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, 1997


                                       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, 1997,  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-Q

                                      Index
                                    

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Condensed Statement of Financial Condition
         As of September 30, 1997 and June 30, 1997                     

         Consolidated Condensed Statement of Income for the Three
         Months Ended September 30, 1997 and 1996                       

         Consolidated Condensed Statement of Cash Flows for the
         Three Months Ended September 30, 1997 and 1996                 

         Consolidated Condensed Statement of Changes in Stockholders'
         Equity for the Three Months Ended September 30, 1997           

         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,  
                                                              1997                1997
                                                         -------------       -------------

<S>                                                      <C>                 <C>      
Assets
  Cash ............................................      $     326,110       $     221,456
  Short-term interest-bearing deposits ............          6,057,744          11,373,316
                                                         -------------       -------------
         Total cash and cash equivalents ..........          6,383,854          11,594,772
  Interest-bearing deposits .......................            100,000             100,000
  Securities available for sale ...................             32,407              42,494
  Loans ...........................................         90,770,595          87,088,294
  Allowance for loan losses .......................           (183,000)           (180,000)
                                                         -------------       -------------
       Net loans ..................................         90,587,595          86,908,294
  Real estate owned and held for development, net .          1,333,281           1,301,734
  Premises and equipment ..........................          1,656,368           1,620,885
  Federal Home Loan Bank stock ....................            921,500             921,500
  Interest receivable .............................            719,623             684,479
  Other assets ....................................            251,412             225,147
                                                         -------------       -------------


         Total assets .............................      $ 101,986,040       $ 103,399,305
                                                         =============       =============
Liabilities
  Deposits
      Noninterest bearing .........................      $   1,188,896       $   1,165,223
        Interest bearing ..........................         71,217,905          70,100,001
                                                         -------------       -------------
                Total deposits ....................         72,406,801          71,265,224

  Federal Home Loan Bank advances .................          8,428,373          11,428,373
  Interest payable ................................            486,631             423,305

  Deferred tax liability ..........................            360,156             360,156
   Dividends Payable ..............................             90,917
  Other liabilities ...............................            692,087             555,669
                                                         -------------       -------------


         Total liabilities ........................         82,464,965          84,032,727
                                                         -------------       -------------

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

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


                                                          September 30,         June 30,  
                                                              1997                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 .................................         13,550,925          13,547,619
  Retained earnings - substantially restricted ....          7,271,152           7,136,492
   Unearned ESOP shares--129,906 and 132,250 ......         (1,305,969)         (1,322,500)
  Unearned compensation ...........................            (11,563)            (11,563)
                                                         -------------       -------------


         Total stockholders' equity ...............         19,521,075          19,366,578


         Total liabilities and stockholders' equity      $ 101,986,040       $ 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
                                                                    September 30,
                                                           -------------------------------
                                                               1997                1996   
<S>                                                        <C>                 <C>
Interest and Dividend Income
  Loans ...........................................        $ 1,854,433         $ 1,676,124
  Investment securities ...........................                567               6,008
  Deposits with financial institutions ............            114,746              48,079
  Dividend income .................................             19,163              14,799
                                                           -----------         -----------
       Total interest and dividend income .........          1,988,909           1,745,010
                                                           -----------         -----------

Interest Expense
  Deposits ........................................            956,764             961,702
  Federal Home Loan Bank advances .................            145,160             132,583
                                                           -----------         -----------
       Total interest expense .....................          1,101,924           1,094,285
                                                           -----------         -----------
Net Interest Income ...............................            886,985             650,725
  Provision for losses on loans ...................              3,000           
                                                           -----------         -----------

Net Interest Income After
  Provision for Losses on Loans ...................            883,985             650,725
                                                           -----------         -----------
Other Income
  Service charges on deposit accounts .............              7,238               6,015

  Net appraisal income (expense) ..................             (1,054)              3,081
  Other income ....................................              1,318                 892
                                                           -----------         -----------
       Total other income .........................              7,502               9,988
                                                           -----------         -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>                 <C>
Other Expenses
  Salaries and employee benefits ..................            275,858             213,680
  Net occupancy expense ...........................             26,186              25,531
  Equipment expense ...............................             35,333              34,121
  Data processing expense .........................             27,958              22,425
  Deposit insurance expense .......................             11,428             468,838
  Real estate operations, net .....................            (10,685)            (13,071)
  Advertising expense .............................              8,599               8,590
  Other expenses ..................................            114,183             106,897
                                                           -----------         -----------
           Total other expenses ...................            488,860             867,011
                                                           -----------         -----------

Income (Loss) Before Income Tax ...................            402,627            (206,298)
  Income tax expense (benefit) ....................            177,050             (79,232)
                                                           -----------         -----------

Net Income (Loss) .................................        $   225,577         $  (127,066)
                                                           ===========         ===========

Net Income (Loss) Per Share .......................        $      0.15         $     (0.27)
                                                           ===========         ===========
Dividends Per Share ...............................        $     0.055         $     0.054
                                                           ===========         ===========
Weighted Average Shares Outstanding ...............          1,521,954             466,350

</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,
                                                              -----------------------------
                                                                   1997              1996
                                                              -----------       -----------
<S>                                                           <C>               <C> 
Operating Activities

  Net income ...........................................      $   225,577       $  (127,066)
  Adjustments to reconcile net income to net cash
      provided by operating activities
      Provision for loan losses ........................            3,000              --
      Depreciation .....................................           50,450            52,177
      Deferred income tax ..............................             --                  24
      ESOP stock amortization ..........................           19,837              --
      Change in
          Interest receivable ..........................          (35,144)          (35,464)

          Interest payable .............................           63,326            47,924

          Other assets .................................          (26,265)          (56,231)

           Other liabilities ...........................          136,418           361,604
                                                              -----------       -----------

          Net cash provided by operating activities ....          437,199           242,968
                                                              -----------       -----------

Investing Activities

  Proceeds from paydowns of securities
      available for sale ...............................           10,087             9,454
  Net change in loans ..................................       (3,682,301)       (3,504,665)
  Additions to real estate owned and held for investment          (39,824)          (77,776)
  Purchases of premises and equipment ..................          (77,656)          (71,213)
                                                              -----------       -----------

          Net cash used by investing activities ........       (3,789,694)       (3,644,200)
                                                              -----------       -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                         MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                     Crawfordsville, Indiana

                         Consolidated Condensed Statement of Cash Flows
                                           (Continued)


                                                                       Three Months Ended
                                                                        September 30,
                                                                -------------------------------
                                                                      1997              1996
                                                                ------------       ------------
<S>                                                             <C>                <C>
Financing Activities

  Net change in
       Noninterest-bearing, interest-bearing demand and
          savings deposits ...............................      $  1,472,058       $   (558,861)
      Certificates of deposit ............................          (330,481)           396,500
      Short-term borrowing ...............................              --            1,293,775
  Proceeds from FHLB advances ............................         2,000,000
  Repayment of FHLB advances .............................        (3,000,000)              --
Dividends paid ...........................................              --              (25,000)
                                                                ------------       ------------

          Net cash provided (used) by financing activities        (1,858,423)         3,106,414
                                                                ------------       ------------



Net Change in Cash and Cash Equivalents ..................        (5,210,918)          (294,818)

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

Cash and Cash Equivalents, End of Period .................      $  6,383,854       $  3,341,386
                                                                ============       ============


Additional Cash Flow and Supplementary Information

  Interest Paid ..........................................      $  1,038,598       $  1,169,252
  Income Tax Paid ........................................           102,800             15,847
  Transfer from Loans to Other Real Estate Owned .........                              307,894
   Cash Dividends Payable ................................            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       Retained      Unearned       Unearned                
                                        Shares     Amount      Capital      Earnings      ESOP Shares   Compensation      Total
                                        ------     ------      -------      --------      -----------   ------------      -----
<S>                                    <C>        <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)    $19,366,578 


  Net income for the three months
      ended September 30, 1997                                                225,577                                      225,577
                    

  Cash dividends ($.055 per share)                                            (90,917)                                     (90,917)


  ESOP shares earned                                               3,306                      16,531                        19,837

                                       ---------  -------    -----------    ----------   -----------      --------     -----------
  Balance September 30, 1997           1,653,032  $16,530    $13,550,925    $7,271,152   $(1,305,969)     $(11,563)    $19,521,075 
                                       =========  =======    ===========    ==========   ===========      ========     =========== 
           

</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, 1997, results
of operations  for the three month periods  ending  September 30, 1997 and 1996,
and cash flows for the three month  periods  ended  September 30, 1997 and 1996.
The results of  operations  for the three month period ended  September 30, 1997
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 month period ended  September  30, 1997,  and
the three month period ended  September  30, 1996,  are computed by dividing net
earnings by the weighted average shares of common stock  outstanding  during the
period.  For the three month  period  ended  September  30,  1996,  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 month period converted to 466,350 shares of Montgomery common stock in
connection with the second conversion and  reorganization  completed on June 30,
1997.
<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 $102.0 million at
September  30,  1997, a decrease of $1.4  million,  or 1.4 percent from June 30,
1997.  During this three month period  interest-earning  assets  decreased  $1.6
million,  or 1.6 percent.  Short-term  interest-earning  deposits decreased $5.3
million, or 46.3 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  $3.7  million,  or 4.3  percent,  which  is the
approximate  increase budgeted for the current  year-to-date.  Real estate owned
increased  $32,000,  or 2.4 percent.  Deposits  increased  $1.1 million,  or 1.5
percent and borrowings  decreased $3.0 million,  or 26.3 percent,  causing a net
decrease  in  interest-bearing  liabilities  of 2.3  percent.  The  increase  in
deposits was primarily due to normal growth.

          Capital and Liquidity. At September 30, 1997, stockholders' equity was
$19,521,000 or 19.1 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  September  30,  1997,   the
Association's  tangible  and core  capital was  $14,838,000,  or 14.6 percent of
tangible  assets,  $13,316,000  in excess of the 1.5  percent  minimum  required
tangible  capital and $11,793,000 in excess of the 3.0 percent minimum  required
core  capital.  Risk-based  capital  equaled  $13,797,000,  or 22.5  percent  of
risk-weighted  assets,  $8,890,000  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, 1997, was 8.7 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.  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 September  30,  1997,  the
Association  would have been exempt from  calculating  or making any  risk-based
capital reduction.  The Association's  management  however,  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 June 30, 1997, the most recent date
for which  information  available from the OTS, 2.0% of the present value of the
Association's assets was approximately $2.12 million,  which was less than $3.64
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, 1997
NPV information,  the amount of the Association's deduction from capital, had it
been subject to reporting, would have been approximately $758,000.

          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.
These strategies have resulted in the Association  maintaining acceptable limits
as set out in the Interest Rate Risk Policy.

          Presented below, as of June 30, 1997 and June 30, 1996, is an analysis
of Montgomery'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, 1997, and June 30, 1996, the NPV of the
Association was $18.4 million and $10.7 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, 1997                     At June 30,1996
     Assumed             Board            --------------------------          --------------------------
    Change in            Limit
  Interest Rates        % Change          $ Change          % Change          $ Change          % Change
  (Basis Points)         in NPV            in NPV            in NPV            in NPV            in NPV
  --------------         ------            ------            ------            ------            ------
<S>                        <C>            <C>                  <C>              <C>                 <C>
                                            (Dollars in Thousands)

       +300                -60            -5,754               -43              -4,823             -45
       +200                -50            -3,637               -31              -3,042             -29
       +100                -30            -1,622               -20              -1,351             -13
          0                  0                 0                 0                   0               0
       -100                -30              +988                +5                +838              +8
       -200                -50            +1,237                +7              +1,097             +10              
       -300                -60            +1,347                +7              +1,112             +10
</TABLE>

          In the event of a 300 basis point  change in interest  rate based upon
estimates as of June 30, 1997, the Association would experience a 7% increase in
NPV in a  declining  rate  environment  and a 43%  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  September 30, 1997, was $226,000  compared to a net loss $127,000 for the
three months ended  September  30, 1996,  an increase of $353,000.  Net interest
income  increased  $236,000,  or 36.3  percent,  primarily due to an increase in
average  interest-earning  assets of $10.9  million,  or 12.6  percent.  Average
interest-earning  assets were $97.3 million for the three months ended September
30, 1997 compared to $86.4 million for the 1996 period. Average interest-bearing
liabilities  decreased from $78.8 million to $78.7 million during the comparable
periods.  Interest rate spread  increased from 2.53 percent for the three months
ended  September 30, 1996, to 2.58 percent for the three months ended  September
30, 1997. Due to the increase in average  interest-earning  assets, net interest
margin  increased to 3.64 percent for the three months ended  September 30, 1997
from 3.01 percent for the three months ended  September 30, 1996.  The provision
for losses on loans was $3,000 for the three  months ended  September  30, 1997,
with no provision being made during the comparable
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


1996  period.  Non-interest  income was $8,000 for the 1997 three  month  period
compared to $10,000 for the 1996 period.  Non-interest  expense was $489,000 for
the three  months  ended  September  30, 1997  compared to $867,000 for the 1996
period,  a decrease of $378,000,  or 43.6 percent,  primarily due to the Savings
Association Insurance Fund ("SAIF") one time special assessment in the amount of
$428,000 in the 1996 period. Income before income tax was $403,000 for the three
months ended  September  30, 1997,  compared to a loss of $206,000 for the three
months ended  September  30, 1996,  an increase of $609,000.  Income tax for the
three months ended September 30, 1997, was $177,000 compared to a net income tax
benefit of $79,000 for the three months ended September 30, 1996. Net income for
the three months ended September 30, 1996 was $132,000, before the after tax net
effect  of the SAIF time  special  assessment  in the  amount  of  $259,000,  as
compared to $226,000 for the current three month period.

          Interest  Income.  Montgomery's  total  interest  income for the three
months ended September 30, 1997, was $2.0 million,  an increase of $244,000,  or
14.0 percent,  compared to interest  income for the three months ended September
30,  1996.  This  increase  was  primarily  caused  by an  increase  in  average
interest-earning  assets from $86.4 million for the three months ended September
30, 1996,  to $97.3  million for the three months ended  September  30, 1997, an
increase of $10.9 million,  or 12.6 percent.  Average loans increased from $81.7
million  for the 1996  period to $88.9  million  for the 1997 period and average
interest-earning  deposits  increased  from $3.7 million to $7.5 million for the
respective  periods.  The  average  yield on  interest-earning  assets  was 8.17
percent for the three months ended September 30, 1997,  compared to 8.08 percent
for the three  months ended  September  30, 1996.  This  increase was  primarily
caused by an increase in the  average  yield on loans from 8.21  percent to 8.35
percent for the current three month period.

          Interest  Expense.   Interest  expense  for  the  three  months  ended
September 30, 1997,  was $1.1 million,  which was an increase of $8,000,  or 0.7
percent,   from  the  three   months   ended   September   30,   1996.   Average
interest-bearing  liabilities  decreased  $94,000,  or 0.1  percent,  from $78.8
million for the three months ended  September 30, 1996, to $78.7 million for the
three  months ended  September  30,  1997.  The average cost of funds  increased
however,  from 5.55 percent to 5.60 percent for the  comparable  periods and the
average  cost of  deposits  increased  from 5.50  percent  to 5.51  percent.  In
addition,  the average rate on  borrowings  increased  from 5.94 percent to 6.22
percent  for the  comparable  periods  due to  converting  some  short term FHLB
advances to longer term fixed rate advances.

          Provision  for Losses on Loans.  The provision for losses on loans was
$3,000 for the three months  ended  September  30, 1997.  There was no provision
made for the three months ended  September  30,  1996.  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 $3,000  provision.  Loans
delinquent ninety days or more were $640,000 at September 30, 1997,  compared to
$502,000 at June 30, 1997 and  $544,000 at September  30,  1996.  Non-performing
loans to total loans at September  30, 1997,  was 0.71 percent  compared to 0.58
percent at June 30, 1997 and 0.65 percent at September 30, 1996.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


Non-performing  assets,  consisting  of  non-performing  loans in the  amount of
$640,000 and other real estate in the amount of $109,000,  totaled $749,000,  or
0.73  percent  of total  assets,  at  September  30,  1997.  At June  30,  1997,
non-performing  assets  were  $611,000,  or 0.59  percent  of total  assets  and
$1,018,000,  or 1.1 percent at September  30, 1996.  The allowance for losses to
non-performing  assets was 24.4 percent at September  30, 1997,  29.5 percent at
June 30, 1996 and 15.5 percent at September  30,  1996.  The  allowance to total
loans was 0.20 percent at September 30, 1997,  0.21 percent at June 30, 1997 and
0.19  percent at  September  30, 1996.  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  September  30, 1997,  totalled  $8,000  compared to $10,000 for the three
months  ended  September  30,  1996,  a  decrease  of $2,000,  or 20.0  percent.
Appraisal  income  decreased  $4,000  during  the  comparable  period due to the
reduction in the number of loan applications in the comparative periods.

         Non-Interest Expense.  Montgomery's other expenses for the three months
ended September 30, 1997, totalled $489,000,  compared to $867,000 for the three
months  ended  September  30, 1996,  a decrease of  $378,000,  or 43.6  percent.
Salaries and employee  benefits  increased  $62,000.  Stock  benefit  plans were
adopted  subsequent  to the  September,  1996 three month period and the cost of
these plans was $26,000 for the three  months  ended  September  30,  1997.  The
balance of the  increase  was  primarily  due to an  increase  in branch  office
personnel to accommodate  growth.  Equipment  expense  increased $1,000 and data
processing expense increased $6,000. These increases are generally reflective of
Montgomery's  growth.  Deposit  insurance  expense  decreased  $458,000  for the
comparative  periods due to the one time  special  assessment  of $428,000 and a
decrease of $30,000 in the quarterly  premium  resulting  from the one time SAIF
special assessment. Real estate operations net income for the three months ended
September  30,  1997,  was $11,000  compared to $13,000 for the 1996  comparable
period, an decrease of $2,000.  This was due to a decrease in net rental income.
Other  expenses  increased  $7,000,  or 6.5 percent,  for the three months ended
September  30,  1997,  compared to the same 1996  period,  primarily  due to the
growth in activity in demand  deposits  and the related  costs of  operation  of
Montgomery's first ATM at its Mill Street Office.

          Income Tax Expense (Benefit).  Income tax expense for the three months
ended September 30, 1997, was $177,000  compared to a tax benefit of $79,000 for
the three months ended  September 30, 1996. The tax benefit for the three months
ended  March  31,  1996,  was  caused  primarily  by the one time  SAIF  special
assessment.
<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 12, 1997             By: /s/Earl F. Elliott
                                         ------------------
                                         Earl F. Elliott, President and Chief
                                         Executive Officer



Date:  November 12, 1997             By: /s/J. Lee Walden
                                         ----------------
                                         J. Lee Walden, Vice President and Chief
                                         Financial Officer