for investment          (90,556)         (182,081)
  Proceeds from real estate owned sales ................           52,795           166,301
  Purchases of premises and equipment ..................         (253,474)         (147,131)
                                                             ------------      ------------

             Net cash used by investing activities .....      (12,285,435)       (3,921,914)
                                                             ------------      ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                       MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                   Crawfordsville, Indiana

                       Consolidated Condensed Statement of Cash Flows
                                         (Continued)

                                                                   Nine Months Ended
                                                                        March 31, 
                                                             ------------------------------
                                                                   1998             1997
                                                             ------------      ------------
<S>                                                          <C>               <C>              
Financing Activities

  Net Change In
       Noninterest-bearing, interest-bearing demand and
          savings deposits .............................     $  1,383,820      $  1,893,276
      Certificates of deposit ..........................        5,578,681         1,064,174
  Proceeds from FHLB advances ..........................        2,807,056         4,000,000
  Repayment of FHLB advances ...........................       (5,167,658)       (1,571,627)
Purchase of unearned compensation (MRP) stock ..........          (11,563)
  Dividends paid .......................................         (181,834)          (75,000)
                                                             ------------      ------------

             Net cash provided by financing activities .        4,420,065         5,299,260
                                                             ------------      ------------
                                                                                 
Net Change in Cash and Cash Equivalents ................       (6,676,419)        1,521,280

Cash and Cash Equivalents, Beginning of Period .........       11,594,772         3,636,204
                                                             ------------      ------------

Cash and Cash Equivalents, End of Period ...............     $  4,918,353      $  5,157,484
                                                             ============      ============

Additional Cash Flow and Supplementary Information

  Interest paid ........................................     $  3,321,071      $  3,350,333
  Income tax paid ......................................          230,527            92,246
  Transfer from loans to other real estate owned .......          121,917           351,836
  Cash dividends payable ...............................           90,917            25,000

</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        Retained       Unearned       Unearned   
                                            Shares         Amount         Capital        Earnings      ESOP Shares   Compensation 
                                            ------         ------         -------        --------      -----------   ------------ 

<S>                                       <C>           <C>             <C>            <C>            <C>             <C>          
Balance July 1, 1997 ...............      1,653,032     $    16,530     $13,547,619    $ 7,136,492    $(1,322,500)    $   (11,563) 
                                                                                                                                   
Net income for the nine months                                                                                                     
    ended March 31, 1998 ...........                                                       681,952                                 
                                                                                                                                   
Cash dividends ($.055 per share) ...                                                      (272,751)                                
                                                                                                                                   
ESOP shares earned .................                                         17,241                        60,884                  
                                                                                                                                   
Net change in unrealized gain                                                                                                      
    on securities available for sale                                                                                               
                                          ---------     -----------     -----------    -----------    -----------     -----------  
                                                                                                                                   
                                                                                                                                   
Balance March 31, 1998 .............      1,653,032     $    16,530     $13,564,860    $ 7,545,693    $(1,261,616)   $   (11,563)  
                                          =========     ===========     ===========    ===========    ===========    ===========  

<CAPTION>
                                               Net Unrealized                    
                                                   Gain On                         
                                                 Securities                       
                                              Available for Sale        Total      
                                              ------------------        -----      
<S>                                                <C>            <C>          
Balance July 1, 1997 ...............                              $19,366,578  
                                                                               
Net income for the nine months                                                 
    ended March 31, 1998 ...........                                  681,952  
                                                                               
Cash dividends ($.055 per share) ...                                 (272,751) 
                                                                               
ESOP shares earned .................                                   78,125  
                                                                               
Net change in unrealized gain                                                  
    on securities available for sale               $    68,700         68,700  
                                                   -----------    -----------  
                                                                               
                                                                               
Balance March 31, 1998 .............               $    68,700    $19,922,604  
                                                   ===========    ===========  
                                                                               
</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-QSB 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 March 31, 1998, results of
operations  for the three and nine month periods ending March 31, 1998 and 1997,
and cash flows for the nine month  periods  ended March 31,  1998 and 1997.  The
results of operations  for the three and nine month periods ended March 31, 1998
are not  necessarily  indicative  of the  results  of  operations  which  may be
expected for the fiscal year ending June 30 1998.

Net Income Per Share

Net income per share for the three and nine month  periods  ended March 31, 1998
and 1997 are computed by dividing net earnings by the weighted average shares of
common stock outstanding during the period. For the three and nine month periods
ended March 31, 1997,  the weighted  average  shares is computed  based upon the
weighted  average of the 250,000  shares of publicly  owned  common stock of the
Association  that were  outstanding  during  the  three  and six  month  periods
converted to 466,350  shares of Montgomery  common stock in connection  with the
second conversion and reorganization completed on June 30, 1997.

<TABLE>
<CAPTION>
For the Three Months Ended                  March 31, 1998                            March 31, 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 ......    $ 256,608    1,524,221    $   0.17     $ 146,538      464,485    $   0.32
                                                              ========                               ========                      
Effect of Dilutive Stock Options
   and Grants ..................            0       26,421                         0            0
                                    ---------    ---------                 ---------      -------         
Diluted Net Income Per Share:
   Net Income Available
   To Common Stockholders ......    $ 256,608    1,550,642    $   0.17     $ 146,538      464,485    $   0.32
                                    =========    =========    ========     =========      =======    ========
                                    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended                   March 31, 1998                            March 31, 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           $ 681,952      1,521,493      $  0.45    $  163,047     465,485     $ 0.35
                                                                   ======                               ======
Effect of Dilutive Stock Options
   and Grants                               0         25,634                          0           0
                                    ---------      ----------                ----------     ------- 

Diluted Net Income Per Share:
   Net Income Available
   To Common Stockholders           $ 681,952      1,547,127      $  0.44    $  163,047     465,485     $ 0.35
                                    =========      =========      =======    ==========     =======     ====== 
</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-Q or future
filings by Montgomery  with the Office of Thrift  Supervision,  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 $109.1 million at
March 31, 1998, an increase of $5.7 million,  or 5.5 percent from June 30, 1997.
During the three month period  ending March 31,  1998,  interest-earning  assets
increased $5.1 million,  or 5.2 percent.  Short-term  interest-earning  deposits
decreased  $6.8 million,  or 60.1 percent  primarily due to the use of liquidity
received from the sale of stock on June 30, 1997 to repay Federal Home Loan Bank
advances and fund loan growth.  Loans increased $11.6 million,  or 13.3 percent,
which is approximately  $2.6 million above the increase budgeted for the current
year-to-date.  Interest-earning  deposits increased $95,000 or 95.0 percent,  to
$195,000 and investment  securities  increased  $293,000 to $336,000  during the
nine months ended March 31, 1998. Real estate owned increased $135,000,  or 10.3
percent primarily due to the acquisition of two single-family  residences due to
foreclosure. One of these two additions to real estate owned has been sold since
March 31, 1998.  There was no loss  recorded on this sale and a decrease in real
estate  owned in the amount of $69,000  was  recorded.  Included  in real estate
owned is a nine-unit  condominium complex with a current book value of $496,000,
which   Montgomery  has  been  holding  for  resale.   A  local   not-for-profit
organization has made a commitment to purchase this nine-unit complex for use as
office  space and housing for abused  family  members.  The sale of this complex
should be completed  during the fourth  quarter of this fiscal year with no loss
anticipated.  Deposits  increased  $7.0 million,  or 9.8 percent and  borrowings
decreased   $2.4  million,   or  20.7   percent,   causing  a  net  increase  in
interest-bearing  liabilities  of 5.5  percent.  The  increase in  deposits  was
primarily  the result of an increase in public funds  deposits.  These  deposits
were acquired at rates below comparable Federal Home Loan Bank advances.
<PAGE>
                MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

         Capital and  Liquidity.  At March 31,  1998,  stockholders'  equity was
$19,923,000 or 18.3 percent of total assets,  compared with stockholders' equity
of $19,367,000,  or 18.7 percent, at June 30, 1997. The Association continues to
exceed all minimum capital  requirements.  At March 31, 1998, the  Association's
tangible and core capital was  $15,273,000,  or 14.1 percent of tangible assets,
$13,742,000 in excess of the 1.5 percent minimum  required  tangible capital and
$10,944,000  in  excess  of the  4.0  percent  minimum  required  core  capital.
Risk-based capital equaled $14,260,000, or 21.2 percent of risk-weighted assets,
$8,880,000 more than the minimum 8.0 percent  risk-based level required.  Tier 1
risk-based capital ratio equaled 22.7 percent at March 31, 1998. 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.  Montgomery's  average  liquidity ratio for the nine months ended March
31, 1998, was 7.1 percent.

          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.  Beginning  September 30. 1995, 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.
Regulations 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 March 31, 1998, the Association
would  have been  exempt  from  calculating  or making  any  risk-based  capital
reduction. The Association's management feels interest-rate risk is an important
factor and makes all reports necessary to OTS to calculate interest-rate risk on
a  voluntary  basis.  At  December  31,  1997,  the most  recent  date for which
information  was  available  from  the  OTS,  2.0% of the  present  value of the
Association's assets was approximately $2.16 million,  which was less than $3.70
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 December 31,
1997 NPV information,  the amount of the  Association's  deduction from capital,
had it been subject to reporting, would have been approximately $770,000.

          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  Montgomery'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.
These strategies have resulted in the Association  maintaining acceptable limits
as set out in the Interest Rate Risk Policy.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

         Presented  below,  as of December  31, 1997,  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
those  assumptions  utilized  by the OTS  for the  purpose  interest  rate  risk
assessment  and  should  not be  considered  as an  indicator  of  value  of the
Association.
<TABLE>
<CAPTION>

                                             At December 31, 1997               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            -6,010                -33          -5,754            -43
       +200                -50            -3,703                -20          -3,637            -31
       +100                -30            -1,621                 -9          -1,622            -20
          0                  0                 0                  0               0              0
       -100                -30              +934                 +5            +988             +5
       -200                -50            +1,315                 +7          +1,237             +7
       -300                -60            +1,867                +10          +1,347             +7
</TABLE>

         In the event of a 300 basis point  change in  interest  rate based upon
estimates  as of December  31,  1997,  the  Association  would  experience a 10%
increase in NPV in a declining rate  environment  and a 33% 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  increased  level of  interest  rate risk  experienced  by the
Association  in  recent  periods  was  primarily  due to the  interest  rate  on
interest-bearing   liabilities   increasing  more  than  the  interest  rate  on
interest-earning assets because of the annual and lifetime caps on interest rate
adjustments for adjustable rate loans and because of the lag in rate adjustments
for such loans as compared to interest-bearing liabilities.

          Results of  Operations.  Montgomery's  net income for the three months
ended March 31,  1998,  was  $257,000  compared to $147,000 for the three months
ended March 31, 1997,  an increase of $110,000,  or 75.1  percent.  Net interest
income increased $297,000, or 43.4 percent, primarily due an increase in average
interest-earning   assets   of  $11.3   million,   or  12.3   percent.   Average
interest-earning assets were $102.8 million for the three months ended March 31,
1998  compared  to  $91.5  million  for the  1997  three-month  period.  Average
interest-bearing  liabilities  decreased  from $84.4  million  to $84.3  million
during the comparable  three-month periods.  Interest rate spread increased from
2.57 percent for the three months ended March 31, 1997,  to 2.84 percent for the
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

three   months   ended  March  31,   1998.   Due  to  the  increase  in  average
interest-earning  assets,  net interest margin increased to 3.81 percent for the
three  months  ended March 31, 1998 from 2.99 percent for the three months ended
March 31, 1997.  Non-interest  income was $8,000 for the 1998 three-month period
compared to $3,000 for the 1997  period.  Non-interest  expense was $553,000 for
the three  months  ended  March  31,  1998  compared  to  $426,000  for the 1997
three-month period, an increase of $127,000,  or 27.7 percent. This increase was
primarily due to an increase in employee  benefits,  including the establishment
of an employee stock  ownership  plan (ESOP) and  additional  expense of being a
publicly held  company.  Net income before income tax was $435,000 for the three
months  ended March 31,  1998,  compared to $248,000  for the three months ended
March 31, 1997,  an increase of $187,000,  or 75.7  percent.  Income tax for the
three  months ended March 31,  1998,  was $179,000  compared to $101,000 for the
three months ended March 31, 1996.

         For the nine  months  ended  March 31,  1998,  net income was  $682,000
compared to $163,000 for the nine months  ended March 31,  1997,  an increase of
$519,000. The most significant factor effecting Montgomery's  operations for the
nine months ended March 31, 1997 was the one time special assessment required by
the Deposit  Insurance  Funds Act of 1996. The after tax effect of this one time
assessment  was  approximately  $258,700.  Net income for the nine months  ended
March 31, 1997,  was $422,000  before the net effect of the Savings  Association
Insurance Fund ("SAIF") special  assessment.  The increase in net income for the
nine-month  period was also primarily due to an increase in net interest  income
from $2.0  million for the 1997 period to $2.8  million for the 1998  nine-month
period,  an increase of  $768,000,  or 38.1  percent.  Average  interest-earning
assets  increased from $88.6 million for the nine months ended March 31, 1997 to
$102.8 million for the 1998 nine-month  period.  Non-interest  expense decreased
$130,000,  or 7.5 percent.  This decrease was  primarily  caused by the one time
SAIF special  assessment  during the 1997 nine month period which was  partially
offset by additional  employee  salaries and benefits and the increased  cost of
operation of a publicly  held  corporation.  Income tax expense was $514,000 for
the nine months ended March 31,  1998,  compared to $120,000 for the nine months
ended March 31, 1997.

          Interest  Income.  Montgomery's  total  interest  income for the three
months ended March 31, 1998, was $2.1 million, an increase of $296,000,  or 16.3
percent,  compared to interest income for the three months ended March 31, 1997.
This  increase was primarily  caused by an increase in average  interest-earning
assets from $91.5  million for the three months ended March 31, 1997,  to $102.8
million for the three months ended March 31, 1998, an increase of $11.3 million,
or 12.3 percent  principally  due to loan growth.  Average loans  increased from
$83.7  million  for the 1997  three-month  period to $96.7  million for the 1998
three month period and average  interest-earning  deposits  decreased  from $7.0
million  to $4.9  million  for the  respective  periods.  The  average  yield on
interest-earning  assets was 8.25  percent for the three  months ended March 31,
1998, compared to 7.97 percent for the three months ended March 31, 1997.

          Interest  income for the nine months  ended March 31,  1998,  was $6.1
million, an increase of $788,000,  or 14.7 percent, from interest income for the
same period in 1997. Average  interest-earning  assets for the nine months ended
March 31, 1998,  was $99.8  million  compared to $88.6 million for the 1997 nine
month period, an increase of $11.2 million, or 12.6 percent,  principally due to
loan growth.  The average yield for the 1998 period was 8.25 percent compared to
8.06 percent for the 1997 period.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

          Interest  Expense.  Interest  expense for the three months ended March
31, 1998,  was $1.1 million,  which was a decrease of $195 from the three months
ended March 31, 1997. Average  interest-bearing  liabilities decreased $101,000,
or 0.1 percent, from $84.4 million for the three months ended March 31, 1997, to
$84.3  million for the three months  ended March 31,  1998.  The average cost of
funds  increased  however,  from 5.40 percent to 5.41 percent for the comparable
periods.  The  average  cost of  deposits  increased  from 5.29  percent to 5.31
percent for the comparable  three-month  periods. The average cost of borrowings
increased  from 6.18 percent to 6.31 percent for the  comparable  periods due to
converting some short term FHLB advances to longer term fixed rate advances.

         Interest  expense for the nine months  ended March 31,  1998,  was $3.4
million,  an increase of $20,000,  or 0.6  percent,  from the nine months  ended
March 31,  1997.  The average cost of funds for the 1998 period was 5.51 percent
compared  to  5.48  percent  for  the  1997  period.  Average   interest-bearing
liabilities  increased  from $81.3  million for the nine months  ended March 31,
1997 to $81.4 million for the 1997 nine-month period.

         Provision  for Losses on Loans.  There was no  provision  for losses on
loans during the three  months  ended March 31, 1998  compared to a provision of
$13,000 for the three months ended March 31, 1997.  During the nine months ended
March 31,  1998, a $3,000  provision  was made  compared to a $13,000  provision
being made in the comparable  1997  nine-month  period.  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
the allowance  for losses on loans.  Loans  delinquent  ninety days or more were
$922,000 at March 31, 1998, compared to $502,000 at June 30, 1997. This increase
was  primarily  caused  by  loans  with no  prior  history  of  delinquency  and
loan-to-value  ratios of less  than 75  percent.  Non-performing  loans to total
loans at March 31, 1998 were 0.93  percent  compared to 0.58 percent at June 30,
1997. Non-performing assets, consisting of non-performing loans in the amount of
$922,000 and other real estate in the amount of $240,000, totaled $1,162,000, or
1.06  percent  of  total   assets,   at  March  31,  1998.  At  June  30,  1997,
non-performing  assets  were  $611,000,  or 0.59  percent of total  assets.  The
allowance for losses to non-performing assets was 15.7 percent at March 31, 1998
and 29.5 percent at June 30, 1997. The allowance to total loans was 0.19 percent
at March 31, 1998 and 0.21  percent at June 30, 1997.  As new loan  products are
offered,  and Montgomery  increases its amount of  non-residential  and consumer
loans, management will re-evaluate the level of the allowance for loan losses.

          Non-Interest  Income.  Montgomery's  other income for the three months
ended March 31, 1998,  totalled  $8,000  compared to $3,000 for the three months
ended March 31, 1997, an increase of $5,000, or 125.8 percent. This increase was
due to an  increase  in service  charges on  deposit  accounts  in the amount of
$3,000 and a decrease in net appraisal expense of $2,000.

         Other income for the nine months ended March 31, 1998, was $25,000,  an
increase of $5,000, or 25.5 percent, from the comparable 1997 nine month period.
During the nine months ended March 31, 1998, service charges on deposit accounts
increased  $6,000 and appraisal income decreased $2,000 from the 1997 nine-month
period.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

         Non-Interest Expense.  Montgomery's other expenses for the three months
ended March 31,  1998,  totalled  $553,000,  an increase  of  $126,000,  or 29.7
percent,  from the three  months  ended March 31,  1997.  Salaries  and employee
benefits increased  $65,000.  Stock benefit plans were adopted subsequent to the
March,  1997 three-month  period and the cost of these plans was $46,000 for the
three months ended March 31, 1998. The balance of the increase was primarily due
to an increase in branch  office  personnel  to  accommodate  growth.  Equipment
expense  increased $11,000 and data processing  expense increased $5,000.  These
increases  are  generally   reflective  of  Montgomery's   growth.  Real  estate
operations  net income for the three  months  ended March 31,  1998,  was $5,000
compared to $19,000 for the 1997 comparable period, a decrease of $14,000 due to
the income on the sale of a real  estate  property  during the 1997 three  month
period.  Advertising  expense increased $3,000 from the 1997 comparative period.
Other expenses  increased $26,000,  or 27.0 percent,  for the three months ended
March 31, 1998  compared to the same 1997  period,  primarily  due to  increased
expenses  relating the operation of a publicly  held company and other  expenses
reflective of Montgomery's growth.

         Non-interest expense for the nine months ended March 31, 1998, was $1.6
million compared to $1.7 million, a decrease of $130,000,  or 7.5 percent,  from
the nine months ended March 31, 1997.  Salary and  employee  benefits  increased
$209,000 of which  $108,000  was due to the adoption of stock  benefit  plans in
effect during the 1998 nine month period. An increase in personnel due to branch
office  growth was the primary  factor for the balance of the increase in salary
and employee  benefits.  Equipment expense increased $13,000 and data processing
expense increased $18,000 due to Montgomery's growth.  Deposit insurance expense
decreased  $476,000 for the nine months  ended March 31,  1998,  compared to the
same period in 1997 due to the one time SAIF special  assessment of $428,000 and
the  reduction  in the  regular  assessment  from 23 basis  points  to 6.4 basis
points.  Net real estate  operations  generated a net income for the nine months
ended  March 31,  1998,  of $18,000  compared to a net income of $60,000 for the
1997 comparable period. This decrease was primarily caused by a gain on the sale
of real estate during the 1997 period. Advertising expense increased $4,000 from
the 1997 period.  Other expenses for the nine months ended March 31, 1998,  were
$371,000  compared to  $313,000  for the nine months  ended March 31,  1997,  an
increase of $58,000,  or 18.5 percent.  Stockholder  related  expense  increased
$33,000 and audit and accounting  expense increased $8,000 due to the additional
cost of  operation  of the  publicly  held  company.  Expenses  relating  to the
operation of  Montgomery's  ATM,  installed  during the second  quarter of 1997,
increased  $11,000  due to the  first  full  fiscal  year of use  and  increased
customer usage.

          Income Tax  Expense.  Income tax  expense for the three  months  ended
March 31,  1998,  was  $179,000  compared to $101,000 for the three months ended
March 31, 1997. This increase was due to the increase in taxable income.

          For the nine  months  ended  March 31,  1998,  income tax  expense was
$514,000  compared to $120,000 for the nine months  ended March 31,  1997.  This
increase was due to the increase in taxable income, which included the effect of
the FDIC special assessment during the 1997 period.
<PAGE>


                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


Part II.  OTHER INFORMATION


Item 1.  Legal Proceedings    None.

Item 2.  Changes in Securities    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

               None

     (b)   Reports on Form 8-K

               None



<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             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:  May 13, 1998                       By:  /s/ Earl F. Elliott 
                                               -------------------- 
                                               Earl F. Elliott, President and  
                                               Chief Executive Officer



Date:  May 13, 1998                       By:  /s/ J. Lee Walden 
                                               -------------------
                                               J. Lee Walden, Vice President and
                                               Chief Financial Officer