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 December 31, 1999


                                       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 January 31, 2000,  there were  1,361,210  shares of the  Registrant's
common stock issued and outstanding.
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


                                   Form 10-QSB

                                      Index
                                                                        Page No.
                                                                        --------

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Condensed Statement of Financial Condition
         As of December 31, 1999 and June 30, 1999                            3

         Consolidated Condensed Statement of Income for the Three
         And Six Months Ended December 31, 1999 and 1998                      4

         Consolidated Condensed Statement of Cash Flows for the
         Six Months Ended December 31, 1999 and 1998                          5

         Consolidated Condensed Statement of Stockholders'
         Equity for the Six Months Ended December 31, 1999                    7

         Notes to Consolidated Condensed Financial Statements                 8

Item 2.  Management's Discussion and Analysis of Financial Condition
           And Results of Operations                                         10


PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                   16

Item 2.  Changes in Securities                                               16

Item 3.  Defaults Upon Senior Securities                                     16

Item 4.  Submission of Matters to a Vote of Security Holders                 16

Item 5.  Other Information                                                   16

Item 6.  Exhibits and Reports on Form 8-K                                    16

Signatures                                                                   17




                                            2
<PAGE>
<TABLE>
<CAPTION>
                        MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                      Crawfordsville, Indiana

                      Consolidated Condensed Statement of Financial Condition
                                            (Unaudited)

                                                              December 31,        June 30,
                                                                  1999              1999
                                                            -------------      -------------
<S>                                                         <C>                <C>
Assets
  Cash ................................................     $     488,146      $     523,585
  Short-term interest-bearing deposits ................        10,883,077          4,409,228
                                                            -------------      -------------
         Total cash and cash equivalents ..............        11,371,223          4,932,813

  Interest-bearing deposits ...........................           169,463            219,463

  Securities available for sale .......................           507,826            880,900

  Loans ...............................................       117,350,287        111,641,224
  Allowance for loan losses ...........................          (226,000)          (226,000)
                                                            -------------      -------------
       Net loans ......................................       117,124,287        111,415,224
        Real estate owned and held for development, net         1,051,918          1,181,720

  Premises and equipment ..............................         3,170,501          2,839,409
  Federal Home Loan Bank Stock ........................         1,893,300          1,250,700

  Interest receivable .................................         1,002,311            893,854

  Other assets ........................................           341,580            345,036
                                                            -------------      -------------
         Total assets .................................     $ 136,632,409      $ 123,959,119
                                                            =============      =============

Liabilities
  Deposits
      Noninterest bearing .............................     $   1,976,530      $   1,349,282
      Interest bearing ................................        84,683,989         81,118,363
                                                            -------------      -------------
         Total deposits ...............................        86,660,519         82,467,645
  Federal Home Loan Bank advances
      and other borrowings ............................        30,391,258         20,632,069
  Interest payable ....................................           590,688            566,632
  Deferred tax liability ..............................           325,382            347,089
  Other liabilities ...................................           642,014            548,612
                                                            -------------      -------------

         Total liabilities ............................       118,609,861        104,562,047
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<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;  1,361,210 and 1,521,142 issued .....            13,612             15,211
  Paid-in capital .....................................        11,144,674         12,464,781
  Retained earnings - substantially restricted ........         8,059,697          8,131,251
   Unearned ESOP shares - 109,864 and 114,180 .........        (1,098,639)        (1,141,796)
   Unearned compensation ..............................           (74,818)           (92,714)
   Accumulated other comprehensive income (loss) ......           (21,978)            20,339
                                                            -------------      -------------

         Total stockholders' equity ...................        18,022,548         19,397,072
                                                            -------------      -------------

         Total liabilities and stockholders' equity ...     $ 136,632,409      $ 123,959,119
                                                            =============      =============
</TABLE>

See notes to Consolidated Condensed Financial Statements.



                                            3
<PAGE>
<TABLE>
<CAPTION>
                               MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                                           Crawfordsville, Indiana

                                  Consolidated Condensed Statement of Income
                                                 (Unaudited)

                                                   Three Months Ended                   Six Months Ended
                                                       December 31,                        December 31,
                                              -----------------------------     ----------------------------
                                                  1999             1998            1999              1998
                                              -----------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>
Interest and Dividend Income
  Loans .................................     $ 2,291,716      $ 2,171,744      $ 4,529,093      $ 4,271,760
  Investment securities .................           4,491            5,757           12,037            9,248
  Deposits with financial institutions ..         134,978           85,360          232,259          195,918
  Dividend Income .......................          36,635           20,933           65,680           39,648
                                              -----------      -----------      -----------      -----------
       Total interest and dividend income       2,467,820        2,283,788        4,839,069        4,516,574
                                              -----------      -----------      -----------      -----------


Interest Expense
  Deposits ..............................       1,097,181        1,063,559        2,148,177        2,163,142
  Federal Home Loan Bank advances
       and other borrowings .............         370,080          230,489          691,016          396,662
                                              -----------      -----------      -----------      -----------
       Total interest expense ...........       1,467,261        1,294,048        2,839,193        2,559,804
                                              -----------      -----------      -----------      -----------

Net Interest Income .....................       1,000,559          989,740        1,999,876        1,956,770
  Provision for losses on loans .........                           10,000                            25,000
                                               -----------      -----------      -----------      -----------
Net Interest Income After
  Provision for Losses on Loans .........       1,000,559          979,740        1,999,876        1,931,770
                                              -----------      -----------      -----------      -----------
Other Income
  Service charges on deposit accounts ...          14,863           13,181           28,678           23,799
  Gain on sale of investment securities .          55,644           55,644
  Net appraisal income (expense) ........           4,260           (5,940)           5,271           (4,535)
  Other income ..........................           7,148            1,638           14,366            3,389
                                              -----------      -----------      -----------      -----------
       Total other income ...............          81,915            8,879          103,959           22,653
                                              -----------      -----------      -----------      -----------


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                           <C>              <C>              <C>              <C>
Other Expenses
  Salaries and employee benefits ........         423,416          359,398          789,739          643,313
  Net occupancy expense .................          38,224           25,918           80,911           53,447
  Equipment expense .....................          57,487           45,958          118,306           92,515
  Data processing expense ...............          38,055           42,197           88,790           78,050
  Deposit insurance expense .............          12,424           12,695           24,773           25,192
  Real estate operations, net ...........         (13,093)         (10,954)         (18,794)         (16,197)
  Advertising expense ...................          20,847           12,221           45,991           23,513
  Other expenses ........................         161,433          139,922          316,851          263,798
                                              -----------      -----------      -----------      -----------

           Total other expenses .........         738,793          627,355        1,446,567        1,163,631
                                              -----------      -----------      -----------      -----------

Income Before Income Tax ................         343,681          361,264          657,268          790,792
  Income tax expense ....................         148,235          125,390          270,460          299,890
                                              -----------      -----------      -----------      -----------

Net Income ..............................     $   195,446      $   235,874      $   386,808      $   490,902
                                              ===========      ===========      ===========      ===========

Net Income Per Share:
      Basic .............................     $      0.16      $      0.16      $      0.30      $      0.33
      Diluted ...........................     $      0.16      $      0.16      $      0.29      $      0.32

Dividends Per Share .....................     $     0.055      $     0.055      $     0.110      $     0.110


</TABLE>

See Notes to Consolidated Condensed Financial Statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

                 Consolidated Condensed Statement of Cash Flows
                                   (Unaudited)
                                                                     Six Months Ended
                                                                       December 31,
                                                             ----------------------------
                                                                  1999            1998
                                                             -----------      -----------
<S>                                                          <C>              <C>
Operating Activities
  Net income ...........................................     $   386,808      $   490,902
  Adjustments to reconcile net income to net cash
      provided by operating activities
      Provision for loan losses ........................                           25,000
      Depreciation .....................................         156,030          125,155
      ESOP stock amortization ..........................          39,390           48,762
      Amortization of unearned compensation ............          10,636            4,341
      Change In
          Interest receivable ..........................        (108,457)         (38,988)
          Interest payable .............................          24,056          108,680
          Other assets .................................           3,456          (89,591)
          Other liabilities ............................         156,819         (419,220)
                                                             -----------      -----------

             Net cash provided by operating activities .         668,738          255,041
                                                             -----------      -----------

Investing Activities

  Proceeds from paydowns of
      securities available for sale ....................                           10,805
  Proceeds from sale of securities
       available for sale ..............................         303,000
   Purchase of securities available for sale ...........                         (441,220)
  Net change in loans ..................................      (5,709,063)      (5,256,388)
  Additions to real estate owned and held for investment         (76,021)         (46,308)
  Proceeds from Real Estate Owned Sales ................         187,853          319,222
  Purchases of premises and equipment ..................        (469,152)        (650,008)
  Purchase of FHLB of Indianapolis stock ...............        (642,600)        (329,200)
                                                             -----------      -----------

             Net cash used by investing activities .....      (6,405,983)      (6,393,097)
                                                             -----------      -----------
</TABLE>
                                       5

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

                      Consolidated Condensed Statement of Cash Flows
                                        (Continued)

                                                                      Six Months Ended
                                                                       December 31,
                                                            ------------------------------
                                                                  1999              1998
                                                            ------------      ------------
<S>                                                         <C>               <C>
Financing Activities

  Net Change In
       Noninterest-bearing, interest-bearing demand and
          savings deposits ............................     $  4,433,645      $  1,960,057
      Certificates of deposit .........................         (240,771)       (5,669,920)
  Proceeds from FHLB advances
      and other borrowings ............................       13,500,000        11,000,000
  Repayment of FHLB advances
      and other borrowings ............................       (3,740,811)       (2,247,413)
Stock purchase ........................................       (1,630,436)         (693,924)
Dividends paid ........................................         (145,972)         (174,465)
                                                            ------------      ------------

             Net cash provided by financing activities        12,175,655         4,174,335
                                                            ------------      ------------

Net Change in Cash and Cash Equivalents ...............        6,438,410        (1,963,721)

Cash and Cash Equivalents, Beginning of Period ........        4,932,813        10,896,745
                                                            ------------      ------------

Cash and Cash Equivalents, End of Period ..............     $ 11,371,223      $  8,933,024


Additional Cash Flow and Supplementary Information

  Interest Paid .......................................     $  2,815,137      $  2,451,124
  Income Tax Paid .....................................          277,824           755,589
Transfer from Loans to Other Real Estate Owned ........                            112,191
   Cash Dividends Payable .............................           68,587            80,663

</TABLE>
See Notes to Consolidated Condensed Financial Statements

                                       6

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

                                      Consolidated Condensed Statement of Stockholders' Equity
                                                             (Unaudited)

                                                           Common Stock
                                                           ---------------            Paid-in        Comprehensive       Retained
                                                      Shares           Amount        Capital            Income           Earnings
                                                      ------           ------        -------            ------           --------
<S>                                                  <C>              <C>          <C>                  <C>              <C>
  Balance July 1, 1999                               1,521,142        $15,211      $12,464,781                           $8,131,251

  Net income for the six months
      ended December 31, 1999                                                                           $386,808            386,808
                                                                                                        --------

  Other comprehensive income,
      net of tax
    Unrealized holdings arising
        during the period, net of tax
        benefit of $5,716                                                                                (8,714)
    Less: Reclassification adjustment
        for gain included in net income,
        net of tax benefit of $22,041                                                                     33,603
                                                                                                        --------
  Unrealized loss on securities                                                                          (42,317)
                                                                                                       ---------

  Other comprehensive income                                                                            $344,491
                                                                                                        ========
  Cash dividends ($.110 per share)                                                                                         (138,605)


  Stock purchase                                       (159,932)       (1,599)          (1,309,080)                        (319,757)

  ESOP shares earned                                                                        (3,767)

  Amortization of unearned
      compensation expense                                                                  (7,260)
                                                     ---------       -------          -----------       --------         ----------
  Balance December 31, 1999                           1,361,210       $13,612          $11,144,674                       $8,059,697
                                                     =========       =======          ===========       ========         ==========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                            Accumulated
                                                                                               Other
                                                          Unearned           Unearned       Comprehensive
                                                        ESOP Shares        Compensation     Income (Loss)       Total
                                                        -----------        ------------     -------------       -----
<S>                                                     <C>               <C>                 <C>            <C>
  Balance July 1, 1999                                  $(1,141,796)      $  (92,714)         $ 20,339       $19,397,072

  Net income for the six months
      ended December 31, 1999                                                                                    386,808

  Other comprehensive income,
      net of tax
    Unrealized holdings arising
        during the period, net of tax
        benefit of $5,716
    Less: Reclassification adjustment
        for gain included in net income,
        net of tax benefit of $22,041

  Unrealized loss on securities                                                                (42,317)          (42,317)


  Other comprehensive income

  Cash dividends ($.110 per share)                                                                              (138,605)


  Stock purchase                                                                                              (1,630,436)

  ESOP shares earned                                         43,157                                               39,390

  Amortization of unearned
      compensation expense                                                    17,896                              10,636
                                                        -----------       ----------          --------       -----------
  Balance December 31, 1999                             $(1,098,639)      $  (74,818)         $(21,978)      $18,022,548
                                                        ===========       ==========          ========       ===========
</TABLE>
         See Notes to Consolidated Condensed Financial Statement


                                        7
<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 December 31, 1999, results
of operations for the three and six month periods  ending  December 31, 1999 and
1998, and cash flows for the six month periods ended December 31, 1999 and 1998.
The results of operations for the three and six month periods ended December 31,
1999 are not  necessarily  indicative of the results of operations  which may be
expected for the fiscal year ending June 30, 2000.


Net Income Per Share

Net income per share for the three and six month periods ended December 31, 1999
and 1998 are computed by dividing net earnings by the weighted average shares of
common stock outstanding during the period.

<TABLE>
<CAPTION>
For the Three Months Ended                  December 31, 1999                       December 31, 1998
                                            -----------------                       -----------------
                                                  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 ......     $195,446     1,237,994     $   0.16      $235,874     1,490,103     $    0.16
                                                                ========                                 =========
Effect of Dilutive Stock Options
   and Grants ..................            0         6,588                          0        12,897
                                     --------     ---------                   --------     ---------

Diluted Net Income Per Share:
   Net Income Available
   To Common Stockholders ......     $195,445     1,244,582     $   0.16      $235,874     1,502,999     $    0.16
                                     ========     =========     ========      ========     =========     =========
</TABLE>
                                       8
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

<TABLE>
<CAPTION>
For the Six Months Ended                    December 31, 1999                       December 31, 1998
                                            -----------------                       -----------------
                                                  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 ......     $386,808     1,303,570     $   0.30  $490,902     1,504,986     $  0.33
                                                                ========                             =======
Effect of Dilutive Stock Options
   and Grants ..................            0         8,367                      0        13,650
                                     --------     ---------               ---------   ----------

Diluted Net Income Per Share:
   Net Income Available
   To Common Stockholders ......     $386,808     1,311,937     $   0.29  $490,902     1,518,636     $  0.32
                                     ========     =========     ========  ========     =========     =======

</TABLE>



                                       9

<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 $136.6 million at
December 31, 1999, an increase of $12.7  million,  or 10.2 percent from June 30,
1999. During this six month period  interest-earning  assets,  including Federal
Home Loan Bank stock,  increased  $12.4  million,  or 10.5  percent.  Short-term
interest-earning  deposits  increased  $6.4  million,  or  138.8  percent.  This
increase was primarily  due to the possible need for increased  liquidity due to
the Year 2000 issue. Loans increased $5.7 million, or 5.1 percent.  Federal Home
Loan Bank Stock  increased  $643,000,  or 51.4  percent  due to an  increase  in
Federal Home Loan Bank advances. Deposits increased $4.2 million, or 5.1 percent
and borrowings  increased $9.8 million, or 47.3 percent,  causing a net increase
in interest-bearing  liabilities of $14.0 million, or 13.5 percent. The increase
in advances was used to fund loan growth and to increase liquidity to acceptable
levels as required by Montgomery's Year 2000 contingency planning.

          Capital  and   Liquidity.   At   December   31,   1999,   Montgomery's
stockholders'  equity  was  $18.0  million,  or 13.2  percent  of total  assets,
compared with stockholders'  equity of $19.4 million,  or 15.7 percent,  at June
30,  1999.  With the  approval  of the OTS on May 5, 1999,  Montgomery  began to
repurchase 209,171 of its outstanding common stock. The repurchase was completed
on September 24, 1999 at a total cost of $2.1 million.  The  repurchase of stock
during the six months ended  December 31, 1999 reduced  capital in the amount of
$1.6  million.   The  Association   continues  to  exceed  all  minimum  capital
requirements.  At December 31, 1999, the Association's tangible and core capital
was $16.8 million,  or 12.5 percent of tangible assets,  $14.8 million in excess
of the 1.5 percent minimum required tangible capital and $11.4 million in excess
of the 4.0 percent  minimum  required core capital.  Risk-based  capital equaled
$16.3 million,  or 19.9 percent of risk-weighted  assets, $9.8 million 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 four  percent.  The
Association's  average  liquidity  ratio for the six months  ended  December 31,
1999, was 8.4 percent.


                                       10
<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.  The OTS  issued a  regulation  which  provides  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 this OTS regulation,  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.  Under the  regulation,
thrift  institutions with greater than "normal" interest rate exposure must take
a deduction from their total capital available to meet their risk-based  capital
requirement.  The amount of that deduction is one-half of the difference between
(a) the institution's actual calculated exposure to the 200 basis point interest
rate increase or decrease  (whichever  results in the greater pro forma decrease
in NPV) or (b) its "normal"  level of exposure  which is 2% of the present value
of its assets. The regulation does exempt all institutions under $300 million in
assets with  risk-based  capital above 12 percent from reporting  information to
OTS to calculate exposure and making any deduction from risk-based  capital.  At
December 31, 1999 the  Association's  total assets were $136.6  million and risk
based capital was 19.9 percent; therefore the Association would have been exempt
from calculating or making any risk-based capital  reduction.  The Association's
management believes however, interest-rate risk is an important factor and makes
all reports  necessary  to OTS to  calculate  interest-rate  risk on a voluntary
basis.  At September 30, 1999,  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 $2.58 million, which was less than $4.50 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 September 30, 1999 NPV  information,  the
amount of the  Association's  deduction  from  capital,  had it been  subject to
reporting, would have been approximately $825,000.
<PAGE>
          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.

          Presented  below, as of September 30, 1999, and September 30, 1998, is
an analysis of the  Association's  estimated  interest  rate risk as measured by
changes in NPV for  instantaneous  and  sustained  parallel  shifts in  interest
rates, up and down 300 basis points in 100 point increments,  compared to limits
set by the Board.  Assumptions used in calculating the amounts in this table are
assumptions utilized by the OTS in assessing the interest risk of the thrifts it
regulates.  Based upon these assumptions at September 30, 1999 and September 30,
1998,  the  NPV  of  the   Association  was  $19.9  million  and  $18.5  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.

                                       11
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana

<TABLE>
<CAPTION>
-------------------- ----------------- ------------------------------------ ------------------------------
                                              At September 30, 1999                At September 30, 1998
-------------------- ----------------- ------------------------------------ ------------------------------
      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            -7,061                -35             -4,882              -26
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
       +200                   -50            -4,503                -23             -2,815              -15
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
       +100                   -30            -2,029                -10             -1,159               -6
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
          0                     0                 0                  0                  0                0
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
        -100                  -30           +1,242                  +6               +829               +5
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
        -200                  -50           +1,221                 +11             +1,840              +10
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
        -300                  -60           +3,281                 +16             +4,363              +24
-------------------- ----------------- ------------------ ----------------- ----------------- ------------
</TABLE>

          In the event of a 300 basis point  change in interest  rate based upon
estimates  as of  September  30, 1999 the  Association  would  experience  a 16%
increase,  compared  to a 24%  increase  at  September  30,  1998,  in  NPV in a
declining  rate  environment  and a 35% decrease,  compared to a 26% decrease at
September 30, 1998,  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 maturities of interest-bearing assets increasing more than the maturities on
interest-bearing  liabilities  due to the  increase  in  fixed-rate  residential
mortgage loans and non-residential loans.

          Results of  Operations.  Montgomery's  net income for the three months
ended December 31, 1999, was $195,000  compared to $236,000 for the three months
ended December 31, 1998, an decrease of $41,000,  or 17.4 percent.  Net interest
income  increased  $11,000,  or 1.1  percent.  Average  interest-earning  assets
increased  $15.5  million,  or 13.8 percent,  from $112.7  million for the three
months  ended  December  31,  1998 to $128.2  million  for the 1999  three-month
period. Average interest-bearing  liabilities increased $18.3 million from $94.4
<PAGE>
million to $112.7 million during the comparable  three-month  periods.  Interest
rate spread  decreased from 2.62 percent for the three months ended December 31,
1998, to 2.49 percent for the three months ended December 31, 1999. Net interest
margin  decreased to 3.12  percent for the three months ended  December 31, 1999
from 3.51  percent for the three months  ended  December 31, 1998.  Non-interest
income was $82,000 for the 1999  three-month  period  compared to $9,000 for the
1998 period primarily due to a gain on the sale of available for sale investment
securities.  Non-interest  expense  was  $739,000  for the  three  months  ended
December  31, 1999  compared to $627,000  for the 1998  three-month  period,  an
increase of $112,000, or 17.8 percent, primarily due to expenses associated with
the  operation of the  Lafayette,  Indiana  office which opened in April,  1999.
Income  before  income tax was $344,000 for the three months ended  December 31,
1999  compared to $361,000  for the 1998 period,  a decrease of $17,000,  or 4.9
percent.  Income  tax  expense  increased  from  $125,000  to  $148,000  for the
comparable periods.



                                       12
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


          For the six months ended  December  31, 1999,  net income was $387,000
compared to $491,000 for the six months  ended  December 31, 1998, a decrease of
$104,000, or 21.2 percent. Net interest income increased from $1,957,000 for the
six months  ended  December  31,  1998 to  $2,000,000  for the six months  ended
December  31,   1999,   an  increase  of  $43,000,   or  2.2  percent.   Average
interest-earning  assets increased $13.0 million from $112.5 million for the six
months ended December 31, 1998 to $125.5  million for the 1999 six-month  period
while average  interest-bearing  liabilities  increased $15.3 million during the
comparable  periods.  Non-interest  income increased  $81,000 primarily due to a
gain on the sale of  available  for  sale  investment  securities.  Non-interest
expense increased $283,000,  or 24.3 percent. This increase was primarily due to
an increase in personnel and operational costs in connection with the Lafayette,
Indiana  office.  Growth in other  offices also  contributed  to the increase in
expense.  Income tax expense was $270,000 for the six months ended  December 31,
1999, compared to $300,000 for the six months ended December 31, 1998.

          Interest  Income.  Montgomery's  total  interest  income for the three
months ended  December 31, 1999, was $2.5 million,  an increase of $184,000,  or
8.1 percent, compared to interest income for the three months ended December 31,
1998.   This   increase  was   primarily   caused  by  an  increase  in  average
interest-earning  assets from $112.7 million for the three months ended December
31, 1998,  to $128.2  million for the three months ended  December 31, 1999,  an
increase of $15.5  million,  or 13.8  percent  principally  due to loan  growth.
Average loans increased from $105.2 million for the 1998  three-month  period to
$115.9  million for the 1998  three-month  period and  average  interest-earning
deposits increased from $5.8 million to $9.8 million for the respective periods.
The  average  yield on  interest-earning  assets was 7.70  percent for the three
months ended  December  31, 1999,  compared to 8.10 percent for the three months
ended December 31, 1998.

          Interest  income for the six months ended  December 31, 1999, was $4.8
million, an increase of $322,000,  or 7.1 percent,  from interest income for the
same period in 1998.  Average  interest-earning  assets for the six months ended
December 31, 1999,  was $125.9  million  compared to $112.4 million for the 1998
six month period, an increase of $13.5 million, or 12.0 percent, principally due
to loan growth.  The average yield for the 1999 period was 7.71 percent compared
to 8.03 percent for the 1998 period.

          Interest Expense. Interest expense for the three months ended December
31, 1999, was $1.5 million,  which was an increase of $173,000, or 13.4 percent,
from  the  three  months  ended  December  31,  1998.  Average  interest-bearing
liabilities increased $18.3 million, or 19.4 percent, from $94.4 million for the
three months ended  December  31, 1998,  to $112.7  million for the three months
ended  December 31,  1999.  Average  interest-bearing  deposits  increased  $7.5
million and  average  borrowings  increased  $10.8  million  for the  comparable
periods.  The average cost of funds  decreased from 5.48 percent to 5.21 percent
for the  comparable  periods.  The average cost of deposits  decreased from 5.41
percent to 5.10 percent for the comparable three-month periods. The average cost
of  borrowings  decreased  from 5.85 percent to 5.57 percent for the  comparable
periods due.

          Interest  expense for the six months ended December 31, 1999, was $2.8
million,  an increase of $279,000,  or 10.9  percent,  from the six months ended
December  31,  1998.  The  average  cost of funds for the 1999  period  was 5.20
percent compared to 5.45 percent for the 1998 period.  Average  interest-bearing
liabilities  increased  from $93.8 million for the six months ended December 31,
1998 to $112.7 million for the 1999 six-month period.


                                       13
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana


          Provision  for Losses on Loans.  There was no provision  for losses on
loans for the three months ended  December 31, 1999  compared to $10,000 for the
three months ended  December 31, 1998.  During the six months ended December 31,
1998, a $25,000  provision was made compared to a no provision being made in the
comparable 1999 six-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  $1,166,000  at
December 31, 1999, compared to $547,000 at June 30, 1999.  Non-performing  loans
to total loans at December 31, 1999 were 0.99  percent  compared to 0.49 percent
at June 30, 1999.  The  allowance  for losses to  non-performing  loans was 19.4
percent at December  31, 1999  compared to 41.3  percent at June 30,  1999.  The
allowance  to total loans was 0.19 percent at December 31, 1999 and 0.20 percent
at June 30,  1999.  Montgomery  is  continually  re-evaluating  the level of the
allowance for loan losses as the amount of  non-residential  mortgage  loans and
other new loan products are offered.

          Non-Interest  Income.  Montgomery's  other income for the three months
ended  December  31,  1999,  totalled  $82,000  compared to $9,000 for the three
months  ended  December  31,  1998,  an increase of $73,000.  This  increase was
primarily  due to a gain on the sale of  available  for sale  securities  in the
amount of $56,000 in the 1999 period compared to no gain during the 1998 period.
Service charges on deposit  accounts  increased of $2,000,  net appraisal income
increased $10,000 and other income increased $5,000.

         Other income for the six months ended  December 31, 1999, was $104,000,
an increase of $81,000 from the comparable  1998 six month period.  As mentioned
above,  this  increase was  primarily due to a gain on the sale of available for
sale  securities in the amount of $56,000 in the 1999 period compared to no gain
during the 1998 period.  During the six months ended December 31, 1999,  service
charges on deposit accounts increased $5,000, appraisal income increased $10,000
and  other  income  increased  $11,000  from the 1998  six-month  period.  These
increases are primarily due to the growth of the institution and increased usage
of debit cards and related ATM transactions.

         Non-Interest Expense.  Montgomery's other expenses for the three months
ended December 31, 1999,  totalled  $739,000,  an increase of $111,000,  or 17.8
percent,  from the three months ended  December 31, 1998.  Salaries and employee
benefits  increased  $64,000  primarily  due  to an  increase  in  personnel  to
accommodate growth and to staff the Lafayette Office which opened in April 1999.
Net occupancy  expense increased $12,000 and equipment expense increased $12,000
primarily due to the increase in expenses  associated  with the operation of the
Lafayette  Office.  Advertising  expense  increased  $9,000  and other  expenses
increased $22,000 primarily due to Montgomery's growth and expansion.

         Non-interest  expense for the six months ended  December 31, 1999,  was
$1.4 million compared to $1.2 million, an increase of $283,000, or 24.3 percent,
from the six months  ended  December  31,  1998.  Salary and  employee  benefits
increased  $146,000,  or 22.8  percent.  An increase in personnel  due to branch
office  growth and the  operation  of the new  Lafayette  office was the primary
factor for the increase in salary and employee  benefits.  Net occupancy expense
increased  $24,000,  equipment  expense  increased  $26,000 and data  processing

<PAGE>
expense  increased  $11,000.  These increases were primarily due to Montgomery's
growth and expansion. Advertising expense increased $22,000 primarily due to the
advertising increase to promote the Lafayette office. Other expenses for the six
months ended December 31, 1999,  were $317,000  compared to $264,000 for the six
months  ended  December  31,  1998,  an increase of  $53,000,  or 20.1  percent.
Included  in other  expenses  is  approximately  $6,000 in  expense  related  to
customer  awareness  of the Y2K issue  with the  balance of the  increase  being
generally reflective of Montgomery's growth.


                                       14
<PAGE>
                 MONTGOMERY FINANCIAL CORPORATION AND SUBSIDIARY
                             Crawfordsville, Indiana



  Impact of the Year 2000. Montgomery conducted testing of all computer systems,
programs and equipment on January 1, 2000.  This testing  reflecting no failures
due to the "Year 2000" issue. No items were found which would have any effect on
Montgomery  or the customers of  Montgomery.  As of January 31, 2000 all systems
appear to be operating properly. Although management believes no future problems
will arise due to the "Year 2000" issue,  continued  monitoring  of all computer
systems and programs will continue into the year 2000.




                                       15
<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
------------------------------------------------------------

The  Annual  Meeting  of  Shareholders  of  Montgomery   Financial   Corporation
("Montgomery")  was held at the principal  office of  Montgomery,  119 East Main
Street,  Crawfordsville,  Indiana 47933,  on Tuesday,  October 19, 1999, at 2:00
p.m.,  Crawfordsville time for purposes of electing two Directors,  to ratifying
the appointment of Olive LLP, as Montgomery's  independent auditors for the 2000
fiscal year and transacting  such other business as may properly come before the
Annual  Meeting.  Proxy  Statements  were  furnished to such holders on or about
September  14, 1999. A total of 1,487,242  shares of common stock of  Montgomery
were  outstanding  on August 31,  1999,  and a total of  1,349,896  shares  were
represented  at the meeting.  Of the 1,349,896  shares,  1,339,896 were voted by
proxy and 10,000 were voted in person.

C. Rex Henthorn and John E. Woodward were  nominated to hold office as directors
until the year 2002 Annual  Meeting of  Shareholders.  Mr.  Henthorn  has been a
director since 1981 and Mr. Woodward since 1975. No other  nominations were made
at the meeting.  C. Rex Henthorn was elected as a director  receiving  1,318,596
votes for,  with  31,300  votes  withheld.  John E.  Woodward  was  elected as a
director  receiving  1,316,224 votes for, with 33,672 votes  withheld.  With the
election of Messrs.  Henthorn  and  Woodward,  the terms of the  Directors as of
October 19, 1999, expire as follows:  2000 - Earl F. Elliott, Mark E. Foster and
Robert C.  Wright;  2001 - Joseph M.  Malott  and J. Lee  Walden;  2002 - C. Rex
Henthorn and John E. Woodward.

Olive LLP  ("Olive"),  served as  independent  auditors for Montgomery in fiscal
1999.  The Board of Directors  approved the  appointment of Olive as independent
auditors for fiscal  2000,  subject to  ratification  by the  shareholders.  The
appointment  of the  independent  auditors is ratified if more votes are cast in
favor of the appointment than against the appointment. The ratification of Olive
was  approved  by  1,340,289  votes in  favor,  5,107  votes  against  and 4,500
abstentions.

Item 5.  Other Information    None.
--------------------------

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

             None

(b)      Reports on Form 8-K

               None

                                       16
<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:  February 10, 2000          By: /s/ Earl F. Elliott
                                      ---------------------
                                      Earl F. Elliott, President and Chief
                                      Executive Officer



Date:  February 10, 2000          By:/s/ J. Lee Walden
                                     -------------------
                                     J. Lee Walden, Vice President and Chief
                                     Financial Officer





                                       17