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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
         ( X )    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 1997

         (   )    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                  SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from               to
                                                 -------------    -------------
                         Commission File Number: 0-23270

                              DOMINION HOMES, INC.
                              --------------------
             (Exact name of registrant as specified in its charter)

                 Ohio                               31-1393233
                 ----                               ----------
   (State or other jurisdiction of               (I.R.S. Employer
    incorporation or organization)               Identification No.)

    5501 Frantz Road, Dublin, Ohio                               43017
    ------------------------------                               -----
(Address of principal executive offices)                       (Zip Code)

        Registrant's telephone number, including area code: 614-761-6000
                                                            ------------
        Securities registered pursuant to Section 12(b) of the Act: None
                                                                    ----
        Securities registered pursuant to Section 12(g) of the Act:
        Common Shares with no par value
        -------------------------------

Indicate by check mark whether the registrant (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 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
                                      -----  -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )

Based upon the closing sale price reported on the NASDAQ National Market on
March 25, 1998, the aggregate market value of the Common Shares of the
Registrant held by non-affiliates (assuming, for this purpose, that all
executive officers and directors are affiliates) on that date was $22,883,873.

As of March 25, 1998 there were 6,271,053 Common Shares issued and outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Definitive Proxy Statement for the Annual Meeting of Shareholders to be
     held on May 20, 1998 (in pertinent part, as indicated)............ Part III


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                                     PART I

ITEM 1     BUSINESS

BACKGROUND

         The Company was founded in 1976 by Donald Borror, its Chairman of the
Board, and was incorporated in Ohio in October 1993. Prior to the consummation
of the Company's initial public offering in March 1994, the business of the
Company was operated as part of the homebuilding and related divisions (the
"Homebuilding Divisions") of Borror Realty Company ("BRC"), an Ohio corporation
incorporated in 1946. In connection with the Company's initial public offering,
the Company and BRC entered into a Corporate Exchange and Subscription Agreement
pursuant to which the Company acquired substantially all of the operating assets
of the Homebuilding Divisions. At March 25, 1998, BRC owned 4,082,000 Common
Shares of the Company, representing 65.1% of the issued and outstanding Common
Shares.

         The principal executive offices of the Company are located at 5501
Frantz Road, Dublin, Ohio and its telephone number is (614) 761-6000.

MARKET OVERVIEW

         The Company is currently the second largest homebuilder in the Central
Ohio market (based upon revenues and closings) and had a 22.7% share of the
homebuilding market in 1997. Columbus, the capital of Ohio, has been a stable
market, with diverse economic and employment bases. Columbus is the home of The
Ohio State University, which has the second largest number of students on one
campus of any university in the United States. In addition, a number of notable
organizations have their headquarters in Central Ohio, including Honda of
America Manufacturing, Inc., The Limited, Inc., Nationwide Insurance Company,
Banc One Corporation, Wendy's International, Inc., Huntington Bancshares
Incorporated, Battelle Memorial Institute, Worthington Industries, Inc., The
Scotts Company and Cardinal Health, Inc.

         Columbus also is the county seat of Franklin County and the largest
city in the Columbus Metropolitan Statistical Area (the "CMSA"). The CMSA
includes Franklin, Pickaway, Madison, Fairfield, Delaware and Licking Counties
(the "CMSA Counties"). References herein to Central Ohio means the CMSA Counties
and Union County. The Company builds homes in Union County and in all of the
CMSA Counties except Pickaway and Madison Counties.

PRODUCTS

         The Company offers three distinct series of single-family homes that
are differentiated by size, price, standard features and available options. This
product diversity allows the Company to target specific market segments and
appeal to a wide range of home buyers. The Company's products range from starter
homes to executive homes with prices from $95,500 to more than $300,000. Homes
offered in the Century Series generally range in size from 1,100 to 1,900 square
feet, at prices from $95,500 to $175,000, and are targeted to appeal primarily
to young, entry level home buyers. Homes offered in the Celebrity Series
generally range in size from 1,700



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to 2,400 square feet, at prices from $135,000 to $205,000, and are targeted to
appeal to both entry level and first-time, move-up home buyers. Homes offered in
the Tradition Series generally range in size from 2,000 to 3,000 square feet, at
prices from $160,000 to more than $300,000, and are targeted to appeal primarily
to existing homeowners who desire to move up to larger homes with more
amenities. The Company has offered condominiums for sale in the past but is
currently focused on single-family homes.

         The Company is a "full option" homebuilder. Each of the Company's homes
has a standard design and basic features. After the purchaser has chosen a home
from among the 40 standard floor plans and elevations available, the purchaser
can "individualize" the home, at additional cost, through the selection of
structural, exterior and interior options. Structural options include two-foot
side-wall extensions, side-load garages and master bathrooms. Exterior/interior
options include brick or stone facades, fireplaces, and upgrades on bathroom and
kitchen fixtures, cabinets, tiles and floorings. The Company's homes feature
nationally recognized and industry leading brand names, including Trane(R)
natural gas furnaces, Andersen(R) wood windows, Armstrong(R) flooring, General
Electric(R) appliances, Wilsonart(R) decorative laminate, Aristokraft(R)
cabinets and the Kohler(R) family of bathroom and kitchen fixtures.

MARKETING AND SALES

         The Company markets all of its homes under the "Dominion Homes(SM)"
tradename. The Company employs an extensive targeted marketing program that
includes advertising in newspapers and magazines, by direct mail, on billboards
and on radio and television. The Company's advertising typically emphasizes
either the quality of its homes, the location of its communities, the brand name
components used in its homes or the wide variety of its home styles and options.
The Company believes these factors differentiate its products and re-enforce its
"Dominion Homes - The Best of Everything(SM)" brand awareness program. At the
end of 1997, according to a third party survey, the Dominion Homes name was
recognized by 86% of the Central Ohio respondents.

         The Company also markets a "Helping Hand Program" to purchasers of its
Century Series Homes. The Helping Hand Program is a work equity program approved
by HUD which permits home buyers to reduce their down payments by performing
some minor construction tasks themselves. Through training seminars conducted
monthly by the Company's personnel and a detailed video, participating home
buyers receive step-by-step guidance on completing these tasks. The Company
aggressively markets this program because it enables the Company to sell homes
to entry level home buyers who otherwise would not have the down payment
necessary to qualify for mortgage financing. This program also allows home
buyers to purchase homes with more desirable features and amenities than they
would otherwise qualify to purchase. In 1997, approximately 76% of the
purchasers of the Company's Century Series homes participated in the Helping
Hand Program.

         The Company conducts its home sales from on-site sales offices in
furnished model homes. Each sales representative is an employee of the Company
and is trained and equipped to fully explain the features and benefits of the
Company's homes, to determine which home best suits the customer's needs and to
explain the construction process. The Company devotes significant



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attention to the training and re-training of sales representatives to assure
high levels of professionalism and product knowledge. The Company believes that
the use of an in-house sales staff allows for a more knowledgeable sales
presentation and enables the Company to communicate a consistent message to its
customers. Sales representatives are compensated on a commission and bonus
basis. At December 31, 1997, the Company employed 29 sales representatives and
operated 26 model homes, of which one was leased from BRC.

         The Company welcomes independent broker participation because it
believes that such participation introduces the Company to customers who might
not otherwise consider purchasing a home from the Company. In 1997, the Company
paid sales commissions of $3.6 million to independent brokers on 771 homes that
had an aggregate sales price of $116.6 million.

         The Company uses promotional and sales incentives such as discounts on
the purchase price of its homes or options to market its products. It is the
Company's intention to use this practice on a selective or seasonal basis to
target slow sales areas and manage production capacity. The Company also offers
a discount to customers who previously purchased one of its homes, to employees
of subcontractors it uses in the building process, and to its own employees.

         Sales of the Company's homes are made pursuant to standard sales
contracts. These contracts generally require the purchaser to make a $500
deposit at the time of execution of the contract and to pay the balance of the
cash down payment, typically up to 3.0% of the purchase price, at the start of
construction.

         The Company generally does not commence construction of a home until it
obtains a sales contract and notice from the customer's lender that mortgage
financing has been approved. However, the Company routinely commences
construction of a home with a sales contract that is contingent upon the
customer selling an existing home. Some customers fail to complete their
contracts, which results in partially constructed homes that are no longer under
contract. In addition, the Company selectively starts construction of a limited
number of homes without a contract to create an inventory in anticipation of
seasonal demand and to attract customers, such as corporate transferees, who
need homes within 60 to 90 days. At December 31, 1997, the Company had 109
inventory homes in various stages of construction.

DESIGN AND CONSTRUCTION

         The Company believes that it is a leading innovator in new home
construction. Its homes include superior construction features such as its
engineered floor truss system; safer, less steep stairs; B.F. Goodrich(R) CPVC
plumbing pipe; and Twenty First Century wiring, which includes Category 5 wiring
and two-way interactive cable wiring.

         The Company employs a full-service architectural department which
controls the design of its homes. Each home design is value-engineered for
greater efficiency in the building process and lower cost to the purchaser. For
example, where possible, back-to-back bathrooms are designed to avoid the need
for multiple drains and room sizes are designed to correspond to standard carpet
widths to avoid the expense and waste involved in cutting carpet. On an ongoing
basis, the design team utilizes the Company's knowledge of the Central Ohio
market and the feedback



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gained from its customers to create new designs and modify existing designs to
keep pace with changing consumer preferences.

         The design team is aided by a computer graphics design system. This
system provides the Company with greater flexibility in creating new designs and
modifying existing designs and enhances the Company's ability to accurately
estimate the materials necessary for a particular design.

         The Company acts as the general contractor for the construction of its
homes. The Company's construction superintendents, together with the
construction managers to whom they report, monitor construction, coordinate the
activities of subcontractors and suppliers, maintain quality and cost controls
and monitor compliance with zoning and building codes.

         The use of subcontractors by the Company enables it to minimize its
investment in employees, equipment and building supply inventory. This practice
also increases the Company's flexibility in responding to changes in the demand
for housing. The Company has long standing business relationships with many of
its subcontractors. These relationships, coupled with the volume and efficient
design of homes built by the Company, have enabled the Company to negotiate
favorable agreements with its subcontractors.

         Through its ownership of a lumberyard, which allows it to purchase its
lumber directly from mills and wholesalers, the Company has reduced its exposure
to risks of inadequate supply and significant price fluctuations. From time to
time the Company purchases lumber for delayed delivery to ensure adequate supply
and predictable cost. During 1997, substantially all of the lumber purchased
through the lumberyard was used by the Company.

         The Company has implemented various administrative systems to support
its construction operations. For instance, the Company's management information
system allows the Company to control construction costs by making available the
information necessary to monitor subcontractor performance and expenditures on
each home. Subcontracted work is authorized by work orders, the cost of
deviations from the work order must be approved for payment by the Company's
construction superintendents and significant cost variances are investigated.
These techniques permit the Company to effectively monitor gross profit margins.

DECORATING CENTER

         Since the introduction of its decorating center in 1990, the Company
has been able to offer customers full-service advice in the decorating process.
Providing the ambiance of a quality retail store, the decorating center features
full-sized samples and vignettes and computer aided graphics that depict the
exterior of the customer's home. These features allow the customer to visualize
color combinations and options, feel the textures and picture how the selections
work together. Management believes that the decorating center reduces customer
anxiety in the decorating and selection process and significantly contributes to
customer satisfaction. The Company's experienced, full-time decorating
consultants are available daily to assist the customer in making selections from
among hundreds of options on display at the decorating center, from bathroom
fixtures to outdoor siding. Beginning in January 1997, the Company placed the
responsibility for



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the sale of decorating options and upgrades with its decorating consultants and
began providing commission on upgrades. Previously these functions were provided
by the Company's sales representatives. Since initiating this change, customer
satisfaction, as well as sales of options and upgrades, have improved.

CUSTOMER SATISFACTION PROGRAM

         The Company's strategy is customer driven and market focused. The
Company recognizes that, for most customers, the purchase of a home represents
the single largest investment that they will ever make. The Company strives to
ensure the soundness of this investment through the delivery of quality homes
that are located in attractive communities and that provide lasting value.

         The Company also understands that many prospective customers are
uncertain about how to choose a homebuilder and a home and have little knowledge
about home construction. Accordingly, every phase of the Company's operations,
from the beginning of the selling process through construction, closing and
service after the closing, educates and involves the customer in the
homebuilding process.

         At the construction conference, the construction superintendent
assigned to the customer's home meets with the customer to review the home plans
and explain the construction process and schedule. Because the Company wants the
customer to see the quality built into the customer's home, the customer is
invited to visit the home site at any time during the course of construction.

         The Company's "Gold Medal" quality assurance program is designed to
provide the customer with peace of mind. Under this program, each home is
subject to eight separate inspections by the Company's construction personnel,
and members of the Company's senior management inspect randomly selected homes
on a monthly basis. Because of the Company's attention to quality and its
commitment to "doing it right the first time," the Company offers a
comprehensive warranty program that features a two-year warranty covering all
mechanical elements (including heating, plumbing and electrical systems), roof,
windows and doors, as well as a twenty-five year warranty covering all major
structural components. The structural warranty on each home is automatically
transferable to subsequent owners of the home. The Company also passes along to
its customers all warranties provided by manufacturers and suppliers. The
Company believes that its warranty program is one of the best warranty packages
offered in the homebuilding industry.

         The Company invites each customer at and after closing to complete
questionnaires that rate the customer's sales representative, construction
superintendent and decorating consultant and provide certain other information
regarding the customer's homebuilding experience. The Company uses the
information obtained from these questionnaires to refine its products, programs
and services to assure that the Company continues to be responsive to its
customers.



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LAND ACQUISITION AND DEVELOPMENT

         The Company believes that one of its key strengths has been its ability
to identify and acquire property to be utilized as lots for future residential
home development. The Company's practice has been to develop most of the lots on
which it builds its homes. The Company generally does not buy unimproved land
for speculation and generally limits its investment in unimproved land to an
amount that it expects to be able to develop and sell within three to five
years. All of the Company's land purchases must be reviewed by the Company's
Strategic Land Committee comprised of the Company's Chief Executive Officer and
certain other members of senior management.

         The Company believes that it obtains certain advantages through its
practice of acquiring and developing unimproved land. This practice provides the
Company with the ability to: (i) improve its profit margins by reducing the cost
of finished lots; (ii) maintain an adequate supply of finished lots to meet
market demand; (iii) control the details of development and create in its
communities a distinctive look of quality and success; and (iv) construct homes
more efficiently.

         The Company believes that its understanding of the Central Ohio market
also gives it an advantage in identifying and acquiring unimproved land with
good market potential. In considering the suitability of unimproved land for
development, the Company reviews such factors as (i) availability of existing
community services such as sewers, water, gas and electricity; (ii) estimated
costs of development; (iii) quality of school systems; (iv) population growth
patterns; (v) proximity to existing developed areas; (vi) employment growth
rates; (vii) anticipated absorption rates for new housing; and (viii)
availability of transportation.

         Although the Company purchases land and engages in land development
activities primarily for the purpose of maintaining an adequate supply of lots
on which to build, the Company also sells unimproved land and finished lots to
developers and other homebuilders. Revenues from the sale of unimproved land and
developed lots in 1997 was $2.2 million.

         Prior to the acquisition of unimproved land, the Company ensures that
any necessary zoning, environmental or other governmental approvals required to
develop the land into residential lots have been obtained and that the land is
served by utilities. The Company's engineering and design professionals then
plan and engineer the land and construct the streets, sewers, water and drainage
facilities and other improvements to meet the Company's specifications. In
developing land, the Company is required by some municipalities and other
governmental authorities to provide letters of credit to secure performance of
the Company's obligations to install sewers, streets and other improvements. At
December 31, 1997, the Company had an aggregate of $6.6 million of letters of
credit outstanding for these purposes. The Company does not believe that any of
the outstanding letters of credit are likely to be drawn upon.



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         To limit its risk, the Company attempts to control land through the use
of option and contingent purchase contracts. These contracts condition the
Company's obligation to purchase land upon the Company's review and approval of
such matters as zoning, utilities, soil and subsurface conditions, environmental
and wetland conditions, levels of taxation, traffic patterns, development costs,
title matters and other property-related criteria.

         The Company designs each of its residential communities to have its own
identity. Through its control over the details of development, from the
placement of streets to the design of each community entryway, the Company
creates in each of its communities a distinctive look of quality and success.
The Company generally completes the sale of homes in its communities in time
periods that range from three to five years from first to last sale, with
smaller communities generally taking less time to complete than larger ones. In
addition, the Company typically incorporates a homeowner association for
communities with common areas to ensure the continued maintenance of the common
areas after the community is developed.

         The Company occasionally enters into joint venture agreements with
other homebuilders to own and develop communities. The primary reason is to
limit the Company's exposure to owning large amounts of land in a single
community and the risks associated with longer holding periods for those larger
communities. The Company also has purchased finished lots in certain communities
which were developed by BRC under various joint venture agreements. The lots
were purchased at a purchase price equal to the lesser of (i) BRC's adjusted tax
basis in such lots plus $500 per lot or (ii) the fair market value of such lots.
Such purchases totaled approximately $4.8 million for the year ended December
31, 1997.

         Land inventory owned by the Company includes land titled in the
Company's name or which the Company is committed to purchase. Land inventory
controlled by the Company represents land which the Company has the right to
acquire under contingent purchase contracts and option contracts, including
option contracts with BRC. The option contracts with BRC relate to 10 finished
lots and unimproved land which the Company expects will be developed into an
estimated 47 finished lots.

         The following table sets forth the Company's land inventory as of
December 31, 1997:

<TABLE>
<CAPTION>
                                      Finished           Lots Under        Unimproved Land            Total
Land Inventory                          Lots            Development         Estimated Lots        Estimated Lots
--------------                          ----            -----------         --------------        --------------
<S>                                     <C>                 <C>                  <C>                  <C>
Owned by the Company                    1,285               248                  3,600                5,133
Controlled by the Company                  10                 0                  2,783                2,793
                                        -----               ---                  -----                -----
                                        1,295               248                  6,383                7,926
                                        =====               ===                  =====                =====
</TABLE>

CUSTOMER FINANCING

         The Company currently does not offer customer financing because it does
not own or operate a mortgage lending business. However, the Company does assist
customers in obtaining financing by referring them to independent mortgage
brokers that offer qualified customers a



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variety of financing options, including both government insured and conventional
financing programs. Additionally, the Company pays certain elements of its
customers' costs of financing with certain mortgage lenders with which the
Company has a relationship, including his or her loan origination fees, rate
commitment fees and discount points. In the event that a customer chooses to
make his or her own financing arrangements, the Company will reduce the purchase
price of the home.

         Upon request and the payment of a fee, the Company will build a home
under FHA or VA guidelines to allow the customer to finance the purchase through
a FHA or VA mortgage program. In comparison to conventional financing,
government insured financing generally allows customers to purchase homes with a
higher percentage of their incomes directed toward housing expenses and with
lower down payments (as little as 1% when used in conjunction with the Company's
Helping Hand Program). FHA and VA rules also are generally more liberal with
respect to the amount of points and closing costs that the seller may pay.
During 1997, 49.7% of the Company's closings involved government insured
financing. At December 31, 1997, the FHA financing limit was $123,900 in the
CMSA Counties and $107,500 in Union County. On March 1, 1998, the FHA financing
limit was increased to $128,700 in the CMSA Counties and $118,000 in Union
County.

         In addition, the Company offers other non-conventional financing
programs, including the Company's Helping Hand Program which is available to
purchasers of its Century Series Homes. This work-equity program, approved by
HUD, allows home buyers to reduce down payments significantly by performing
certain minor construction tasks themselves.

         Because virtually all of the Company's customers use long-term first
mortgages to finance their home purchases, adverse economic conditions,
increases in unemployment, increases in mortgage interest rates and a reduction
in the scope or funding of government programs could deter or eliminate a
substantial number of potential customers for the Company's homes.

TITLE INSURANCE AGENCY

         During the first quarter of 1997, the Company participated in the
creation of a title insurance agency, Alliance Title Agency, that began
operating on April 1, 1997. Alliance was formed to provide title insurance to
the Company's customers and third parties and to facilitate closing of the
Company's homes. The Company believes that, through the operations of Alliance,
the Company has improved its service to customers and enhanced its
administrative processes.

AVAILABILITY OF LABOR AND RAW MATERIALS

         During periods of increased construction activity, the homebuilding
industry has faced shortages in the availability of skilled labor. Waiting for
skilled labor to become available may result in construction delays, while the
use of less skilled labor to fill a skilled labor shortage may cause quality
standards to suffer. Additionally, harsh winters could result in a larger than
usual labor demand in the early spring from the homebuilding industry. Increases
in the demand for skilled labor also can result in increases in the cost of such
labor. The Company believes that by taking a long-term approach to its
relationships with subcontractors and by providing a consistent



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stream of work it is able to enhance its ability to retain subcontractors and
better control the cost of skilled labor.

         The principal raw materials used in the homebuilding industry, lumber,
brick and concrete, as well as plumbing and electrical supplies, generally are
available from a variety of sources, but are subject to periodic price
fluctuations. In particular, lumber has occasionally been subject to limited
availability and significant price increases. Because the Company may not be
able to pass on to its customers price increases in raw materials or labor,
future price increases in these items could have a material adverse effect on
the Company's profitability.

COMPETITION

         The homebuilding industry in the Central Ohio market is highly
competitive. The Company competes with national, regional and local
homebuilders, some of which have greater financial, marketing, sales and other
resources than the Company. The Company competes with other homebuilders and the
resale market for the sale of homes on the basis of such factors as location,
price, design and the Company's reputation for quality and service. The Company
also competes with other homebuilders for materials and skilled labor and with
other homebuilders and land developers for financing and desirable unimproved
land. The Company believes that its primary competitive strengths are: (i) its
knowledge of the Central Ohio market, which has allowed it to capitalize on
opportunities for advantageous land acquisition in desirable locations; (ii) its
ability to design and offer communities and homes that home buyers find
appealing and (iii) its reputation for quality and service.

REGULATION

         The Company is subject to environmental, wetlands, zoning, land use,
sales, building design, construction, health and safety and other regulation by
various federal, state and local authorities. The Company must obtain licenses,
permits and approvals from various governmental authorities to conduct its
business, the granting of which are beyond the Company's control. The Company is
subject to local regulations which impose zoning and density requirements in
order to limit the areas for residential development and the number of houses
within particular areas.

         The Company could be subject to periodic delays or could be precluded
entirely from developing land due to building moratoriums. Generally, such
moratoriums relate to insufficient water or sewage facilities within specific
areas or subdivisions. To date, moratoriums have not had a material adverse
effect on the Company's business.

         The Company generally conditions its obligation to purchase unimproved
land on, among other things, obtaining acceptable zoning and soil and wetland
studies. Accordingly, land development activities historically have not been
materially adversely affected by zoning restrictions or environmental
liabilities. However, there can be no assurance that zoning restrictions will
not adversely affect the Company in the future or that the Company will not
incur material liabilities relating to the removal of hazardous waste or other
environmental matters affecting land acquired by the Company.



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         Increasingly stringent requirements could be imposed on homebuilders
and land developers in the future. Such requirements could have a material
adverse effect on the Company and the industry. Although the Company cannot
predict the effect of compliance with any such additional regulatory
requirements, the Company could be required to implement time-consuming and
expensive compliance programs.

SERVICE MARKS

         The Company has adopted, has used and owns registrations in the State
of Ohio for the service marks "Dominion Homes(SM)" and "Tradition Homes(SM)".
The Company also has adopted, has used, and owns the service marks in the
State of Ohio for "The Best Building Experience(SM)" and "Building Relationships
That Last(SM)". In 1996, the Company was awarded federal registrations of the
latter two service marks. In January 1998, the Company was awarded federal
registration of the service mark "The Best of Everything(SM)". The Company
is currently pursuing federal registration of the service mark "Dominion
Homes(SM)".

EMPLOYEES

         On December 31, 1997, the Company employed 348 people (including 17
part-time employees), of which 148 were employed in construction, 68 in sales,
55 in the lumber division, and 77 in management, administrative or clerical
positions. Although the Company's employees are not represented by labor unions
or covered by collective bargaining agreements, certain of the subcontractors
engaged by the Company are represented by labor unions or are subject to
collective bargaining arrangements. The Company believes that its relationships
with its employees and subcontractors are generally good.

OTHER INFORMATION

         Information regarding seasonality, practices of the Company regarding
working capital items and backlog orders is contained in the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

ITEM 2     PROPERTIES

         During 1997, the Affiliated Transaction Review Committee of the Board
of Directors of the Company (composed of the three independent directors)
reviewed and approved the sale by the Company to BRC of the Company's corporate
office building and the contemporaneous execution by the Company of a long-term
lease with BRC for the corporate office building. The sale was closed and the
lease was executed on December 29, 1997. The purpose of the transaction from the
Company's perspective was to create additional liquidity with which to invest in
assets associated with the homebuilding process and to allow the Company to
reduce it's financing costs. The office building was sold at a price of
$3,950,000, less a credit of up to $200,000 for roof repairs and sidewalk
improvements, together with parking expansion. The lease is for a term of twelve
years at a rental rate of $12.00 per square foot on a total net basis with two
options to renew for periods of five years each at then-current market rates.
Both the



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sale price and rental rates were established by an MAI appraisal commissioned by
the Committee, and confirmed in a review for the Committee by a second MAI
appraiser.

         The Company owns a lumberyard located on 6.1 acres in Columbus, Ohio.
The facility includes ten buildings containing approximately 75,000 square feet
of space. Two buildings are constructed of steel and the remaining eight
buildings are constructed of concrete block and wood.

         The Company leases space in a shopping center owned by BRC which the
Company uses for its 4,200 square foot decorating center and a 1,350 square foot
architectural office.

         In addition, the Company leases from unaffiliated third parties
approximately 5,400 square feet of office-warehouse space in three locations
under short term leases. The Company uses the facilities for warranty operations
and storage.

         During 1997, the Company entered into a program with an unaffiliated
third party to which the Company expects to sell and lease back most of its
model homes. In prior years the Company occasionally sold and leased back model
homes, however the majority were owned by the Company. During 1997, fourteen
model homes were sold and leased back pursuant to this program. The Company also
sold and leased back an additional two model homes to another unaffiliated third
party.


ITEM 3     LEGAL PROCEEDINGS

         The Company is involved in various legal proceedings, most of which
arise in the ordinary course of business and some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.

ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.




                                       12
<PAGE>   13


                                     PART II

ITEM 5     STOCK MARKET PRICES AND DIVIDEND POLICY

         The Company's Common Shares are traded on the Nasdaq National Market
under the symbol "DHOM." The following table sets forth for the periods
indicated the high and low sales prices for the Common Shares, as reported by
the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                                                       SALES PRICES
                                                                                   --------------------
          CALENDAR YEAR ENDING DECEMBER 31, 1998                                    HIGH           LOW
          --------------------------------------                                    ----           ---
<S>                                                                                <C>             <C>
          First Quarter (Through March 25, 1998)............................       $12.50          $9.25


          CALENDAR YEAR ENDED DECEMBER 31, 1997                                     HIGH           LOW
          -------------------------------------                                     ----           ---
          First Quarter.....................................................        $5.13          $4.38
          Second Quarter....................................................        $5.00          $4.38
          Third Quarter.....................................................        $9.00          $4.38
          Fourth Quarter....................................................       $12.00          $7.63


          CALENDAR YEAR ENDED DECEMBER 31, 1996                                     HIGH           LOW
          -------------------------------------                                     ----           ---
          First Quarter.....................................................        $4.88          $3.25
          Second Quarter....................................................        $4.63          $3.88
          Third Quarter.....................................................        $4.38          $3.75
          Fourth Quarter....................................................        $4.63          $4.00

</TABLE>

         On March 25, 1998, the last sale price of the Common Shares, as
reported by the Nasdaq National Market, was $11.88 per share, and there were
approximately 92 holders of record of the Common Shares.

         The Company has not paid any dividends in the past and does not
anticipate that it will pay any dividends in the near term. The provisions of
the Company's bank credit facilities limit the amount of dividends that the
Company may pay during any calendar year to 25% of the Company's net income
after taxes for such year.




                                       13
<PAGE>   14


ITEM 6     SELECTED FINANCIAL DATA
           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


         The following table summarizes certain selected financial and operating
data of the Company since the initial public offering in 1994 and of the
Homebuilding Divisions of BRC prior to the initial public offering. This data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements of
the Company, including the notes thereto, appearing elsewhere herein.

<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA                          1997           1996           1995            1994           1993
-----------------------                          ----           ----           ----            ----           ----
<S>                                            <C>             <C>            <C>            <C>            <C>
Revenues....................................   $207,926        $175,579       $178,112       $161,895       $141,821
Gross profit................................     49,553          39,081         27,102         32,701         33,745
Income from operations......................     18,919          12,756            887          6,333         11,983
Income (loss) before income taxes...........     13,274           6,411         (5,182)         3,315          8,968
Provision for income taxes(1)...............      5,569           2,374         (1,684)         1,326          3,587
Net income (loss)(1)........................      7,705           4,037         (3,498)         1,989          5,381
Diluted earnings (loss) per share(1)(3).....       1.20            0.64          (0.56)          0.35           1.39
Total assets at year end....................    117,795         103,826        105,031        118,215         75,216
Long term obligations at year end...........     57,763          54,563         61,782         70,363         50,828

OPERATING DATA                                   1997           1996           1995            1994           1993
--------------                                   ----           ----           ----            ----           ----

Homes:
     Sales contracts (2).........                 1,402           1,308          1,253          1,103          1,284
     Closings....................                 1,387           1,188          1,206          1,138          1,067
     Backlog at year end.........                   703             688            568            521            556
Aggregate sales value of homes in backlog
     at year end.................              $106,686        $101,202        $83,167        $75,438        $80,036
</TABLE>

-----------------------
(1)      Pro forma for 1994 and 1993.
(2)      Net of cancellations.
(3)      All earnings per share calculations reflect the adoption of SFAS No.
         128 "Earnings per Share".


                                       14
<PAGE>   15


ITEM 7     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

         The Company achieved record revenues, number of homes delivered and net
income for 1997. Revenues for 1997 increased by 18.4% to $207.9 million from
$175.6 million for 1996. Net income increased by 90.9% to $7.7 million in 1997
from $4.0 million in 1996. The Company delivered a record 1,387 homes in 1997
compared to 1,188 homes in 1996. Home sales for 1997 increased by 7.2% to 1,402
from 1,308 for 1996. Despite the record number of homes delivered in 1997, the
Company ended 1997 with a record backlog of 703 sales contracts compared with
688 at the end of 1996. The Company's market share in Central Ohio grew to 22.7%
by year-end 1997 from 18.9% at year-end 1996.

         The Company's record performance was due, in part, to programs the
Company implemented in 1997 to increase revenues and enhance productivity,
including a new and expanded marketing campaign, improved administrative
systems, increased production capacity and better utilization of subcontracted
labor. The latter programs directly contributed to a decrease in the amount of
time from the Company acceptance of the sales contract to the home delivery
date. Favorable economic conditions, generally stable interest rates, a mild
winter season and selective price increases also contributed to the favorable
results.

         One of the Company's key strengths has been its ability to identify and
acquire property to be used as lots for future residential home development. The
Company generally develops and sells land within a three to five year period
from the date of its acquisition. Following two years of strong homebuilding
sales and limited land acquisitions, the Company increased its land inventory in
1997. Investment in land and land development inventories increased to $62.9
million at December 31, 1997 from $50.0 million at the end of 1996.
Substantially all of such increase in land and land development inventories
occurred as a result of an increase in finished lots in inventory. Undeveloped
land and land in development remained relatively constant between the two
periods. The Company's objective in creating the larger inventory of developed
lots as of December 31, 1997 is to meet the anticipated demand during the first
half of 1998.

         A portion of the Company's growth in 1997 included activities which are
complementary to its core homebuilding business. The Company participated in the
creation of a title insurance agency, Alliance Title Agency, Ltd. ("Alliance"),
which commenced operations on April 1, 1997. The Company owns 49.9% of the
equity of Alliance and reports its investment using the equity method of
accounting. The balance of the equity of Alliance is beneficially owned by an
unaffiliated company and an individual who became an employee of the Company in
January 1998. Alliance was formed to provide title insurance to the Company's
customers and third parties and to facilitate the closing of the Company's
homes. The Company believes that, through the operations of Alliance, the
Company has improved its service to customers and enhanced its administrative
processes. In addition, the Company continued to expand its lumber division by
increasing its truss manufacturing capacity as well as its delivery and
distribution systems.


         During 1997, the Company initiated substantial upgrades to the
Company's computer



                                       15
<PAGE>   16

systems to increase operating efficiencies, provide the technology for growth
both within and outside of Central Ohio and address the Year 2000 issues. Most
of the implementation of these upgrades will take place during 1998.

COMPANY OUTLOOK

         The Company believes that it is well positioned for future growth in
1998 due to the record number of homes in backlog at the end of 1997, strong
sales activity in early 1998, further implementation of operational and
administrative improvements, and ongoing cost control programs, combined with
the expected continuation of a favorable economic environment. The Company
believes that these factors, in conjunction with the addition of five additional
sales locations in Central Ohio, will lead to a positive comparison with 1997
results.

         The Company's growth strategy is to maximize sales in each of the
Company's existing sales locations in Central Ohio as well as to increase the
overall number of its sales locations within Central Ohio. Additionally, the
Company has been actively evaluating opportunities to expand regionally to new
markets outside of Central Ohio.

         The Company has developed a long-term information systems strategy, one
aspect of which is to address exposure related to the impact on its computer
systems of the Year 2000 issues. Key financial, information and operations
systems have been assessed and plans developed in order to mitigate the Year
2000 issues. These plans include upgrades of purchased software and conversion
of in-house developed software. The Company is currently in various stages of
implementing the upgrades and expects to invest between $2.0 - $2.5 million in
this effort with the cost to be allocated over a five year period. Costs of
replacing computer software programs are expected to be primarily accounted for
and financed as operating leases. The costs of reprogramming computer programs
that are not replaced will be expensed as incurred and are not expected to be
material. All programs subject to Year 2000 concerns will be evaluated utilizing
internal and external resources to reprogram, replace and test. The Company
intends to initiate during 1998 a communication plan with significant suppliers
to determine the status of their Year 2000 compliance programs. Management
believes its plans will adequately address the Year 2000 issues and does not
currently anticipate a material impact on the Company's operations and financial
results. However, if such upgrades and conversions are not made, or are not
timely completed, the Year 2000 issues could have a material impact on the
operations and financial results of the Company.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995

         The statements contained in this report under the caption "Company
Outlook" and other provisions of this report which are not historical facts are
"forward looking statements" that involve various important risks, uncertainties
and other factors which could cause the Company's actual results for 1998 and
beyond to differ materially from those expressed in such forward looking
statements. These important factors include, without limitation, the following
risks and uncertainties: real or perceived adverse economic conditions and/or an
increase in mortgage interest rates, mortgage commitments that expire prior to
homes being delivered, the Company's



                                       16
<PAGE>   17

ability to install public improvements or build and close homes on a timely
basis due to adverse weather conditions, delays in the zoning, permitting or
inspection processes, the effect of changing consumer tastes on the market
acceptance for the Company's products, the impact of competitive products and
pricing, the effect of shortages or increases in the costs of materials, labor
and financing, the continued availability of credit, the outcome of litigation,
the impact of changes in government regulation, the problems associated with the
Year 2000 issue and the other risks described in the Company's Securities and
Exchange Commission filings.

SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS

The Company has experienced, and expects to continue to experience, significant
seasonality and quarter-to-quarter variability in homebuilding activity levels.
Typically, closings and related revenues will increase in the second half of the
year. The Company believes that this seasonality reflects the tendency of home
buyers to shop for a new home in the Spring with the goal of closing in the Fall
or Winter. Weather conditions can also accelerate or delay the scheduling of
closings.

         The following table sets forth certain data for each of the last eight
quarters:


<TABLE>
<CAPTION>
                                                                Sales                                   Backlog
             Three                      Revenues              Contracts           Closings          (at period end)
          Months Ended               (in thousands)         (in units)(1)        (in units)           (in units)
          ------------               --------------         -------------        ----------         ---------------
<S>                                     <C>                       <C>                <C>                  <C>
         Mar. 31, 1996                  $36,318                   425                255                  738
         June 30, 1996                  $41,524                   325                278                  785
         Sept. 30, 1996                 $45,916                   305                301                  789
         Dec. 31, 1996                  $51,821                   253                354                  688
         Mar. 31, 1997                  $36,997                   356                266                  778
         June 30, 1997                  $56,672                   333                380                  731
         Sept. 30, 1997                 $58,723                   380                383                  728
         Dec. 31, 1997                  $55,534                   333                358                  703
</TABLE>
------------------
(1)      Net of cancellations.

        At December 31, 1997 the aggregate sales value of homes in backlog was
$106.7 million compared to $101.2 million at December 31, 1996. The average
sales value of homes in backlog at December 31, 1997 increased to $151,800 from
$147,100 at December 31, 1996.

         The Company annually incurs a substantial amount of indirect
construction costs which are essentially fixed in nature. For purposes of
financial reporting, the Company capitalizes these costs to real estate
inventories on the basis of the ratio of estimated annual indirect costs to
direct construction costs to be incurred. Thus, variations in construction
activity cause fluctuations in interim and annual gross profits.




                                       17
<PAGE>   18


RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
items from the Statements of Operations contained in the Financial Statements
expressed as percentages of total revenues, as well as certain operating data:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                               1997                1996                 1995
                                                               ----                ----                 ----
<S>                                                            <C>                 <C>                  <C>
Revenues...............................................        100.0%              100.0%               100.0%
Cost of real estate sold...............................         76.2                77.7                 84.8
                                                               -----               -----                -----
     Gross profit......................................         23.8                22.3                 15.2
Selling, general and administrative....................         14.7                14.5                 14.7
Settlement of litigation...............................           --                 0.5                   --
                                                               -----               -----                -----
     Income from operations............................          9.1                 7.3                  0.5
Interest expense.......................................          2.7                 3.6                  3.4
                                                               -----               -----                -----
     Income (loss) before income taxes.................          6.4                 3.7                 (2.9)
Provision for income taxes.............................          2.7                 1.4                 (0.9)
                                                               -----               -----                -----
     Net income (loss).................................          3.7%                2.3%                (2.0)%
                                                               =====               =====                =====

Homes:
     Sales contracts...................................        1,402               1,308                1,253
     Closings..........................................        1,387               1,188                1,206
     Backlog at year end...............................          703                 688                  568
Average sales price of homes closed
     during the year (in thousands)....................         $148                $145                 $141
Average sales price of homes in backlog
     at year end (in thousands)........................         $152                $147                 $146
Aggregate sales price of homes in backlog at year
end (in thousands).....................................     $106,686            $101,202              $83,167
</TABLE>

         A home is included in "sales contracts" when the Company's standard
sales contract, which requires a deposit and generally has no contingencies
other than for buyer financing and/or for the sale of an existing home, is
executed. "Closings" or "deliveries" represent homes for which the closing has
occurred and conveyance of the deed has passed from the Company to the buyer.
Revenue and cost of real estate sold are recognized at the time of closing.
"Backlog" represents homes for which the Company's standard sales contract have
been executed, but for which closings had not occurred as of the end of the
period.

         Homes included in "sales contracts" and in "backlog" in the foregoing
table are net of cancellations. Most cancellations occur because customers
cannot qualify for financing. While most cancellations occur prior to the start
of construction, some cancellations occur during the construction process. The
cancellation rates for homes in backlog as of December 31, 1996, 1995 and 1994
were 15.2%, 12.7%, and 11.1%, respectively.



                                       18
<PAGE>   19

         1997 COMPARED TO 1996

         REVENUES. Revenues for 1997 increased to $207.9 million from $175.6
million for 1996, an increase of $32.3 million or 18.4%. The increase in
revenues was primarily the result of a 16.8% increase in the number of homes
delivered and a 2.2% increase in the average price per delivered home. In 1997
the Company delivered 1,387 homes compared to 1,188 homes in 1996, an increase
of 199 homes. Included in the 199 additional deliveries are 16 model homes the
Company sold and leased back to use as sales models. The increase in the number
of homes delivered in 1997 as compared to 1996 was due to a larger backlog of
homes at the beginning of 1997, a greater number of homes sold, more favorable
weather conditions and increased construction efficiencies which led to shorter
building times. The average price per delivered home increased to $148,100 in
1997 from $144,900 in 1996, an increase of $3,200. The increase in the average
price per delivered home occurred principally in the second half of the year and
reflects the purchase of larger homes with more customer selected options in
1997 than in 1996. The Company also was able to selectively increase the prices
of some of its homes. Included in revenues are other revenues, consisting
principally of the sale of land and building supplies to other homebuilders. In
1997, land sales to other homebuilders decreased to $2.2 million from $2.4
million in 1996 and building supply sales decreased to $300,000 from $1.1
million in 1996. The decrease in building supply sales resulted from the
Company's lumber division's increased focus of its activities on the Company's
internal needs.

         GROSS PROFIT. Gross profit for 1997 increased to $49.6 million from
$39.1 million for 1996, representing a gross profit margin improvement to 23.8%
from 22.3%. This 1.5% improvement in gross profit margin is attributable to the
delivery of homes with more customer selected options, which have a higher gross
profit margin, selective price increases, a declining mortgage rate environment
that minimized the costs of the financing the Company pays on behalf of its
customers and more effective control of direct construction costs.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1997 increased to $30.6 million from $25.5 million
for 1996. This increase was primarily due to the costs associated with selling
and delivering a larger number of homes in 1997 compared to 1996 and increased
promotional efforts. As a percentage of revenues, selling, general and
administrative expenses increased slightly to 14.7% for 1997 compared to 14.5%
for 1996.

         INTEREST EXPENSE. Interest expense decreased to $5.6 million for 1997
compared to $6.3 million for 1996. The primary reason for the decrease was a
recognition of less net capitalized interest expense, a lower average term debt
balance and reduced bank fees. The weighted average rate of interest of the
Company's revolving line of credit was 8.9% for 1997 and 8.8% for 1996. The
average revolving line of credit borrowings outstanding were $57.5 million and
$58.7 million for 1997 and 1996, respectively.

         PROVISION FOR INCOME TAXES. Income tax expense for 1997 increased to
$5.6 million from $2.4 million for 1996. The Company's estimated annual
effective tax rate increased to 42.0% for 1997 from 37.0% for 1996. The lower
effective tax rate in 1996 was attributable to recognition of state tax loss
carryforwards which by 1997 had been fully utilized.



                                       19
<PAGE>   20

         1996 COMPARED TO 1995

         REVENUES. Revenues for 1996 decreased to $175.6 million from $178.1
million for 1995, a decrease of $2.5 million or 1.4%. This decrease was
primarily the result of the 18 fewer homes delivered in 1996 compared to 1995.
In 1996, the Company delivered 1,188 homes compared to 1,206 homes in 1995. The
decrease in deliveries is attributed to construction delays due to difficult
weather conditions during the first few months of 1996, limited availability of
key subcontractor labor and fewer inventory homes delivered during 1996 compared
to 1995. The average price of homes delivered during 1996 increased to $144,900
from $141,000 in 1995 due to price increases and reduced sales discounts.
Included in revenues are other revenues, consisting principally of the sale of
land and building supplies to other homebuilders. In 1996, land sales to other
homebuilders decreased to $2.4 million from $6.5 million in 1995 and building
supply sales decreased to $1.1 million from $1.6 million for the same time
periods.

         GROSS PROFIT. Gross profit for 1996 increased to $39.1 million from
$27.1 million for 1995, representing a gross profit margin improvement to 22.3%
from 15.2%. This 7.1 percentage point improvement in gross profit margin is
attributable primarily to price increases, reduced sales discounts and improved
control of direct construction costs.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1996 decreased to $25.5 million from $26.2 million
for 1995. As a percentage of revenues, selling, general and administrative
expenses decreased slightly to 14.5% for 1996 compared to 14.7% for 1995.

         SETTLEMENT OF LITIGATION. During 1996, the Company agreed to the
settlement of a class action that resulted in a charge to operations in the
fourth quarter of $850,000 or 0.5% of revenues.

         INTEREST EXPENSE. Interest expense increased to $6.3 million for 1996
compared to $6.1 million for 1995. Although the Company's average indebtedness
decreased to $58.7 million for 1996 from $66.3 million in 1995, the Company's
weighted average interest rate increased to 8.8% for 1996 compared to 8.2% for
1995. Previously capitalized interest charged to expense exceeded interest
capitalized during 1996 by $500,000.

         PROVISION FOR INCOME TAXES. Income tax expense for 1996 was $2.4
million compared to an income tax benefit of $1.7 million for 1995. The
Company's effective tax rate increased to 37.0% for 1996 compared to an
effective tax rate benefit of 32.5% for 1995 due principally to the Company's
inability to utilize certain deductions for tax purposes during 1995. During
1996, the Company continued to use tax benefits associated with tax loss
carryforwards that lowered the effective tax rate for 1996 by 3.7%. These tax
benefits were fully utilized in 1996.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, the Company's capital needs have depended upon sales
volume, asset turnover, land acquisition and inventory levels. The Company's
traditional sources of capital have been internally generated cash, bank
borrowings and seller financing. The Company has incurred



                                       20
<PAGE>   21

substantial indebtedness in the past and expects to incur substantial
indebtedness in the future to fund its operations and its investment in land.

         During 1997, the Company began to explore expanding into areas outside
of Central Ohio. Such expansion will require additional capital resources,
particularly if such expansion would be accomplished through the acquisition of
one or more homebuilders. To meet this need, the Company is exploring additional
sources of capital to augment its traditional sources.

     SOURCES AND USES OF CASH
     1997 COMPARED TO 1996

         Net cash used in operating activities was $6.5 million for 1997
compared to net cash provided by operating activities of $7.4 million for 1996.
The Company used cash generated from the sale of homes to invest in real estate
inventories to meet customer demand and to replace inventories under options
that are no longer available. Land and land development costs increased to $62.9
million as of December 31, 1997 from $50.0 million as of December 31, 1996 due
to an increase in finished lots in inventory. The Company increased finished
lots in inventory to meet the anticipated demand during the first half of 1998.
Homes under construction increased to $46.7 million as of December 31, 1997,
from $43.0 million as of December 31, 1996, reflecting the larger number of
homes under construction at the end of 1997 as compared to 1996. The increase in
homes under construction was reduced by $2.3 million for homes in inventory that
were sold during 1997 and leased back to the Company for use as sales models.
Net cash provided by investing activities during 1997 was $3.3 million compared
to net cash used by investing activities of $200,000 during 1996. The primary
reason for this difference is that the Company sold its office facility for $4.0
million during 1997. Net cash provided by financing activities was $3.2 million
during 1997 compared to net cash used by financing activities of $7.2 million
during 1996.

     SOURCES AND USES OF CASH
     1996 COMPARED TO 1995

         Net cash provided by operating activities for 1996 was $7.4 million
compared to $12.4 million for 1995. Net income provided cash flow of $4.0
million in 1996 compared to a use of cash resulting from a loss of $3.5 million
in 1995. These amounts were offset by increases in real estate inventories in
1996 of $1.0 million compared to reduced real estate inventories in 1995 of
$14.9 million. In addition, $1.0 million in refundable income taxes were
received in 1996. During 1996, accounts payable, deposits on homes under
contract and accrued liabilities provided cash flow of $1.9 million compared to
providing cash flow of $1.2 million in 1995. Additionally, increases in accounts
receivable, prepaid expenses and other assets resulted in a $100,000 use of cash
in 1996 compared to providing cash of $1.2 million during 1995. Net cash used in
investing activities decreased $500,000 because of a reduction in expenditures
for property and equipment, and increased proceeds from sale of property and
equipment in 1996. Net cash used in financing activities, which reflects
payments on debt, decreased to $7.2 million in 1996 from $11.7 million in 1995,
principally as a result of cash flow generated from operations.



                                       21
<PAGE>   22

REAL ESTATE INVENTORIES

         The Company's practice is to develop most of the lots upon which it
builds its homes. The Company generally does not buy unimproved land for
speculation and generally limits its investment in unimproved land to an amount
it expects to be able to develop and sell within the next three to five years.
At December 31, 1997, the Company either owned or had under contract to purchase
lots or land that could be developed into approximately 5,100 lots, and the
Company controlled through option agreements an additional 2,800 lots. Included
in the 2,800 lots controlled through option agreements were 57 lots owned by
BRC. During 1997, the Company exercised options to purchase 1,300 controlled
lots, including 188 lots from BRC. Option agreements expire at varying dates
through June 30, 2001. The Company's decision to exercise any particular option
or otherwise acquire additional land is based upon an assessment of a number of
factors, including its existing land inventory at the time and its evaluation of
the future demand for its homes. During 1997, the Company sold lots and land to
other builders for $2.2 million.

         Land and land development costs at December 31, 1997 increased from the
previous year end as a result of increased sales activity, replacement of land
inventory depleted but not replaced during the previous two years and a need to
replace lots no longer available to the Company from BRC. Homes under
construction also increased from year end as a result of having more homes under
construction and having homes generally at a more advanced stage of
construction. The aggregate investment in inventory homes, however, declined
$1.8 million to $6.8 million at December 31, 1997 from $8.6 million at December
31, 1996. On December 31, 1997, the Company had 109 inventory homes in various
stages of construction, compared to 140 inventory homes in various stages of
construction at December 31, 1996. Unsold inventory homes are not reflected in
sales or backlog. Also included in real estate inventories are building
materials and supplies.

SELLER-PROVIDED DEBT

         The Company had $5.1 million and $2.0 million of seller-provided term
debt outstanding at December 31, 1997 and 1996, respectively. On December 2,
1997, the Company exercised an option to purchase land for a purchase price of
$6.3 million, of which the seller agreed to finance $3.6 million over four
years. The interest rate on the note payable is 6.5%. Interest rates on the
remaining seller-provided debt, which matures within three years, are at 8.0%
and prime.

LAND PURCHASE COMMITMENTS

         At December 31, 1997, the Company had commitments to purchase 186
residential lots and unimproved land at an aggregate cost of $5.0 million, of
which $4.1 million is expected to be funded during 1998. In addition, at
December 31, 1997, the Company had cancelable obligations to purchase
residential lots and unimproved land of $26.1 million, of which $13.4 million is
expected to be funded during 1998. The Company had invested $700,000 in good
faith deposits in these cancelable purchase obligations at December 31, 1997.
Included in the $26.1 million of cancelable purchase obligations are $1.3
million of purchase options with BRC.



                                       22
<PAGE>   23

BANK CREDIT FACILITY

         The Company's bank credit facility has a maturity date of June 30, 2000
and provides for revolving loans and letters of credit (limited to $15 million
in the aggregate) of up to $90 million in the aggregate, subject to borrowing
base limitations. As of December 31, 1997, the Company had $15.5 million
available under its bank credit facility, after adjustment for borrowing base
limitations. The bank credit facility is not collateralized. See Note 5 to the
Notes to the Financial Statements.

         The Company is exploring additional sources of capital to augment its
existing sources. As part of that effort, the Company also is discussing with
certain of its bankers a new bank credit facility that would replace the
existing facility and would provide certain more favorable terms to the Company.

         The Company has entered into two contracts to fix the interest rate on
a total of $20.0 million of borrowings under its bank credit facility. Each
contract fixed the interest rate on $10.0 million of the outstanding revolving
line of credit for a term of three years (expiring in October 2000 and January
2001, respectively). The interest rate on the first contract was fixed at a
three month Eurodollar rate of 6.13% plus a variable margin and the interest
rate on the second contract was fixed at a three month Eurodollar rate of 5.48%
plus a variable margin. The variable margin is determined quarterly, based upon
the Company's leverage ratio, and can range from 2.25% to 3.25%. At December 31,
1997, the variable margin was 2.25%, and the Company's overall effective
borrowing rate was approximately 8.1%.

INFLATION AND OTHER COST INCREASES

         The Company is not always able to reflect all of its cost increases in
the prices of its homes because competitive pressures and other factors require
it in many cases to maintain or discount those prices. After a sales contract
has been accepted, the Company is generally able to maintain costs with
subcontractors from the date the sales contract is accepted until the date
construction is completed; however, unanticipated additional costs may be
incurred between the date a sales contract is accepted and the date construction
is completed. For example, delays in construction of a home can cause the
mortgage commitment to expire and can require the Company, if mortgage interest
rates have increased, to pay significant amounts to the mortgage lender to
extend the original mortgage interest rate. In addition, during periods of high
construction activities, additional costs may be incurred to obtain
subcontractor availability when certain trades are not readily available, which
additional costs can result in lower gross profits.




ITEM 7A  QUANTITATIVE AND QUALITATIVE
         DISCLOSURES ABOUT MARKET RISK

         Not applicable




                                       23
<PAGE>   24


ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS
AND SHAREHOLDERS
OF DOMINION HOMES, INC.


         We have audited the accompanying balance sheets of Dominion Homes, Inc.
as of December 31, 1997 and 1996 and the related statements of operations,
changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Dominion Homes, Inc.
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.








                                             Coopers & Lybrand L.L.P.

Columbus, Ohio
February 2, 1998





                                       24
<PAGE>   25




                              DOMINION HOMES, INC.
                            STATEMENTS OF OPERATIONS
               (In thousands, except share and per share amounts)
================================================================================


<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                                1997                    1996                    1995
                                                              --------                --------                --------
<S>                                                            <C>                     <C>                    <C>
Revenues                                                      $207,926                $175,579                $178,112
Cost of real estate sold                                       158,373                 136,498                 151,010
                                                              --------                --------                --------
Gross profit                                                    49,553                  39,081                  27,102
Selling, general and administrative                             30,634                  25,475                  26,215
Settlement of litigation                                                                   850
                                                              --------                --------                --------
Income from operations                                          18,919                  12,756                     887
Interest expense                                                 5,645                   6,345                   6,069
                                                              --------                --------                --------
         Income (loss) before income taxes                      13,274                   6,411                  (5,182)
Provision for income taxes                                       5,569                   2,374                  (1,684)
                                                              ========                ========                ========
              Net income (loss)                               $  7,705                $  4,037                $ (3,498)
                                                              ========                ========                ========

Earnings (loss) per share
         Basic                                                   $1.23                   $0.65                  $(0.56)
                                                              ========                ========                ========
         Diluted                                                 $1.20                   $0.64                  $(0.56)
                                                              ========                ========                ========

Weighted average shares outstanding
         Basic                                               6,250,918               6,220,033               6,201,387
                                                             =========               =========               =========
         Diluted                                             6,430,925               6,275,050               6,201,387
                                                             =========               =========               =========

</TABLE>












    The accompanying notes are an integral part of the financial statements.



                                       25
<PAGE>   26



                              DOMINION HOMES, INC.
                                 BALANCE SHEETS
                    (In thousands, except share information)
================================================================================
<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                                 1997                1996
                                                                                                -------            --------
                                     ASSETS
<S>                                                                                             <C>                <C>
Cash and cash equivalents                                                                       $    252           $    252
Notes and accounts receivable:
     Trade                                                                                         1,443              1,092
     Due from financial institutions for residential closings                                        340                589
Real estate inventories:
     Land and land development costs                                                              62,867             49,990
     Homes under construction                                                                     46,717             43,049
     Other                                                                                         2,177              2,351
                                                                                                --------           --------
            Total real estate inventories                                                        111,761             95,390
                                                                                                --------           --------
Prepaid expenses and other                                                                           455                526
Deferred income taxes                                                                              2,110              1,270
Property and equipment, at cost:                                                                   4,325              8,948
        Less accumulated depreciation                                                             (2,891)            (4,241)
                                                                                                --------           --------
            Total property and equipment                                                           1,434              4,707
                                                                                                --------           --------
                Total assets                                                                    $117,795           $103,826
                                                                                                ========           ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, trade                                                                         $  6,770           $  6,255
Deposits on homes under contract                                                                   1,977              1,825
Accrued liabilities                                                                               10,625              8,332
Note payable, banks                                                                               52,687             49,770
Term debt                                                                                          5,076              4,793
                                                                                                --------           --------
            Total liabilities                                                                     77,135             70,975
                                                                                                --------           --------
Commitments and contingencies
Shareholders' equity
     Common shares, without stated value, 12,000,000 shares authorized,
        6,266,953 and 6,239,153 shares issued and outstanding, respectively                       30,673             30,526
        Less deferred compensation                                                                  (150)              (107)
     Retained earnings                                                                            10,137              2,432
                                                                                                --------           --------
            Total shareholders' equity                                                            40,660             32,851
                                                                                                --------           --------
                Total liabilities and shareholders' equity                                      $117,795           $103,826
                                                                                                ========           ========
</TABLE>

    The accompanying notes are an integral part of the financial statements.



                                       26
<PAGE>   27


                              DOMINION HOMES, INC.
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                    (In thousands, except share information)

================================================================================
<TABLE>
<CAPTION>
                                                   Common Shares
                                              ------------------------
                                                                                                  Retained
                                                                                Deferred          Earnings
                                              Shares           Amount         Compensation       (Deficit)         Total
------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                                <C>              <C>
Balance, December 31, 1994                    6,191,020        $ 30,320                           $ 1,893          $ 32,213

     Net loss                                                                                      (3,498)           (3,498)

     Shares issued - shares awarded              12,850              96                                                  96

     Deferred Compensation                       10,000                           $ (36)                                (36)
------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1995                    6,213,870          30,416             (36)           (1,605)           28,775
------------------------------------------------------------------------------------------------------------------------------

     Net income                                                                                     4,037             4,037

     Shares issued - shares awarded              25,283             110             (93)                                 17

     Deferred Compensation                                                           22                                  22
------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1996                    6,239,153          30,526            (107)            2,432            32,851
------------------------------------------------------------------------------------------------------------------------------

     Net income                                                                                     7,705             7,705

     Shares issued - shares awarded              27,800             147            (127)                                 20

     Deferred Compensation                                                           84                                  84
------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1997                    6,266,953        $ 30,673           $(150)          $10,137          $ 40,660
------------------------------------------------------------------------------------------------------------------------------
</TABLE>





    The accompanying notes are an integral part of the financial statements.



                                       27
<PAGE>   28




                              DOMINION HOMES, INC.
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)

================================================================================
<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                         --------------------------------------------------
                                                                                1997              1996              1995
                                                                         --------------------------------------------------
<S>                                                                          <C>                <C>              <C>
Cash flows from operating activities:
      Net income (loss)                                                      $  7,705          $  4,037          $ (3,498)
      Adjustments to reconcile net income (loss) to cash (used in)
           provided by operating activities:
           Depreciation and amortization                                          934               997             1,360
           Loss on disposal of property & equipment                                91               107
           Allowance for doubtful accounts                                        (52)              152               341
           Reserve for real estate inventories                                   (483)              549               850
           Issuance of common shares for compensation                              20                17                96
           Deferred income taxes                                                 (840)             (430)             (665)

           Changes in assets and liabilities:
               Notes and accounts receivable                                      (50)               57               842
               Refundable federal income taxes                                                    1,019            (1,019)
               Real estate inventories                                        (15,888)           (1,001)           14,915
               Prepaid expenses                                                   (77)               (7)              314
               Accounts payable                                                   515              (189)           (4,056)
               Deposits on homes under contract                                   152               128               231
               Increase in accrued liabilities                                  1,494             1,999             2,660
                                                                             --------          --------          --------
                    Net cash (used in) provided by operating activities        (6,479)            7,435            12,371
                                                                             --------          --------          --------
Cash flows from investing activities:
      Proceeds from sale of property & equipment                                3,798               151
      Purchase of property & equipment                                           (526)             (322)             (625)
                                                                             --------          --------          --------
                    Net cash provided by (used in) investing activities         3,272              (171)             (625)
                                                                             --------          --------          --------
Cash flows from financing activities:
      Payments on note payable, banks                                        (205,972)         (118,086)          (88,271)
      Proceeds from note payable, banks                                       208,889           114,805            77,967
      Proceeds from term debt                                                   3,638
      Payments on term debt                                                    (3,355)           (3,938)           (1,437)
      Exercise of stock options                                                     7
                                                                             --------          --------          --------
                    Net cash provided by (used in) financing activities         3,207            (7,219)          (11,741)
                                                                             --------          --------          --------
           Net increase in cash and cash equivalents                                                 45                 5
Cash and cash equivalents, beginning of year                                      252               207               202
                                                                             ========          ========          ========
           Cash and cash equivalents, end of year                            $    252          $    252          $    207
                                                                             ========          ========          ========
Supplemental disclosures of cash flow information:
      Interest paid (net of amounts capitalized)                             $  1,631          $  1,367          $  1,310
                                                                             ========          ========          ========
      Income taxes paid                                                      $  6,423          $  1,878          $     88
                                                                             ========          ========          ========
Supplemental disclosures of non cash financing activities:
      Land acquired by purchase contract or seller financing                 $  3,638                            $  3,160
                                                                             ========                            ========
      Sale of land for note receivable                                                                           $    692
                                                                                                                 ========
</TABLE>
    The accompanying notes are an integral part of the financial statements.



                                       28
<PAGE>   29



                        NOTES TO THE FINANCIAL STATEMENTS

1.       BUSINESS OPERATIONS AND BASIS OF PRESENTATION:

         The Company, incorporated in October 1993 as BRC Services, Inc.,
changed its name to Borror Corporation on January 19, 1994 and changed its name
to Dominion Homes, Inc. on May 7, 1997. Prior to the Company's initial public
offering of common shares in March 1994, the business of the Company was
operated as part of the homebuilding and related divisions (the "Homebuilding
Divisions") of Borror Realty Company ("BRC"), an Ohio corporation incorporated
in 1946. BRC owned 4,082,000 common shares of the Company at December 31, 1997.
The Company operates primarily as a single-family homebuilder in Central Ohio.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         CASH AND CASH EQUIVALENTS: For purposes of the statements of cash
flows, all highly liquid investments purchased with an original maturity of
three months or less are considered to be cash equivalents.

         REAL ESTATE INVENTORIES: Real estate inventories are stated at the
lower of cost or net realizable value. Net realizable value represents
estimates, based on management's present plans and intentions, of sales prices
less development and disposition costs, assuming that disposition occurs in the
normal course of business. Annually, the Company reviews the estimated carrying
values of its properties on an individual project basis. Management evaluates
the recoverability of real estate inventories and other long-lived assets using
several factors in the valuation including, but not limited to, management's
plans for future operations, recent operating results and projected cash flows.

         Land and land development costs are allocated to development phases
based on the total number of lots expected to be developed within each
subdivision. As each development phase is completed, land development costs,
including capitalized interest and real estate taxes, are then allocated to
individual lots.

         Homes under construction include lot costs, construction costs,
capitalized interest and indirect costs related to development and construction
activities. Indirect costs that do not relate to development and construction
activities, including general and administrative expenses, are charged to
expense as incurred.

         Other inventories consist principally of lumber and building supplies.

         PROPERTY AND EQUIPMENT: Depreciation and amortization are recognized on
straight-line and declining-balance methods at rates adequate to amortize costs
over the estimated useful lives of the applicable assets. The estimated useful
lives of the assets range from three to forty years. Depreciation expense was
$702,000, $773,000 and $1,204,000 for the years ended December 31, 1997, 1996
and 1995, respectively.

         Maintenance, repairs and minor renewals are charged to expense as
incurred while major renewals and betterments are capitalized and amortized. The
asset cost and accumulated



                                       29
<PAGE>   30

depreciation is removed for assets sold or retired, and any resulting gain or
loss is reflected in operations.

        EARNINGS PER SHARE: During 1997, the Company adopted Financial
Accounting Standard No. 128 (FAS 128) "Earnings per Share". All prior year
earnings per share amounts have been restated.

         Basic earnings per common share is computed by dividing net income
available to common shareholders by the weighted average number of common shares
outstanding during each period. Diluted computations include common share
equivalents, when dilutive, and the elimination of related expenses, net of
income taxes.

         WARRANTY COSTS: The Company provides a two-year limited warranty on
materials and workmanship and a twenty-five year warranty against major
structural defects. An estimated amount of warranty cost is provided for each
home at the date of closing based on actual warranty experience. Warranty
expense was $2,082,000, $2,052,000 and $1,603,000 for the years ended December
31, 1997, 1996 and 1995, respectively. Accrued warranty cost was $1,003,000 and
$1,060,000 at December 31, 1997 and 1996, respectively.

         INCOME TAXES: The Company records income taxes on the liability method.
This method requires the recognition of deferred income taxes for the impact of
"temporary differences" between the amount of assets and liabilities for
financial reporting purposes and such amounts as determined by tax regulations.

        The provision for income taxes consists of the following for the years
ended December 31, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                 1997                1996                1995
                                                                 ----                ----                ----
<S>                                                            <C>                 <C>                 <C>
Currently payable (refundable):
Federal                                                        $5,061,000          $2,492,000          $(1,019,000)
State and local                                                 1,348,000             312,000
Deferred:
Federal                                                          (737,000)           (231,000)            (665,000)
State                                                            (103,000)           (199,000)
                                                               ----------          ----------          -----------
Income tax expense (benefit)                                   $5,569,000          $2,374,000          $(1,684,000)
                                                               ==========          ==========          ===========
</TABLE>


         The Company had net operating loss carryforwards of $826,000 for
federal purposes and $4.0 million for state purposes as of December 31, 1995.
These net operating loss carryforwards were fully utilized during 1996.


                                       30
<PAGE>   31


         The components of the net deferred tax asset at December 31, are as
follows:
<TABLE>
<CAPTION>
                                                                                     1997                 1996
                                                                                     ----                 ----
<S>                                                                                <C>                   <C>
Assets:
     Valuation reserves                                                            $  219,000            $  330,000
     Accrued expenses                                                               1,585,000               969,000
     Property & Equipment                                                              13,000
     Deferred Gain                                                                    351,000
     Other                                                                                                   52,000
                                                                                   ----------            ----------
          Gross deferred tax assets                                                 2,168,000             1,351,000
Liabilities:
     Property and equipment                                                                                  24,000
     Other                                                                             58,000                57,000
                                                                                   ----------            ----------
          Gross deferred tax liabilities                                               58,000                81,000
                                                                                   ----------            ----------
Net deferred income taxes as recorded in the balance sheet                         $2,110,000            $1,270,000
                                                                                   ==========            ==========
</TABLE>



         A reconciliation of the federal corporate income tax rate and the
effective tax rate on income taxes is summarized below for the years ended
December 31, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                                          1997              1996             1995
                                                                          ----              ----             ----
<S>                                                                       <C>                 <C>             <C>
Statutory income tax rate                                                 34.0%               34.0%           34.0%
Permanent differences                                                       .5%                 .3%             .2%
State and local taxes, net of federal benefit                              6.7%                1.0%
Other                                                                       .8%                1.7%           (1.7%)
                                                                          -----               -----           -----
     Effective income tax rate                                            42.0%               37.0%           32.5%
                                                                          =====               =====           =====
</TABLE>

         INCOME RECOGNITION ON SALES OF REAL ESTATE: The Company recognizes
revenues from the sale of homes at the time the deed is conveyed from the
Company to the buyer. Accounts receivable due from financial institutions
represent payments to be received on completed closings. Gains on sales of model
homes subject to leasing arrangements are deferred and recognized over the term
of the lease.

         CAPITALIZATION OF INTEREST: The Company capitalizes the cost of
interest related to construction costs incurred during the construction period
of homes and land development costs incurred while development activities on
undeveloped land are in process. The summary of total interest is as follows:




                                       31
<PAGE>   32



<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                         1997              1996             1995
                                                                         ----              ----             ----
<S>                                                                  <C>                <C>              <C>
Interest incurred                                                    $5,532,000         $5,804,000       $6,891,000
Interest capitalized                                                 (3,453,000)        (4,482,000)      (4,712,000)
                                                                     -----------        -----------      -----------
Interest expensed directly                                            2,079,000          1,322,000        2,179,000
Previously capitalized interest charged to expense                    3,566,000          5,023,000        3,890,000
                                                                     ----------         ----------       ----------
Total interest expense                                               $5,645,000         $6,345,000       $6,069,000
                                                                     ==========         ==========       ==========
Capitalized interest in ending inventory                             $1,871,000         $2,153,000       $2,874,000
                                                                     ==========         ==========       ==========
</TABLE>

         DEFERRED COSTS: Fees and costs incurred in connection with financing
agreements are capitalized as other assets and amortized over the terms of the
respective agreements. Amortization expense was $148,000, $202,000 and $192,000
for the years ended December 31, 1997, 1996 and 1995, respectively.

         ADVERTISING COSTS: The Company expenses advertising costs when
incurred. Advertising expense was $1,763,000, $1,193,000 and $1,272,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.

         NEW ACCOUNTING STANDARDS: In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No 131, "Disclosures About Segments of
a Enterprise and Related Information". Each standard is effective for financial
statements for fiscal years beginning after December 15, 1997.

         SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses).
SFAS No. 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. The Company is evaluating this pronouncement and has not yet determined
the ultimate impact of this pronouncement on its future financial statements.

         SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders. This
statement defines business segments as components of an enterprise about which
separate financial information is available and used internally for evaluating
segment performance and decision making on resource allocation. SFAS No. 131
requires reporting a measure of segment profit or loss, certain specific revenue
and expense items, and segment assets;



                                       32
<PAGE>   33

and other reporting about geographic and customer matters. The Company believes
that it operates as a single business segment.

         UTILIZATION OF ESTIMATES: 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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

         RECLASSIFICATIONS: Certain prior year information has been reclassified
to conform with the current year presentation.

3.       AFFILIATED ENTITY

         During the first quarter of 1997 the Company participated in the
creation of a title insurance agency, Alliance Title Agency, that began
operating on April 1, 1997. The title insurance agency was formed to provide
title insurance to the Company's customers and third parties and to facilitate
the closing of the Company's homes. The Company owns 49.9% of the title
insurance agency and reports its investment using the equity method of
accounting. During the nine months of operations, the Company recognized
$242,000 as its share of the earnings from this investment.

4.       LAND PURCHASE COMMITMENTS:

         Unconditional purchase contracts for residential lots at December 31,
1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                   1997                     1997
                                                                                   ----                     ----
<S>                                                                              <C>                     <C>
Number of lots.......................................................                   186                      94
                                                                                        ===                      ==

Purchase price.......................................................            $4,993,000              $2,639,000
Less deposits........................................................               (58,000)                 (6,000)
                                                                                 ----------              ----------
Net land purchase commitments........................................            $4,935,000              $2,633,000
                                                                                 ==========              ==========
</TABLE>


         In addition, at December 31, 1997, the Company had entered into
cancelable contracts to purchase residential lots and unimproved land in Central
Ohio. Included in the cancellable contracts are $1.3 million of purchase options
with BRC for 13 finished lots and for an estimated 47 lots that have not been
developed. The remaining future minimum obligations under cancelable contracts
are as follows:



                                       33
<PAGE>   34


                                                                Minimum
                                                              Obligations
                                                              -----------

          1998.............................................   $14,694,000
          1999.............................................     6,928,000
          2000.............................................     3,386,000
          2001.............................................     1,072,000
                                                              -----------
                                                              $26,080,000
                                                              ===========
5.       NOTES PAYABLE, BANKS:

         Notes payable, banks at December 31, 1997 and 1996 consisted of the
following:

<TABLE>
<CAPTION>
                                                                               1997                1996
                                                                               ----                ----

<S>                                                                          <C>                  <C>
          Revolving note payable to banks, principal due June 30,            $52,687,000          $49,770,000
          2000, with interest payable monthly
</TABLE>


         The Company has also issued $6.6 million in irrevocable letters of
credit at December 31, 1997 to municipalities to secure performance and the
completion of certain land development activities.

         On September 29, 1997 the Company executed a Loan Agreement with its
banks for a credit facility having a maturity date of June 30, 2000. The credit
facility provides for revolving loan and letters of credit (limited to $15
million in the aggregate) of up to $90 million in the aggregate, subject to
borrowing base limitations. The credit facility is not collateralized and no
collateral will be required as long as the Company's ratio of total liabilities
to tangible net worth ("leverage ratio") as of the end of each fiscal quarter
through December 31, 1999 does not exceed 2.75 to 1 and as long as the leverage
ratio does not exceed 2.50 to 1 for any two consecutive quarters thereafter. The
credit facility contains the following major provisions: (1) the Company has the
option to use any combination of the following methods to price the revolving
line of credit: (a) the lead bank's prime rate of interest that may be adjusted
based upon performance criteria; (b) a Eurodollar rate of interest plus a
variable margin based upon the Company's leverage ratio; or (c) a fixed rate of
interest as determined by the lead bank; (2) the Company has agreed to fix the
interest rate through the maturity date of the loan agreement on a minimum of
$10 million of the revolving line of credit by June 30, 1998 and a minimum
additional amount of $15 million by June 30, 1999; (3) the Company has agreed to
not exceed the following ratios: (a) a leverage ratio of not greater than 3.00
to 1.00 until December 31, 1998, not greater than 2.75 to 1.00 from January 1,
1999 until December 31, 1999 and not greater than 2.50 to 1.00 thereafter; and
(b) an uncommitted land holdings to tangible net worth ratio of not greater than
2.00 to 1.00 until December 31, 1998, not greater than 1.85 to 1.00 from January
1, 1999 until December 31, 1999 and not greater than 1.75 to 1.00 thereafter;
(4) uncommitted land holdings in Central Ohio are limited to $70 million; (5)
investments in new market areas outside of Central Ohio are limited to $7.5
million in the aggregate and $5 million in any one market; (6) the Company will
not permit



                                       34
<PAGE>   35

the value of its model homes to exceed $6.5 million in the aggregate; (7) the
Company will not permit the value of its speculative homes and condominiums to
exceed $12.5 million in the aggregate and the value of its speculative
condominiums to exceed $3.0 million; (8) the Company must maintain a minimum
tangible net worth of $31 million plus 75% of net income for each fiscal year
after 1997 (but not less than $32 million during the period from December 31,
1997 through December 31, 1998); (9) the Company may not incur a loss during any
five consecutive quarters; and (10) the Company may not pay during any calendar
year dividends in excess of 25% of the Company"s net income after taxes for such
year.

         As of December 31, 1997 the Company was in compliance with all credit
facility covenants and had $15.5 million available under the credit facility,
after adjustment for borrowing base limitations. However, the borrowing
availability under the credit facility could increase, depending on the
Company's utilization of the proceeds.

         On October 14, 1997 and on January 12, 1998 the Company entered into
contracts to fix the interest rate on a total of $20.0 million of bank
borrowings. Each contract fixed the interest rate on $10.0 million of the
outstanding revolving line of credit for a term of three years. The interest
rate on the contract dated October 14, 1997 was fixed at a three month
Eurodollar rate of 6.13% plus a variable margin and the contract dated January
12, 1998 was fixed at a three month Eurodollar rate of 5.48% plus a variable
margin. The variable margin is determined quarterly, based upon the Company's
leverage ratio, and can range from 2.25% to 3.25%. Since the inception of the
credit facility, the variable margin paid by the Company has been 2.25%. At
December 31, 1997 the Company's overall effective borrowing rate was
approximately 8.1%.

         Information regarding the bank borrowings is summarized as follows:

<TABLE>
<CAPTION>
                                                             1997                   1996                   1995
                                                             ----                   ----                   ----
<S>                                                        <C>                    <C>                    <C>
Borrowings outstanding:
Maximum amount...........................................  $70,814,000            $62,998,000            $80,836,000
Average amount...........................................  $57,450,000            $58,739,000            $66,305,000
Weighted average daily interest rate
      during the year....................................         8.9%                   8.8%                   8.2%
Interest rate at December 31.............................         8.1%                   8.3%                   8.5%
</TABLE>




                                       35
<PAGE>   36


6.       TERM DEBT:

         Term debt consisted of the following as of December 31:
<TABLE>
<CAPTION>
                                                                                       1997                  1996
                                                                                       ----                  ----
          <S>                                                                         <C>                 <C>
          9.75% Mortgage note payable, paid in 1997.........................                              $2,763,000
          Prime rate mortgage notes payable due in installments
               through January 1999.........................................         $  678,000            1,070,000
          8.00% Mortgage note payable due in installments
               through February 2000........................................            760,000              960,000
          6.5% Mortgage note payable due installments
               through August 2001..........................................          3,638,000
                                                                                     ----------           ----------
          Total term debt...................................................         $5,076,000           $4,793,000
                                                                                     ==========           ==========
</TABLE>

         Aggregate maturities of note payable, banks and term debt in years
subsequent to December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                   Note
                                                              Payable, Banks            Term Debt              Total
                                                              --------------            ---------              -----
          <S>                                                 <C>                      <C>                  <C>
          1998.............................................                            $1,804,000            $1,804,000
          1999.............................................                               485,000               485,000
          2000.............................................     52,687,000              1,573,000            54,260,000
          2001.............................................                             1,214,000             1,214,000
                                                               -----------             ----------           -----------
                                                               $52,687,000             $5,076,000           $57,763,000
                                                               ===========             ==========           ===========
</TABLE>

7.       LEASE COMMITMENTS:

         Rent expense charged to operations is primarily for model homes,
vehicles, equipment and office facilities, including month-to-month leases and
noncancelable commitments. Rent expense amounted to $1,128,000, $1,127,000 and
$1,110,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
(See also Note 8 Related Party Transactions)

         Minimum rental commitments due under noncancelable leases for model
homes, vehicles, equipment and office facilities are as follows:

                                                        Minimum
                                                        Rentals
                                                        -------
           1998....................................    $1,488,000
           1999....................................       941,000
           2000....................................       727,000
           2001....................................       588,000
           2002....................................       460,000
                                                       ----------
                                                       $4,204,000
                                                       ==========


                                       36
<PAGE>   37

8.       RELATED PARTY TRANSACTIONS:

         During 1997, the Affiliated Transaction Review Committee of the Board
of Directors of the Company (comprised of the three independent directors)
reviewed and approved the sale by the Company to BRC of the Company's corporate
office building and the contemporaneous execution by the Company of a long-term
lease with BRC for the corporate office building. The sale was closed and the
lease was executed on December 29, 1997. The purpose of the transaction from the
Company's perspective was to create additional liquidity with which to invest in
assets associated with the building process and to allow the Company to reduce
its financing costs and charges under its bank credit facility. The office
building was sold at a price of $3,950,000, less a credit of up to $200,000 for
roof repairs and sidewalk improvements, together with parking expansion. The
lease is for a term of twelve years at a rental rate of $12.00 per square foot
on a total net basis with two options to renew for periods of five years each at
then-current market rates. The gain on the sale of the office building was
$790,000 and it is being recognized over the lease term. Both the sale price and
rental rates were established by an MAI appraisal commissioned by the Committee,
and confirmed in a review for the Committee by a second MAI appraiser.

         The Company purchased finished lots, pursuant to a Land Option
Agreement, in certain communities which were developed by BRC and other
homebuilders under various joint venture agreements. Such purchases totaled
$4,789,000, $8,155,000 and $6,485,000 for the years ended December 31, 1997,
1996 and 1995, respectively.

         The Company also purchased from Wilcox Road Associates, additional lots
that amounted to $648,000 in 1996. Wilcox Road Associates is an Ohio joint
venture partnership of which BRC is the managing partner and in which it has a
50% interest.

         The Company acquired printing services from a printing company
principally owned by members of the Borror family. Such services aggregated
$189,000, $177,000 and $166,000 for the years ended December 31, 1997, 1996 and
1995, respectively.

         Under the Model Home Lease Agreement dated January 20, 1994, effective
with the initial public offering, the Company leases model homes from BRC. Lease
expense for the years ended December 31, 1997, 1996 and 1995 was $39,000,
$89,000 and $168,000 respectively.

         Under the Employee Lease Agreement dated January 20, 1994, effective
with the initial public offering, the Company leased to BRC the employees
necessary to operate BRC's business. The Employee Lease Agreement was terminated
December 31, 1995. During 1995, BRC reimbursed the Company $183,000 for the
costs associated with the leased employees. In addition BRC paid the Company
$21,400, $21,400 and $19,800 in 1997, 1996 and 1995, respectively for
miscellaneous services performed by Company personnel.

         The Company and BRC have also entered into operating lease agreements
in which the Company leases space in a shopping center owned by BRC. Lease
expense for the years ended December 31, 1997, 1996 and 1995 was $70,000,
$69,000 and $84,000, respectively.



                                       37
<PAGE>   38

         The Company provides land development and management services to
certain joint ventures in which one of the partners in the joint venture is BRC.
Fees charged for the years ended December 31, 1997, 1996 and 1995 were $174,000,
$370,000 and $234,000, respectively.

9.       RETIREMENT PLAN:

         The Company maintains a defined contribution plan which provides a base
Company contribution of 2% of a qualified employee's compensation and a Company
matching contribution of one-quarter of the employee's voluntary deferral not to
exceed 1.5%. Substantially all employees are covered by the plan after one year
of service. The Company's contribution to the plan amounted to $334,000,
$279,000 and $281,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.

10.      INCENTIVE STOCK AND EXECUTIVE DEFERRED COMPENSATION PLANS:

         In March 1994, the Company adopted the Dominion Homes, Inc. Incentive
Stock Plan. The Plan is administered by the Compensation Committee of the Board
of Directors, and provides for grants of performance awards of Common Shares,
restricted Common Shares, incentive stock options and non-qualified options for
the purpose of attracting, motivating, and retaining key employees and eligible
directors. A maximum of 850,000 Common Shares have been reserved for issuance
under the Plan. The Plan provides that grants shall include certain terms and
conditions and be subject to certain restrictions as provided for under
applicable provisions of the Internal Revenue Code and federal securities laws.
In general, grants of options are subject to vesting schedules at twenty percent
a year, set forth an exercise price that is equal to the fair market value on
the grant date (110% of the fair market value for 10% shareholders), and must be
exercised within ten years of the grant date (5 years for 10% shareholders).

         In December 1994, the Company adopted a non-qualified Executive
Deferred Compensation Plan for directors and certain executives. Under the Plan,
participants may elect to defer a portion of their compensation (20% of total
base and bonus for employees and 100% of director fees). At December 31 of each
year, the Company provides a matching contribution of 25% of the amount deferred
in a given year by a participant, provided that the Company's matching
contribution will not exceed $2,500 in any year. The Company's contribution
vests in 20% increments over a five-year period. Under the plan as originally
adopted, contributions were to be converted into theoretical common shares and
adjusted in future periods based on the market value of the Common Shares,
similar to stock appreciation rights. On October 29, 1997, the Board of
Directors approved an Amended and Restated Executive Deferred Compensation Plan
under which contribution and match amounts are used by the trustee to acquire
Common Shares of the Company in the open market. These Common Shares are held
and voted by the trustee pursuant to a rabbi trust agreement.

         The Company applies APB Opinion 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its Incentive Stock Plan. The Company recognized expense for the Executive
Deferred Compensation Plan of $468,000 and $56,000 for the plan years ended
December 31, 1997 and 1996. The Company did not recognize expense for the plan
year ended December 31, 1995. Had compensation cost for the Company's



                                       38
<PAGE>   39

Incentive Stock Plan been determined based on the fair value at the grant dates
for awards under that plan consistent with the method of SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                   1997                 1996               1995
                                                                   ----                 ----               ----

<S>                                       <C>                   <C>                 <C>                 <C>
Net income (loss)                         Pro forma              $7,619,000          $3,977,000          $(3,534,000)
                                          As Reported            $7,705,000          $4,037,000          $(3,498,000)

Diluted earnings (loss) per share         Pro forma                   $1.18               $0.63               $(0.57)
                                          As Reported                 $1.20               $0.64               $(0.56)

Weighted-average fair value of options
granted during the year                                               $1.94               $1.27                $1.99
</TABLE>

         In determining the pro forma amount of stock-based compensation on a
basis consistent with SFAS No. 123, the fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: no dividend yield; expected
volatility of 27.0%; risk-free interest rate of 6.4%, 5.6% and 7.8% for the
1997, 1996 and 1995 Plan options, respectively; and expected life of 6 years for
the Plan options.

         A summary of the status of the Company's Incentive Stock Plan as of
December 31, 1997, 1996 and 1995, respectively, and changes during the years
then ended is presented below:

<TABLE>
<CAPTION>
                                               1997                      1996                      1995
                                        -------------------      --------------------      --------------------
                                                   Weighted                  Weighted                  Weighted
                                                   Average                   Average                   Average
                                                   Exercise                  Exercise                  Exercise
Fixed Options Price                     Shares     Price         Shares      Price         Shares      Price
-------------------                     ------     --------      ------      --------      ------      -----

<S>                                     <C>         <C>           <C>        <C>           <C>         <C>
Outstanding at beginning of year        428,500    $3.77         204,000     $4.44         135,000     $ 11.50
Granted                                  85,000    $4.75         268,500     $3.27         315,000     $  4.53
Expired                                                           (4,200)    $4.14
Forfeited                               (11,000)   $3.36         (39,800)    $3.91        (111,000)    $  4.70
Canceled                                                                                  (135,000)    $ 11.50
Exercised                               (12,000)   $3.92
                                        -------                  ------                   --------
Outstanding at end of year              490,500    $3.95         428,500     $3.77         204,000     $  4.44
Options exercisable at year-end         177,200                   85,700
</TABLE>


                                       39
<PAGE>   40



         The following table summarizes information about fixed stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                                                             Weighted
Year                    Range of                  Number                Average Remaining               Number
Issued               Exercise Prices           Outstanding              Contractual Life              Exercisable
------               ---------------           -----------              ----------------              -----------
<C>                   <C>                        <C>                         <C>                        <C>
1995                  $3.88 - $4.50              172,600                     7 Years                     72,040
1996                  $3.25 - $4.13              232,900                     8 Years                     97,660
1997                  $4.75                       85,000                     9 Years                      7,500
                                                 -------                                                 ------
                                                 490,500                                                177,200
                                                 =======                                                =======
</TABLE>

11.      COMMITMENTS AND CONTINGENCIES:

         On May 21, 1997, the United States District Court for the Southern
District of Ohio entered a final order approving the settlement of a class
action that had been filed on August 2, 1995 (Case No. C2-95-746), against the
Company, certain of its present and former directors and officers, and the lead
underwriters in it's initial public offering. The time frame in which to file an
appeal has expired without an appeal having been filed. The class action had
alleged that the registration statement for the initial public offering
contained false and misleading statements and asserted violations of Sections
11, 12(2) and 15 of the Securities Act of 1933. Under the settlement, the
defendants agreed to establish a fund of $2.3 million to pay certain costs,
expenses and attorney fees and to make a distribution to members of the
plaintiff-class. The Company's contribution to the settlement resulted in a
pre-tax charge to fourth quarter 1996 earnings of $850,000. In entering into the
settlement, neither the Company nor the other defendants admitted liability.
Nevertheless, the Company believes that settlement of the class action was in
its best interests in order to avoid further costs of litigation.

         The Company is also involved in various other legal proceedings, most
of which arise in the ordinary course of business and some of which are covered
by insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material adverse effect on the
financial condition or results of operations of the Company.

         The Company has developed a long-term information systems strategy, one
aspect of which is to address exposure related to the impact on its computer
systems of the Year 2000 issues. Key financial, information and operations
systems have been assessed and plans developed in order to mitigate the Year
2000 issues. These plans include upgrades of purchased software and conversion
of in-house developed software. The Company is currently in various stages of
implementing the upgrades and expects to invest between $2.0 - $2.5 million in
this effort with the cost to be allocated over a five year period. Costs of
replacing computer software programs are expected to be primarily accounted for
and financed as operating leases. The costs of reprogramming computer programs
that are not replaced will be expensed as incurred and are not expected to be
material. All programs subject to Year 2000 concerns will be evaluated utilizing
internal and external resources to reprogram, replace and test. The Company
intends to initiate during 1998 a communication plan with significant suppliers
to determine the status of their Year



                                       40
<PAGE>   41

2000 compliance programs. Management believes its plans will adequately address
the Year 2000 issues and does not currently anticipate a material impact on the
Company's operations and financial results. However, if such upgrades and
conversions are not made, or are not timely completed, the Year 2000 issues
could have a material impact on the operations and financial results of the
Company.

12.      QUARTERLY FINANCIAL DATA (UNAUDITED)
         (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   Quarter Ended
                                       March 31             June 30           September 30          December 31
                                       --------             -------           ------------          -----------
<S>                                    <C>                   <C>                  <C>                <C>
Revenues:
     1997......................        $ 36,997              $ 56,672             $ 58,723           $ 55,534
     1996......................        $ 36,318              $ 41,524             $ 45,916           $ 51,821
Gross Profit:
     1997......................        $  9,280              $ 13,688             $ 14,036           $ 12,549
     1996......................        $  7,583              $  9,317             $ 10,535           $ 11,646
Income before income taxes:
     1997......................        $  1,039              $  4,159             $  4,610           $  3,466
     1996......................        $    252              $  1,711             $  2,308           $  2,140
Net Income:
     1997......................        $    603              $  2,412             $  2,674           $  2,016
     1996......................        $    152              $  1,086             $  1,418           $  1,381
Diluted Earnings Per Share:
     1997......................        $   0.10              $   0.38             $   0.41           $   0.31
     1996......................        $   0.02              $   0.17             $   0.23           $   0.22
</TABLE>

ITEM 9     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.




                                       41
<PAGE>   42





                                    PART III

ITEM 10    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         In accordance with General Instruction G(3), the information contained
under the captions "BOARD OF DIRECTORS AND MANAGEMENT" and "SECTION 16
BENEFICIAL OWNERSHIP COMPLIANCE" in the Company's definitive Proxy Statement for
the Annual Meeting of Shareholders to be held on May 20, 1998, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934, is incorporated herein by reference.

ITEM 11    EXECUTIVE COMPENSATION

         In accordance with General Instruction G(3), the information contained
under the captions "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" in the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, is incorporated herein by reference. Neither the report of
the Compensation Committee of the Company's Board of Directors on executive
compensation nor the performance graph included in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on May 20,
1998, shall be deemed to be incorporated herein by reference.

ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         In accordance with General Instruction G(3), the information contained
under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" in the Company's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 20, 1998, to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A promulgated under the Securities
Exchange Act of 1934, is incorporated herein by reference.

ITEM 13    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In accordance with General Instruction G(3), the information contained
under the caption "CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on May 20, 1998, to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A promulgated under the Securities Exchange Act of
1934, is incorporated herein by reference.




                                       42
<PAGE>   43


                                     PART IV

ITEM 14    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
           FORM 8-K

(a) (1)  Financial Statements.
         ---------------------

         The financial statements filed as part of this Annual Report on Form
         10-K are the balance sheets of the Registrant as of December 31, 1997,
         and 1996, and the related statements of operations, changes in
         shareholder's equity and cash flows for each of the three years in the
         period ended December 31, 1997, together with the notes thereto.

(a) (2)  Financial Statement Schedules.
         ------------------------------

         There are no financial statement schedules required to be filed with
         this Annual Report on Form 10-K.

(a) (3)  Exhibits.
         ---------

         Exhibits filed with this Annual Report on Form 10-K are attached
         hereto. For a list of such exhibits, see "Index to Exhibits." The
         following table provides certain information concerning executive
         compensation plans and arrangements required to be filed as exhibits to
         this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
          Exhibit No.       Description
          -----------       -----------
          <S>               <C>
          10.1              Dominion Homes, Inc. Incentive Stock Plan, as amended
                            December 5, 1995 and May 7, 1997

          10.9              Incentive Stock Option Agreement, dated January 4, 1995,
                            between Dominion Homes, Inc. and Richard R. Buechler
                            (which agreement is substantially the same as Incentive
                            Stock Option Agreements entered into between the Company
                            and other employees to whom options were granted
                            January 4, 1995 under the Company's Incentive Stock Plan)

          10.10             Incentive Stock Option Agreement, dated July 1, 1997, between
                            Dominion Homes, Inc. and Richard R. Buechler (which agreement is
                            substantially the same as Incentive Stock Option Agreements
                            entered into between the Company and other employees to whom
                            options were granted on July 1, 1997 under the Company's
                            Incentive Stock Plan)
</TABLE>



                                       43
<PAGE>   44
<TABLE>
<CAPTION>
          <S>                 <C>
          10.11               Amended and Restated Dominion Homes, Inc. Deferred
                              Compensation Plan, effective November 15, 1997

          10.12               Employment Agreement, dated May 17, 1996, between Dominion
                              Homes, Inc. and Richard R. Buechler

          10.13               Employment Agreement, dated May 17, 1996, between Dominion
                              Homes, Inc. and Robert A. Meyer, Jr.

          10.15               Employment Agreement, dated  May 17, 1996, between Dominion
                              Homes, Inc. and Jon M. Donnell

          10.16               First Amendment,  dated November 6, 1996, to Employment
                              Agreement between Dominion Homes, Inc. and Jon M. Donnell

          10.17               Restricted Stock Agreement, dated August 1, 1995, between
                              Dominion Homes, Inc. and Jon M. Donnell

          10.18               Restricted Stock Agreement, dated November 6, 1996, between
                              Dominion Homes, Inc. and Jon M. Donnell

          10.19               Restricted Stock Agreement, dated August 1, 1997, between
                              Dominion Homes, Inc. and Jon M. Donnell
</TABLE>

(b)      Reports on Form 8-K.
         --------------------

         No reports on Form 8-K were filed by the Company in 1997.

(c)      Exhibits.
         ---------

         Exhibits filed with this Annual Report on Form 10-K are attached
         hereto. For a list of such exhibits, see "Index to Exhibits" at page
         45.

(d)      Financial Statement Schedules.
         ------------------------------

         There are no financial statement schedules required to be filed with
         this Annual Report on Form 10-K.



                                       44
<PAGE>   45


                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.        Description                                                          Location
-----------        -----------                                                          --------
<S>                <C>                                                                  <C>
 2.1               Corporate Exchange and Subscription Agreement, dated January 20,     Incorporated by reference to
                   1994, between Borror Corporation and Borror Realty Company           Exhibit 2.1 to the Company's
                                                                                        Registration Statement on Form S-1
                                                                                        (File No. 33-74298) as filed with the
                                                                                        Commission on January 21, 1994 and as
                                                                                        amended on March 2, 1994 (The "Form S-1").

 2.2               Form of First Amendment to Corporate Exchange and Subscription       Incorporated by reference to
                   Agreement                                                            Exhibit 2.2 to Form S-1.

 3.1               Amended and Restated Articles of Incorporation of Dominion Homes,    Incorporated by reference to
                   Inc., as amended May 7, 1997                                         Exhibit 4(a)(3) to the Company's
                                                                                        Registration Statement on Form S-8
                                                                                        (File No. 333-26817) filed with the
                                                                                        Commission on May 9, 1997.

 3.2               Amended and Restated Code of Regulations of Borror Corporation       Incorporated by reference to
                                                                                        Exhibit 3.2 to Form S-1.

 4.                Specimen of Stock Certificate of Dominion Homes, Inc.                Incorporated by reference to
                                                                                        Exhibit 4 to the Company's March 31,
                                                                                        1997 Form 10-Q.

10.1               Dominion Homes, Inc. Incentive Stock Plan, as amended December 5,    Incorporated by reference to
                   1995 and May 7, 1997                                                 Exhibit 4(c) to the Company's
                                                                                        Registration Statement on Form S-8
                                                                                        (File No. 333-26817) as filed with
                                                                                        the Commission on May 9, 1997.

10.2               Shareholder Agreement, dated January 20, 1994, between Borror        Incorporated by reference to Exhibit
                   Corporation and Borror Realty Company                                10.4 to Form S-1.

10.3               Land Option Agreement, dated January 20, 1994, between Borror        Incorporated by reference to
                   Corporation and Borror Realty Company                                Exhibit 10.5 to Form S-1.

10.4               Model Home Lease Agreement, dated January 20, 1994, between Borror   Incorporated by reference to Exhibit
                   Corporation and Borror Realty Company                                10.6 to Form S-1.
</TABLE>



                                       45
<PAGE>   46

<TABLE>
<CAPTION>
<S>                <C>                                                                  <C>
10.5               Architectural Department Lease Agreement, dated January 4, 1994,     Incorporated by reference to
                   between Borror Corporation and Borror Realty Company                 Exhibit 10.9 to Form S-1.

10.6               Open Ended Mortgage and Security Agreement, dated December           Incorporated by reference to
                   22, 1987, between The Borror Corporation and W. Lyman                Exhibit 10.11 to Form S-1.
                   Case & Company

10.7               Decorating Center Lease Agreement, dated January 4, 1994, between    Incorporated by reference to
                   Borror Corporation and Borror Realty Company, as amended by          Exhibit 10.12 to the Company's
                   addendum No. 1, effective July 1, 1994                               December 31, 1994 Form 10-K.

10.8               Loan Agreement ,dated September 29, 1997, among Dominion Homes,      Incorporated by reference to Exhibit
                   Inc., the lenders listed therein, and The Huntington National        10.13 to the Company's Form 10-Q.
                   Bank, as agent

10.9               Incentive Stock Option Agreement, dated January 4, 1995, between     Incorporated by reference to
                   Borror Corporation and Richard R. Buechler (which agreement is       Exhibit 10.18 to the Company's
                   substantially the same as Incentive Stock Option Agreements          December 31, 1995 Form 10-K.
                   entered into between the Company and other employees to whom
                   options were granted on January 4, 1995 under the Company's
                   Incentive Stock Plan)

10.10              Incentive Stock Option Agreement, dated July 1, 1997, between        Incorporated by reference to Exhibit
                   Dominion Homes, Inc. and Richard R. Buechler (which agreement is     10.15 to the Company's September 30,
                   substantially the same as Incentive Stock Option Agreements          1997 Form 10-Q.
                   entered into between the Company and other employees to whom
                   options were granted on July 1, 1997 under the Company's
                   Incentive Stock Plan)

10.11              Amended and Restated Dominion Homes, Inc. Executive Deferred         Incorporated by reference to Exhibit
                   Compensation Plan, effective November 15, 1997                       4(a) to the Company's Registration
                                                                                        Statement on Form S-8 (file No.
                                                                                        333-40051) as filed with the
                                                                                        Commission on November 12, 1997.

10.12*             Employment Agreement, dated May 17, 1996, between Dominion Homes,    Filed herewith
                   Inc. and Richard R. Buechler

10.13*             Employment Agreement, dated May 17, 1996, between Dominion Homes,    Filed herewith
                   Inc. and Robert A. Meyer, Jr.
</TABLE>



                                       46
<PAGE>   47



<TABLE>
<CAPTION>
<S>                <C>                                                                  <C>
10.14              First Amendment to Lease Agreement, dated March 19, 1996, between    Incorporated by reference to Exhibit
                   Borror Realty Company and Borror Corporation                         10.21 to the Company's March 31, 1995
                                                                                        Form 10-Q.

10.15              Employment Agreement, dated May 17, 1996, between Borror             Incorporated by reference to
                   Corporation and Jon M. Donnell                                       Exhibit 10.22 to the Company's
                                                                                        September 30, 1996 Form 10-Q.

10.16              First Amendment, dated November 6, 1996, to Employment Agreement     Incorporated by reference to
                   between Borror Corporation and Jon M. Donnell                        Exhibit 10.28 to the Company's
                                                                                        December 31, 1996 Form 10-K.

10.17              Restricted Stock Agreement, dated August 1, 1995, between Borror     Incorporated by reference to Exhibit
                   Corporation and Jon M. Donnell                                       10.19 to the Company's December 31,
                                                                                        1995 Form 10-K.

10.18              Restricted Stock Agreement, dated November 6, 1996, between Borror   Incorporated by reference to Exhibit
                   Corporation and Jon M. Donnell                                       10.30 to the Company's December 31,
                                                                                        1996 Form 10-K.

10.19              Restricted Stock Agreement, dated August 1, 1997, between Dominion   Incorporated by reference to
                   Homes, Inc., and Jon M. Donnell                                      Exhibit 10.24 to the Company's
                                                                                        September 30, 1997 Form 10-Q.

10.20*             Real Estate Purchase Contract, dated December 18, 1997, between      Filed herewith
                   Borror Realty Company and Dominion Homes, Inc.

10.21*             Lease, dated December 29, 1997 as amended by Addendum dated          Filed herewith
                   February 2, 1998, between Borror Realty Company and Dominion
                   Homes, Inc.

23*                Consent of Coopers & Lybrand L.L.P. Independent Public Accountants   Filed herewith

24*                Powers of Attorney                                                   Filed herewith

27*                Financial Data Schedule                                              Filed herewith
</TABLE>

-------------
* Filed herewith



                                       47
<PAGE>   48




                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: March 30, 1998                              Dominion Homes, Inc.

                                                  */s/ DOUGLAS G. BORROR
                                                  ----------------------
                                                  By Douglas G. Borror,
                                                  President and Chief Executive
                                                  Officer

         Pursuant to the requirements of 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.

<TABLE>
<CAPTION>
Signature                                   Capacities                                  Date
---------                                   ----------                                  ----
<S>                                         <C>                                         <C>
*/s/ DONALD A. BORROR                       Director                                    March 30, 1998
------------------------------
Donald A. Borror

*/s/ DOUGLAS G. BORROR                      Director and                                March 30, 1998
-----------------------------               Principal Executive Officer
Douglas G. Borror

*/s/ JON M. DONNELL                         Director,                                   March 30, 1998
--------------------------------            Chief Operating Officer and
Jon M. Donnell                              Principal Financial Officer

*/s/  TAD E. LUGIBIHL                       Principal Accounting Officer                March 30, 1998
---------------------------------
Tad E. Lugibihl

*/s/ DAVID S. BORROR                        Director                                    March 30, 1998
--------------------------------
David S. Borror

*/s/ PETE A. KLISARES                       Director                                    March 30, 1998
--------------------------------
Pete A. Klisares

*/s/ GERALD E. MAYO                         Director                                    March 30, 1998
-----------------------------
Gerald E. Mayo

*/s/ C. RONALD TILLEY                       Director                                    March 30, 1998
-------------------------------
C. Ronald Tilley

*By  /s/ ROBERT A. MEYER, JR.               Attorney-in-fact                            March 30, 1998
-----------------------------
Robert A. Meyer, Jr.

</TABLE>



                                       48