<PAGE>


                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-QSB

                QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2002
                                               ------------------

                        Commission file number 000-24498
                                               ---------

                       DIAMOND HILL INVESTMENT GROUP, INC
                       ----------------------------------
                 (Name of small business issuer in its charter)


                       Ohio                    65-0190407
                    ----------------------------------------
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)


             375 North Front Street, Suite 300, Columbus, Ohio 43215
             -------------------------------------------------------
             (Address of principal executive offices)      (Zip Code)

                    Issuer's telephone number (614) 255-3333
                                              --------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes  X  No
                                                              ---    ---

State the number of shares outstanding of each of the issuer's classes of common
equity, as of October 31, 2002:
     Common Stock: 1,408,466 shares

Transitional Small Business Disclosure Format (check one):

         Yes  X       No
             ---         ---




<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                      INDEX
                                      -----

<TABLE>
<CAPTION>

                                                                                          PAGE
                                                                                          ----
<S>               <C>                                                                    <C>
Part I Financial Information:                                                               3

         Item 1.   Consolidated Statements of Financial Condition As of                     4
                   September 30, 2002 (unaudited) and December 31, 2001
                   (audited)

                   Consolidated Statements of Operations For the Nine                       5
                   Months and Three Months Ended September 30, 2002
                   and 2001 (unaudited)

                   Consolidated Statements of Changes in Shareholders'                      6
                   Equity For the Nine Months Ended September 30, 2002
                   (unaudited)

                   Consolidated Statements of Cash Flows for the Nine                       7
                   Months Ended September 30, 2002 and 2001 (unaudited)

                   Notes to Consolidated Financial Statements                              8-13

         Item 2.   Management's Discussion and Analysis of Financial                      14-19
                   Condition and Results of Operations

Part II Other Information:                                                                 20

         Item 1.   Legal Proceedings

         Item 2.   Change in Securities

         Item 3.   Defaults Upon Senior 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                                                                                 21

</TABLE>


                                       2
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                     PART I

                              FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

          The accompanying consolidated financial statements, which should be
          read in conjunction with the consolidated financial statements and
          footnotes thereto included in the Company's Annual Report on Form
          10-KSB for the year ended December 31, 2001, are unaudited (except for
          the December 31, 2001 consolidated balance sheet, which was derived
          from the Company's audited financial statements), but have been
          prepared in accordance with generally accepted accounting principles
          for interim financial information. Accordingly, they do not include
          all of the information and footnotes required by generally accepted
          accounting principles for complete financial statements. In the
          opinion of management, all adjustments (consisting only of normal
          recurring adjustments) considered necessary for a fair presentation
          have been included.

          Operating results for the three and the nine months ended September
          30, 2002 are not necessarily indicative of the results that may be
          expected for the entire fiscal year ending December 31, 2002.










                                       3
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                 As of September 30, 2002 and December 31, 2001

<TABLE>
<CAPTION>

                                                                                           UNAUDITED          AUDITED
                                                                                           09/30/02          12/31/01
                                                                                     -----------------------------------

                                    ASSETS
                                    ------
<S>                                                                                  <C>                  <C>
Cash                                                                                 $         64,668     $    1,174,026
Investment portfolio (Note 4 and 6):
     Mutual fund shares and limited partnership interests                                   3,245,177          4,372,394
     Marketable equity securities, at market value                                            531,209            241,710
     Not readily marketable equity securities, at estimated fair value                        236,841            316,656
Accounts receivable:
     Mutual fund fees                                                                          64,762             56,968
     Pending settlements and other                                                             37,775             34,222
     Refundable income taxes                                                                        -            414,251
Property and equipment, net of accumulated depreciation of                                    180,445            139,737
     $159,821 and $207,877, respectively
Deposits and other                                                                            166,357            113,783
                                                                                     ----------------    ---------------

          Total assets                                                               $      4,527,234    $     6,863,747
                                                                                     ================    ===============

                                  LIABILITIES
                                  -----------

Note payable - line of credit (Note 6)                                               $        152,200    $             -
Accounts payable to broker-dealers and other                                                    6,632                  -
Accrued expenses                                                                              328,582            491,767
                                                                                     ----------------    ---------------

          Total liabilities                                                                   487,114            491,767
                                                                                     ----------------    ---------------

                                                  SHAREHOLDERS' EQUITY

Common stock: (note 3)
     No par value, 7,000,000 shares authorized,
          1,821,972 shares issued and 1,408,466 shares outstanding                         10,023,703         10,023,703
     Treasury stock, at cost
          (413,506 shares and 342,206 shares, respectively)                                (2,394,510)        (2,101,810)
     Deferred compensation                                                                    (19,442)           (36,793)
Accumulated deficit                                                                        (3,569,931)        (1,513,120)
                                                                                     ----------------    ---------------

          Total shareholders' equity                                                        4,039,820          6,371,980
                                                                                     ----------------    ---------------

          Total liabilities and shareholders' equity                                      $ 4,527,234    $     6,863,747
                                                                                     ================    ===============


</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       4
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For The Nine Months and Three Months Ended September 30, 2002 and 2001

                                    UNAUDITED
                                    ---------

<TABLE>
<CAPTION>
                                                               9 MONTHS ENDED                  3 MONTHS ENDED
                                                      ----------------------------------------------------------------
                                                           SEP 2002        SEP 2001        SEP 2002       SEP 2001
                                                      ----------------------------------------------------------------

<S>                                                   <C>                <C>           <C>              <C>
OPERATING REVENUES:
 Management fees and commissions                      $        761,072   $    813,414  $      254,002   $    230,036
 Market making gains and (losses)                              (60,225)       139,583         (42,598)        47,606
                                                      -------------------------------  -------------------------------

 Total operating revenues                                      700,847        952,997         211,404        277,642
                                                      -------------------------------  -------------------------------

OPERATING EXPENSES:
 Salaries, benefits and payroll taxes                        1,131,470      1,330,427         381,194        428,290
 Brokers' commission                                            45,868        122,265         (18,169)        78,757
 Professional fees                                             744,082        533,314         295,382        199,332
 General and administrative                                    565,744        796,814         227,936        264,044
                                                      -------------------------------  -------------------------------

  Total operating expenses                                   2,487,164      2,782,820         886,343        970,423
                                                      -------------------------------  -------------------------------

OPERATING INCOME (LOSS)                                     (1,786,317)    (1,829,823)       (674,939)      (692,781)
                                                      -------------------------------  -------------------------------

OTHER REVENUE AND EXPENSES:
 Investment gains and (losses)                                (315,493)       546,937        (482,509)      (403,477)
 Dividend income                                                18,192        143,880           4,102         26,714
 Interest and other income                                      27,279         31,875           2,410         26,076
 Interest expense                                                 (472)          (493)           (472)           (86)
                                                      -------------------------------  -------------------------------

  Total other revenue and expenses                            (270,494)       722,199        (476,469)      (350,773)
                                                      -------------------------------  -------------------------------

LOSS BEFORE TAXES                                           (2,056,811)    (1,107,624)     (1,151,408)    (1,043,554)

 Income tax provision (credit)                                       -              -               -              -
                                                      -------------------------------  -------------------------------

 NET INCOME (LOSS)                                    $     (2,056,811)  $ (1,107,624)  $  (1,151,408)  $ (1,043,554)
                                                      ===============================  ===============================

 BASIC EARNINGS (LOSS) PER SHARE                      $          (1.44)  $      (0.67)  $       (0.82)  $      (0.66)
                                                      ================================================================

 DILUTED EARNINGS (LOSS) PER SHARE                    $          (1.44)  $      (0.67)  $       (0.82)  $      (0.66)
                                                      ================================================================

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       5
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                  For the Nine Months Ended September 30, 2002

                                    UNAUDITED
                                    ---------

<TABLE>
<CAPTION>

                                                     Treasury               Deferred               Retained
                                Common                 Stock              Compensation             Earnings               Total
                        ------------------    ------------------    --------------------    ------------------    ----------------
<C>                          <C>                   <C>                        <C>                <C>                  <C>
Balance at
December 31,
2001                         $10,023,703           ($2,101,810)               ($36,793)          ($1,513,120)         $6,371,980

Amortization of
deferred
compensation                            -                    -                  17,351                      -             17,351

Purchase of treasury
stock                                   -             (292,700)                       -                     -           (292,700)

Net loss                                -                     -                       -           (2,056,811)         (2,056,811)

                        ------------------    ------------------    --------------------    ------------------    ----------------
Balance at
September 30,
2002                         $10,023,703           ($2,394,510)               ($19,442)          ($3,569,931)          $4,039,820
                        ==================    ==================    ====================    ==================    ================

</TABLE>





















        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       6
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              For the Nine Months Ended September 30, 2002 and 2001

                                    UNAUDITED
                                    ---------

<TABLE>
<CAPTION>

                                                                                       2002                       2001
                                                                              --------------------      ---------------------
<S>                                                                           <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss)                                                       $       (2,056,811)       $        (1,107,624)
      Adjustments to reconcile net income (loss)
      to net cash provided by (used in) operating activities:
          Depreciation and amortization                                                   43,352                     51,624
          Loss on disposal of property and equipment                                      39,766                          -
          Bad debt expense (recovery)                                                          -                    (14,025)
          Amortization of deferred compensation                                           17,351                     29,020
          Unrealized (gain) loss                                                         443,280                    (75,750)
          (Increase) decrease in certain assets-
             Investment portfolio                                                        474,253                    313,647
             Mortgage participation notes                                                      -                    223,500
            Accounts receivable
                Mutual fund fees                                                          (7,794)                         -
                Pending settlements and other                                             (3,553)                    88,921
                Refundable income taxes                                                  414,251                     96,966
             Deposits and other                                                          (52,574)                    55,307
          Increase (decrease) in certain liabilities-
             Accounts payable to broker-dealers and other                                  6,632                     (1,698)
             Accrued expenses and other                                                 (163,185)                    19,979
                                                                              --------------------      ---------------------
                 Net cash used in operating activities                                  (845,032)                  (320,133)
                                                                              --------------------      ---------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of property and equipment                                                (123,826)                  (107,697)
                                                                              --------------------      ---------------------
                 Net cash used in investing activities                                  (123,826)                  (107,697)
                                                                              --------------------      ---------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Purchase of treasury stock                                                        (292,700)                (1,192,834)
      Note payable - line of credit                                                      152,200                          -
      Advances to affiliates                                                                   -                    (23,614)
                                                                              --------------------      ---------------------
                 Net cash used in financing activities                                  (140,500)                (1,216,448)
                                                                              --------------------      ---------------------

NET INCREASE (DECREASE) IN CASH                                                       (1,109,358)                (1,644,278)

CASH, BEGINNING OF PERIOD                                                              1,174,026                  3,443,228
                                                                              --------------------      ---------------------

CASH, END OF PERIOD                                                           $           64,668        $         1,798,950
                                                                              ====================      =====================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
      Cash paid during the period for:
          Interest                                                            $              472        $               493
          Income taxes                                                                         -                          -

</TABLE>

        The accompanying notes are an integral part of these consolidated
                             financial statements.




                                       7
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


Note 1 ORGANIZATION AND NATURE OF BUSINESS
       -----------------------------------

Diamond Hill Investment Group, Inc. (the Company) is an Ohio corporation
incorporated in May 2002 and previously a Florida corporation since April 1990.
The Company has two subsidiary operating companies.

Diamond Hill Capital Management, Inc. (DHCM), an Ohio corporation, is a wholly
owned subsidiary of the Company and a registered investment advisor. DHCM is the
investment advisor to the Diamond Hill Focus Fund, Diamond Hill Small Cap Fund,
Diamond Hill Large Cap Fund, Diamond Hill Short Term Fixed Income Fund and
Diamond Hill Strategic Income Fund, open-end mutual funds, and Diamond Hill
Investment Partners, L.P. DHCM also offers advisory services to institutional
and individual investors.

Diamond Hill Securities, Inc. (DHS), an Ohio corporation, is a wholly owned
subsidiary of DHCM and a NASD registered broker-dealer. DHS is registered with
the Securities and Exchange Commission and the securities commissions of eleven
states (including Ohio) and the District of Columbia. DHS trades securities on a
fully-disclosed basis and clears customer transactions through an unaffiliated
broker-dealer that also maintains the customer accounts. DHS is also a
registered investment advisor and offers advisory services to institutional and
individual investors. DHS is the investment advisor to the Diamond Hill Bank &
Financial Fund, formerly The Banc Stock Group Fund, an open-end mutual fund.

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       ------------------------------------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses for the periods. Actual results could differ from those
estimates. The following is a summary of the Company's significant accounting
policies:

LIMITED PARTNERSHIP INTERESTS
-----------------------------

DHCM is the managing member of Diamond Hill General Partner, LLC, the General
Partner of Diamond Hill Investment Partners, L.P., (DHIP) a limited partnership
whose underlying assets consist of marketable securities. DHCM's investment in
DHIP is accounted for using the equity method, under which DHCM's share of the
net earnings or losses of the partnership is reflected in income as earned and
distributions received are reflected as reductions of the investment. The
Company is actively seeking additional unaffiliated investors for DHIP and, if
successful, seeks to reduce DHCM's percentage ownership significantly.






                                       8
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
       ------------------------------------------

EARNINGS PER SHARE

Basic and diluted earnings per common share are computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share." A
reconciliation of the numerators and denominators used in these calculations is
shown below:

For nine months ending September 30, 2002:

                                      Numerator        Denominator      Amount
                                      ---------        -----------      ------

Basic Earnings                      $(2,056,811)        1,430,040      $(1.44)
Diluted Earnings                     (2,056,811)        1,430,040       (1.44)

For nine months ending September 30, 2001:

                                      Numerator        Denominator      Amount
                                      ---------        -----------      ------

Basic Earnings                      $(1,107,624)        1,645,472      $(0.67)
Diluted Earnings                     (1,107,624)        1,645,472       (0.67)

For three months ending September 30, 2002:

                                      Numerator        Denominator      Amount
                                      ---------        -----------      ------

Basic Earnings                      $(1,151,408)        1,412,542      $(0.82)
Diluted Earnings                     (1,151,408)        1,412,542       (0.82)

For three months ending September 30, 2001:

                                      Numerator        Denominator      Amount
                                      ---------        -----------      ------

Basic Earnings                      $(1,043,554)        1,573,613      $(0.66)
Diluted Earnings                     (1,043,554)        1,573,613       (0.66)


Stock options and warrants have not been included in the denominator of the
diluted per-share computations because the effect of their inclusion would be
anti-dilutive.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Substantially all of the Company's financial instruments are carried at fair
value or amounts approximating fair value. Assets, including accounts
receivable, mortgage participation notes, notes and interest receivable and
securities owned are carried at amounts that approximate fair value. Similarly,
liabilities, including accounts payable and accrued expenses are carried at
amounts approximating fair value.




                                       9
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


Note 3 CAPITAL STOCK
       -------------

STOCK SPLIT

Effective September 26, 2001, the Company completed a 1 for 5 reverse stock
split of its common stock. Share amounts have been retroactively adjusted to
reflect the split.

TREASURY STOCK

For the year ended December 31, 2001, the Company purchased 261,136 shares for
$1,553,426. During the three months ending September 30, 2002, the Company
purchased 15,000 shares for $67,500. During the nine months ending September 30,
2002, the Company purchased 71,300 shares for $292,700.

AUTHORIZATION OF PREFERRED STOCK

The Company's Articles of Incorporation authorize the issuance of 1,000,000
shares of "blank check" preferred stock with such designations, rights and
preferences, as may be determined from time to time by the Company's Board of
Directors. The Board of Directors is empowered, without shareholder approval, to
issue preferred stock with dividend, liquidation, conversion, voting, or other
rights that could adversely affect the voting or other rights of the holders of
the Common Stock. There were no shares of preferred stock issued or outstanding
at September 30, 2002 or December 31, 2001.

Note 4 INVESTMENT PORTFOLIO

Investment portfolio balances of as September 30, 2002, are comprised of the
following:

<TABLE>
<CAPTION>
                                                                                UNREALIZED           UNREALIZED
                                           MARKET              COST                GAINS               LOSSES
                                     ------------------- ------------------  ------------------ ---------------------
<S>                                  <C>                 <C>                  <C>                <C>
Mutual fund shares and
limited partnership interest         $       3,245,177   $      3,466,490     $             -    $         (221,313)

Marketable equity securities                   531,209            592,711               1,325               (62,827)

Not readily marketable equity
securities                                     236,841            342,464               1,094              (106,717)
                                     ------------------- ------------------  ------------------ ---------------------
TOTAL                                 $      4,013,227    $     4,401,665     $         2,419    $         (390,857)
                                     =================== ==================  ================== =====================

</TABLE>






                                       10
<PAGE>

              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


Note 4 INVESTMENT PORTFOLIO (Continued)
       -------------------------------

Investment portfolio balances of as December 31, 2001, are comprised of the
following:
<TABLE>
<CAPTION>

                                                                           UNREALIZED        UNREALIZED
                                              MARKET         COST             GAINS            LOSSES
                                        --------------- --------------  ---------------- ----------------
<S>                                       <C>             <C>             <C>              <C>
Mutual fund shares and
limited partnership interest              $  4,372,394    $  4,171,975    $     200,419    $           -

Marketable equity securities                   241,710         290,948                -          (49,238)

Not readily marketable equity
securities                                     316,656         412,994           11,825         (108,163)
                                        --------------- --------------  ---------------- ----------------
TOTAL                                     $  4,930,760    $  4,875,917    $     212,244    $    (157,401)
                                        =============== ==============  ================ ================

</TABLE>

DHCM is the managing member of the General Partner of Diamond Hill Investment
Partners, L.P., whose underlying assets consist primarily of marketable
securities. The General Partner is contingently liable for all of the
partnership's liabilities.

Summary financial information, including the Company's carrying value and income
from this partnership at September 30, 2002 and 2001, and for the nine months
then ended, is as follows:

                                               2002                  2001
                                         -----------------     ----------------
Total Assets                             $      11,211,502     $      6,277,201
Total Liabilities                                3,361,068            1,333,464
Net Assets                                       7,850,434            4,943,737
Net fair market value of earnings                 (732,970)            (272,521)

DHCM's carrying value                    $       2,886,493     $      2,846,074
DHCM's income                                     (177,942)            (153,965)


DHCM's income from this partnership includes its pro-rata capital allocation and
its share of an incentive allocation from the limited partners. In addition,
DHCM earns an administrative fee payable quarterly at the rate of .25% of the
value of the limited partners' capital accounts.



                                       11
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

Note 5 CHANGE IN ACCOUNTING METHOD
       ---------------------------

The sales commissions paid to brokers for the sale of the Company's mutual fund
C shares had previously been expensed when paid; despite the fact that the
revenue, which offsets this expense, is collected over a twelve-month period.
Going forward, commissions paid to brokers for C share sales will be matched
against the revenue collected over the twelve months following the payment of
commission. The impact on the income statement for the three months and nine
months ended September 30, 2002 was a $30,377 reduction in broker commission
expense.

Note 6 LINE OF CREDIT
       --------------

The Company obtained a line of credit loan with a maximum principal amount of
$325,000 on August 28, 2002 at an annual percentage interest rate of prime plus
0.50%, which is currently 5.25%. The balance due on the line of credit loan at
September 30, 2002 was $152,200. A portion of the Company's investment portfolio
secures this loan. The line of credit loan is due to mature on August 28, 2003.

Note 7 OPERATING LEASE
       ---------------

The Company leases office space under an operating lease. Under the previous
operating lease, which expired July 2002, total lease expenses were
approximately $133,000 for the year ended December 31, 2001. The Company entered
into a new lease agreement effective May 1, 2002, which terminates on May 31,
2005. Total lease expenses for the three months ended September 30, 2002 were
$20,000. The future minimum lease payments under the new lease are as follows:

                     YEAR ENDED                  AMOUNT
                ---------------------          ----------
                        2002                   $   50,000
                        2003                      120,000
                        2004                      120,000
                        2005                       50,000


Note 8 CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS WITH
       ------------------------------------------------------------
       OFF-BALANCE SHEET RISK
       ----------------------

DHS, under a correspondent agreement with its clearing broker, has agreed to
indemnify the clearing broker from damages or losses resulting from customer
transactions. The Company is, therefore, exposed to off-balance sheet risk of
loss in the event that customers are unable to fulfill contractual obligations.
The Company manages this risk by requiring customers to have sufficient cash in
their account before a buy order is executed and to have the subject securities
in their account before a sell order is executed. The Company has not incurred
any losses from customers unable to fulfill contractual obligations.




                                       12
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


In the normal course of business, DHS was a market maker for a limited number of
community bank stocks quoting bid and ask prices for those stocks. Effective
August 2002, DHS ceased market making activities.

Senior management of the Company is responsible for reviewing trading positions,
exposures, profits and losses, trading and hedging strategies on a daily basis.

The Company's significant industry concentration, primarily through the
operations of DHS, which arises within its normal course of business activities,
is with financial institutions for bank securities transactions.
















                                       13
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


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

FORWARD-LOOKING STATEMENTS

Throughout this discussion, the Company may make forward-looking statements
relating to such matters as anticipated operating results, prospects for
achieving a critical threshold of assets under management, technological
developments, economic trends (including interest rates and market volatility),
expected transactions and acquisitions and similar matters. While the Company
believes that the assumptions underlying its forward-looking statements are
reasonable, any of the assumptions could prove to be inaccurate and accordingly,
the actual results and experiences of the Company could differ materially from
the anticipated results or other expectations expressed by the Company in its
forward-looking statements. Factors that could cause such actual results or
experiences to differ from results discussed in the forward-looking statements
include, but are not limited to: the adverse effect from a decline in the
securities markets; a decline in the performance of the Company's products; a
general downturn in the economy; changes in government policy and regulation;
changes in the Company's ability to attract or retain key employees; and
unforeseen costs and other effects related to legal proceedings or
investigations of governmental and self-regulatory organizations. Once again,
the following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes included in the Company's report on
Form 10-KSB for the year ended December 31, 2001.

BUSINESS OVERVIEW

Diamond Hill Investment Group, Inc. (the Company) was incorporated in Ohio in
May 2002. Previously, the Company had been incorporated in the state of Florida
since April 1990. Through its two subsidiary operating companies, Diamond Hill
Capital Management, Inc. (DHCM) and Diamond Hill Securities, Inc. (DHS), the
Company offers investment advisory services through its mutual funds,
individually managed accounts and alternative investments. The Company's clients
include individual investors, corporations, retirement plans and endowments.

DHCM, an Ohio corporation, is a wholly owned subsidiary of the Company and a
registered investment advisor. DHCM serves as investment advisor to the
following open-end mutual funds: Diamond Hill Focus Fund, Diamond Hill Small Cap
Fund, Diamond Hill Large Cap Fund, Diamond Hill Short Term Fixed Income Fund and
Diamond Hill Strategic Income Fund. DHCM is also the investment advisor to
advisory accounts for institutional and individual investors and to Diamond Hill
Investment Partners, L.P.

DHS, an Ohio corporation, is a wholly owned subsidiary of DHCM and a NASD
registered broker-dealer. DHS is registered with the Securities and Exchange
Commission and the securities commissions of eleven states (including Ohio) and
the District of Columbia. DHS trades securities on a fully-disclosed basis and
clears customer transactions through an unaffiliated broker-dealer that also
maintains the customer accounts. Effective August 2002, DHS ceased market making
activities.





                                       14
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


DHS is a registered investment advisor and is the investment advisor to advisory
accounts for institutional and individual investors. DHS serves as the
investment advisor to the Diamond Hill Bank & Financial Fund, formerly The Banc
Stock Group Fund, an open-end mutual fund.

In May of 2000, with the change in executive management, the Company shifted its
emphasis from its traditional investment related activities through its DHS
subsidiary, to the investment advisory services of its DHCM subsidiary.
Staffing, other costs associated with this shift and various marketing
initiatives have negatively impacted the Company in 2001 and 2002. Management
believes that this process is necessary in order to achieve a critical threshold
of assets under management to support operations in the future. However, there
can be no assurance the Company will be able to achieve the critical threshold
of assets under management to support future operations.

ASSETS UNDER MANAGEMENT

As of September 30, 2002, assets under management totaled $87,572,635, a 25%
increase from December 31, 2001. During the three months ended September 30,
2002, assets under management decreased 5%. Asset growth for the nine months and
three months ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the entire fiscal year ending December 31,
2002. The table below provides a summary of assets under management:

<TABLE>
<CAPTION>
                                          9/30/2002         6/30/2002             12/31/2001
                                      ----------------- ------------------  ------------------
<S>                                      <C>                <C>                   <C>
Individually Managed Accounts            $ 41,896,773       $ 40,195,872          $ 28,809,342
Mutual Funds                               37,825,428         43,817,028            35,943,939
Alternative Investments                     7,850,434          8,337,044             5,375,657
                                      ----------------- ------------------  ------------------
Total Assets Under Management            $ 87,572,635       $ 92,349,944          $ 70,128,938

</TABLE>


RESULTS FROM OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2001

As shown on the attached Consolidated Statements of Operations, total operating
revenue for the three months ended September 30, 2002 was $211,404, a 24%
decline from the three months ended September 30, 2001 operating revenue of
$277,642. Losses from market making activities were the main cause of the
decline.

The Company generated management fees and commissions of $254,002 for the three
months ended September 30, 2002 compared to $230,036 for the three months ended
September 30, 2001, an increase of 10%. The decline in the U.S. markets reduced
the value of client portfolios, thus reducing asset-based fee revenue. For the
three months ended September 30, 2002, the Company had a loss from market making
activities of $42,598, a 189% decrease from the market making gains of $47,606
for the three months ended September 30, 2001. This decrease is largely due to
the decreased




                                       15
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


emphasis on market making activities. Consistent with the Company's shift to
investment advisory services, effective August, 2002 market making activities
were halted. The Company simply was not likely to be profitable in this segment.
The trading portfolios of the Company and its subsidiaries have been reduced
significantly by liquidation, and management is unable to predict how future
fluctuations in market values will impact the performance of the Company's
remaining trading portfolios.

Operating expenses for the three months ended September 30, 2002 decreased 9%
from $970,423 for the three months ended September 30, 2001 to $886,343 for the
three months ended September 30, 2002. The decrease was due to a drop in
salaries, benefits, payroll taxes, brokers' commissions and general and
administrative fees. Salaries, benefits and payroll taxes decreased to $381,194
for the three months ended September 30, 2002 from $428,290 for the three months
ended September 30, 2001, a decrease of 11%. This decrease reflects changes in
personnel. General and administrative expenses decreased 14%, from $264,044 to
$227,936, for the three months ended September 30, 2001 and for the three months
ended September 30, 2002, respectively. This resulted from decreases in a number
of expenses including marketing and brokerage expenses. Brokers' commission
decreased to a negative $18,169 for the three months ended September 30, 2002
from a positive $78,757 for the three months ended September 30, 2001, a
decrease of 123%. This resulted from the change in accounting treatment for
commissions paid to brokers for the sale of the Company's mutual fund C shares.
Previously, the commission was expensed when paid, despite the fact that the
revenue, which offsets this expense, is collected over a twelve-month period.
Therefore, the portion of commission expense that has not yet been offset by the
matching revenue was capitalized Due to expenses related to special corporate
projects and new products (Short Term Fixed Income and Strategic Income Funds),
professional fees increased 48% to $295,382 for the three months ended September
30, 2002 compared to $199,332 for the three months ended September 30, 2001.

Other expenses for the three months ended September 30, 2002 totaled $476,469, a
36% decrease from $350,773 for the three months ended September 30, 2001.
Investment losses and lower dividend income were the primary causes for the
decrease. Investment losses totaled $482,509 for the three months ended
September 30, 2002, compared to investment losses of $403,477 for the three
months ended September 30, 2001, a decrease of 20%. Investment losses were the
result of decreases in market values of the Company's trading portfolio, which
primarily includes mutual fund and limited partnership investments. Management
is unable to predict how future fluctuations in market values will impact the
performance of the Company's trading and investment portfolios. Dividend income
declined for the three months ended September 30, 2002 to $4,102 compared to
$26,714, a decrease of 85%. The decline in dividend income was due to a
significant reduction in the Company's portfolio of bank stocks (many of which
pay dividends) and lower interest rates on lower money market balances. Interest
and other income decreased by 91% from $26,076 for the three months ended
September 30, 2001 to $2,410 for the three months ended September 30, 2002.




                                       16
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 2001

Total operating revenues for the nine months ended September 30, 2002 decreased
to $700,847 from $952,997 for the nine months ended September 30, 2001, a 26%
decrease. Market making gains were $139,583 for the nine months ended September
30, 2001 compared to a loss of $60,225 for the same period of time in 2002.
Management fees and commissions totaled $761,072 for the nine months ended
September 30, 2002 compared to $813,414 for the nine months ended September 30,
2001, a decrease of 6%. Part of this decrease is due to changes in personnel and
other shifts in corporate emphasis that resulted in a large client terminating
their account effective September 30, 2001. This account, with the State of
Ohio, represented assets under management that produced $99,927 in management
fees in the nine months ended September 30, 2001. In conjunction with the shift
in corporate emphasis to the investment advisory services of DHCM, a program was
initiated to gather new assets under management at DHCM. However, there can be
no assurance that the Company will be able to achieve the critical threshold of
assets under management at DHCM to support future operations.

Operating expenses for the nine months ended September 30, 2002 decreased to
$2,487,164 compared to $2,782,820 for the nine months ended September 30, 2001,
a decrease of 11%. Generally, the decrease is due to a drop in salaries,
brokers' commission and general and administrative fees. Salaries, benefits and
payroll taxes decreased to $1,131,470 for the nine months ended September 30,
2002 from $1,330,427 for the nine months ended September 30, 2001, a decrease of
15%. This decrease is primarily due to changes in personnel. Brokers' commission
expense decreased from $122,265 for the nine months ended September 30, 2001 to
$45,868 for the nine months ended September 30, 2002, a decrease of 62%. The
decrease in broker commission is a result of the capitalization of certain
commission expense, as explained in the Notes to the Financial Statements, and
the effect of the down market on mutual fund sales. General and administrative
expenses decreased to $565,744 for the nine months ended September 30, 2002 from
$796,814 for the nine months ended September 30, 2001, a decrease of 29%. Due to
expenses related to special corporate projects and new mutual fund products,
professional fees increased 40% to $744,082 for the nine months ended September
30, 2002 compared to $533,314 for the nine months ended September 30, 2001.

Other expense for the nine months ended September 30, 2002 decreased 137% to
$270,494 from other revenue of $722,199 for the nine months ended September 30,
2001. The decrease resulted primarily from decreases in revenue from investment
gains and dividend income. Investment gains were $546,937 for the nine months
ended September 30, 2001 compared to losses of $315,493 for the nine months
ended September 30, 2002, resulting in an 158% decrease. Investment losses were
the result of decreases in market values of the Company's trading portfolio,
which primarily includes mutual fund and limited partnership investments.
Management is unable to predict how future fluctuations in market values will
impact the performance of the Company's trading and investment portfolios. In
addition, dividend income declined for the nine months ended September 30, 2002
to $18,192 compared to $143,880 for nine months ended September 30, 2001, a
decrease of 87%. This is due to a significant



                                       17
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


reduction in the Company's portfolio of bank stocks (many of which pay
dividends) and lower interest rates on lower money market balances. Interest and
other income decreased from $31,875 for the nine months ended September 30, 2001
to $27,279 for the nine months ended September 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

As a result of a net loss of $2,056,811 for the nine months ending September 30,
2002, the Company's cash balance decreased 93% to $64,668 compared to the cash
balance at September 30, 2001. As shown on the attached Consolidated Statements
of Financial Condition, the Company's overall working capital for the three
months ending September 30, 2002 was approximately $4,100,000. As of December
31, 2001 working capital was approximately $6,100,000.

Net cash used in operating activities increased from $320,133 for the nine
months ended September 30, 2001 to $845,032 for the nine months ended September
30, 2002. The primary cause for this increase was the net operating loss. Net
cash used in operating activities for the nine months ended September 30, 2001
of $320,133 primarily resulted from the net operating loss of 1,107,624.


                                                   SEPTEMBER         SEPTEMBER
                                                      2002              2001
                                               ---------------    --------------
     Cash Flow From Operating Activities              (845,032)        (320,133)
     Cash Flow From Investing Activities              (123,826)        (107,697)
     Cash Flow From Financing Activities              (140,500)      (1,216,448)
                                               ---------------    --------------
     Net Increase (Decrease) in Cash                (1,109,358)      (1,644,278)
     Cash Beginning of Period                        1,174,026        3,443,228
     Cash, Ending of Period                             64,668        1,798,950


Net cash used in investing activities for the nine months ended September 30,
2002 and for the nine months ended September 30, 2001 was for the purchase of
office equipment and other property and equipment were the primary uses of these
funds.

Net cash used in financing activities for the nine months ended September 30,
2002 and for the nine months ended September 30, 2001 was primarily for the
purchase of Company common stock. As stated previously, the Company acquired a
line of credit during the quarter ended September 30, 2002, which partially
offsets this use of cash.

Approximately 94% of the Company's trading portfolio is readily marketable.
Investments in securities traded on national securities markets and securities
not traded on national securities markets, but with readily ascertainable market
values, are valued at market value. The remaining 6% of the value of the
Company's trading portfolio is comprised of small capitalization bank stocks,
which are thinly traded, and there can be no assurance that active markets will
develop. The failure of such markets to develop could negatively affect the
Company's operations and financial condition. Other securities, for which market
quotations are not readily available, due to infrequency of transactions, are
valued at fair value as determined in good faith by management of the Company.
While management employs objective criteria to ascertain these values,




                                       18
<PAGE>



              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES


there is no independent benchmark by which the values assigned by management can
be judged. Accordingly, the value of these securities may be overstated.

Investment management fees and revenue from the investment portfolio principally
fund the operations of the Company. Management believes that the Company's
existing resources, including available cash and cash provided by operating
activities, will be sufficient to satisfy its working capital requirements in
the foreseeable future. However, no assurance can be given that additional funds
will not be required. To the extent that returns on investments are less than
anticipated, or expenses are greater than anticipated, the Company may be
required to reduce its activities, liquidate the trading portfolio or seek
additional financing. Further, this additional financing may not be available on
acceptable terms, if at all. No significant capital expenditures are expected in
the foreseeable future.

LEGAL PROCEEDINGS (COMMITMENTS AND CONTINGENCIES)

In the normal course of business, the Company may be named or become involved in
various inquiries, administrative proceedings and litigation. While any
proceeding or litigation has the element of uncertainty, the Company does not
believe there are currently any such proceedings that will have a material
impact on its results from operations or financial condition.

As stated in Note 5 of this filing, DHS, under a correspondent agreement with
its clearing broker, has agreed to indemnify the clearing broker from damages or
losses resulting from customers' transactions. The Company is, therefore,
exposed to off-balance sheet risk of loss in the event that customers are unable
to fulfill contractual obligations. The Company manages this risk by requiring
customers to have sufficient cash in their account before a buy order is
executed and to have the subject securities in their account before a sell order
is executed. The Company has not incurred any losses from customers being unable
to fulfill contractual obligations.

Please refer to Note 5 of this filing for further discussion regarding the
Company's risk exposure from market making activities, short selling, option
contracts, and a significant industry concentration in bank and financial
institutions.

IMPACT ON INFLATION AND OTHER FACTORS

The Company's operations have not been significantly affected by inflation. The
Company's trading portfolios of equity securities, primarily in the
community-banking sector, are carried at current market values. Therefore,
general economic and market conditions, including volatility in the banking
sector, the volume of securities trading and fluctuations in interest rates,
affect the Company's profitability.

The Company's business is also subject to government regulation and changes in
legal, accounting, tax and other compliance requirements. Changes in these
regulations may have a significant effect on the Company's operations.




                                       19
<PAGE>


              DIAMOND HILL INVESTMENT GROUP, INC. AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION
                                -----------------


Item 1.   Legal Proceedings
             None

Item 2.   Change in Securities
             None

Item 3.   Defaults Upon Senior Securities
             None

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

Item 5.   Other Information
             None

Item 6.   Exhibits and Reports on Form 8-K
            a) Index of Exhibits:
               99.3  Certification for Quarterly Report on Form 10-QSB
               99.4  Certification for Quarterly Report on Form 10-QSB
            b) Reports on Form 8-K:
               None


















                                       20
<PAGE>



                                   SIGNATURES

In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.



Signature                    Title                            Date
-------------------------------------------------------------------------------

/S/R. H. Dillon              President and Director           October 31, 2002
---------------
R. H. Dillon


/S/James F. Laird            Chief Financial Officer          October 31, 2002
-----------------
James F. Laird


















                                       21