TABLE OF CONTENTS

Description of Business....................................................Below
Message to Shareholders....................................................    1
Selected Consolidated Financial Data.......................................    2
Management's Discussion and Analysis.......................................    4
Independent Auditor's Report...............................................   18
Consolidated Statement of Financial Condition..............................   19
Consolidated Statement of Income...........................................   20
Consolidated Statement of Stockholders' Equity ............................   21
Consolidated Statement of Cash Flows.......................................   22
Notes to Consolidated Financial Statements.................................   23
Shareholder Information....................................................   38
Directors and Officers.....................................................   39





DESCRIPTION OF BUSINESS

         Home  Financial  Bancorp (the  "Holding  Company" and together with the
Bank (as  defined  below),  "HFB" or the  "Company")  is an Indiana  corporation
organized  in  February  1996,  to  become  a  bank  holding  company  upon  its
acquisition  of all the issued and  outstanding  capital stock of Owen Community
Bank, s.b. (the "Bank") in connection with the Bank's  conversion from mutual to
stock form. The Holding  Company  became the Bank's  holding  company on July 1,
1996;  therefore,  all historical financial and other data contained for periods
prior  to July 1,  1996  herein  relate  solely  to the  Bank  while  historical
financial  and other data  contained  herein  for the period  after July 1, 1996
relate to the Company.  The  principal  asset of the Holding  Company  currently
consists of 100% of the issued and outstanding  shares of common stock, $.01 par
value per share,  of the Bank. The Bank was organized under the name Owen County
Savings and Loan Association in 1911. In 1972, the Bank converted to a federally
chartered  savings and loan and changed its name to Owen County Federal  Savings
and Loan Association,  and in 1989, the Bank converted to a federally  chartered
savings bank known as Owen Federal  Savings  Bank.  In 1994,  the Bank became an
Indiana savings bank known as Owen Community  Bank, s.b.  Effective May 1, 1999,
the Bank converted to a federally  chartered  stock savings bank and the Company
became a  savings  and loan  holding  company.  The  Bank's  principal  business
consists  of  attracting  deposits  from  the  general  public  and  originating
long-term  adjustable-rate  loans secured  primarily by first  mortgage liens on
one- to four-family  real estate.  The Bank's deposit accounts are insured up to
applicable limits by the Savings Association  Insurance Fund (the "SAIF") of the
Federal Deposit Insurance Corporation (the "FDIC").

         The Bank is the oldest  continuously  operating  financial  institution
headquartered  in  Owen  County,  Indiana.  Management  believes  the  Bank  has
developed  a solid  reputation  among its loyal  customer  base  because  of its
commitment to personal  service and its strong  support of the local  community.
The Bank offers a number of consumer and commercial  financial  services.  These
services  include:  (i)  residential  real estate  loans;  (ii)  indemnification
mortgage loans ("ID Mortgage Loans");  (iii) mobile home loans; (iv) combination
land-mobile  home loans ("Combo  Loans");  (v)  construction  loans;  (vi) share
loans; (vii)  nonresidential  real estate loans; (viii) multi-family loans; (ix)
installment  loans;  (x) home equity  loans;  (xi) NOW  accounts;  (xii)  demand
deposit accounts;  (xiii) passbook savings accounts;  and (xiv)  certificates of
deposit.  The  Company  conducts  business  out of its main  office  located  in
Spencer,  Indiana.  The Bank is and  historically  has been a  significant  real
estate mortgage lender in Owen County, Indiana.


FELLOW SHAREHOLDERS AND FRIENDS:

     On behalf of our colleagues and ourselves, we are pleased to present to you
the 1999 Annual Report of Home Financial Bancorp.

     The decision to become a stock company three years ago presented management
with  choices.  One option was to simply  maintain the status quo  operations of
slow growth and average  earnings.  An alternative was to grow into our capital,
and  leverage  the Bank  into a larger  institution.  We chose  the  latter.  We
invested in a new branch in Cloverdale,  we built an annex to the Spencer office
location,  and we  invested in tax  credits in the Cunot  Apartments  Retirement
Community, among other growth oriented initiatives.

     We are mindful of the tremendous  change  occurring in the banking industry
in recent  years.  The  challenges  facing a small  community  oriented  lending
institution  have never seemed  greater.  Recently,  mortgage  brokers and other
originators  active  in  the  secondary  market  have  lured  away  many  of our
traditional  customers with low rates on thirty year fixed rate mortgages.  Just
the  other  day we  were  reminded  that  approximately  75%  of  all  mortgages
originated  in the United States last year were done through  mortgage  brokers.
Like  many  small  community  banks,   this  Bank  has  responded  to  increased
competition by re-inventing itself. Rather than chasing low rate competition and
originating  marginally  profitable loans with excessive  interest rate risk, we
have evolved into a bank specializing in sub-prime mortgage loans. We make loans
on  non-conforming  collateral to customers  with  tarnished  credit  records at
risk-adjusted rates. Coupled with aggressive collections, this strategy offers a
viable and profitable market niche for the Bank. Additionally,  to grow the Bank
we have  aggressively  pursued and acquired  several sizable real  estate-backed
commercial loans extended to low credit risk customers.

     Although recent  infrastructure  investments dampened financial results for
1999,  management  believes that the Bank is better  positioned than ever before
for long-term growth and enhanced  shareholder value.  Further, the expansion of
our  physical  facilities  during the past year  allows the Bank to be a larger,
more visible presence in our local market communities. Our new Cloverdale branch
is in full swing now and has been  successful in  attracting  many new customers
since its doors opened in October 1998. We are pleased with the level of initial
deposit  and loan growth at the branch and excited  about the  long-term  growth
prospects for this  location.  The branch staff has worked hard to cultivate new
customer relationships and promote our services to the Cloverdale community.

     Our long-term  commitment to the  Cloverdale  area is also reflected in our
investment  in the  newly  constructed  Cunot  Apartments  Retirement  Community
complex.  Although  conceived  of  several  years  ago  as a  complement  to the
neighboring  Cunot Community and Senior Center,  actual  groundbreaking  for the
apartment  project was in July 1998.  Based on the level of public  interest and
early occupancy  numbers,  we anticipate  utilizing  federal housing tax credits
associated  with this project as early as the first quarter of fiscal year 2000.
Our  ability to use these tax credits  should have a favorable  impact on future
earnings.

     Throughout this past year, we worked hard to improve our existing  products
and  services  as  well  as  introduce  new  ones.  We  introduced  an  enhanced
construction loan product,  two new commercial  checking accounts and a new auto
loan  program.  Also this past summer,  we entered  into a floor-plan  financing
arrangement  with a new local  modular and mobile home  dealer.  We believe this
relationship   has  encouraging   growth   potential  and  fits  well  with  our
retail-lending  niche. Earlier this year we also expanded our lending activities
to include a limited number of real estate development loans. During fiscal year
2000,  management  intends to continue the active pursuit of prudent loan growth
opportunities, primarily through mortgage lending.

     Effective May 1, 1999, Home Financial Bancorp converted from a bank holding
company into a savings and loan holding company and Owen Community Bank became a
federal stock savings bank. We are convinced that the broader powers afforded by
this charter  conversion  offer greater  flexibility and therefore  provide more
business  opportunities  for the  Company as a whole.  Also,  as a result of the
conversion,  the Bank's real estate  development  subsidiary  corporation,  BSF,
Inc., a reliable  source of income in the past,  will again be allowed to pursue
profitable business  opportunities.  We believe the decision to convert was made
in the best interest of the Bank and its shareholders.

     During the most recent two  quarters,  we have seen  favorable  loan growth
while  maintaining  an  attractive  yield.  During the same period,  our overall
deposits increased while the average cost on those deposits  decreased.  We will
continue our existing  strategy of increasing  loan volume and lowering our cost
of  funds as we  enter a new  millennium.  With  our  expanded  facilities,  new
markets,  and dedicated staff, the opportunity for stronger  performance  levels
looks promising.

Respectfully submitted,


/s/ Frank R. Stewart            /s/ Kurt J. Meier
Frank R. Stewart, Chairman      Kurt J. Meier, President

                                     - 1 -
<PAGE>


<TABLE>
<CAPTION>
                     SELECTED CONSOLIDATED FINANCIAL DATA OF
                      HOME FINANCIAL BANCORP AND SUBSIDIARY

     The  following  selected  consolidated  financial  data of the  Company  is
qualified  in its  entirety  by, and  should be read in  conjunction  with,  the
consolidated financial statements,  including notes thereto,  included elsewhere
in this Annual Report.

                                                                          SELECTED FINANCIAL DATA
At  June 30                                               1999         1998         1997         1996         1995
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Summary of Financial Condition:
<S>                                                   <C>           <C>          <C>          <C>           <C>
Total assets.......................................   $53,136       $42,560      $42,508      $39,426       $30,839
Loans receivable, net..............................    38,238        33,959       34,117       27,125        25,547
Cash and cash equivalents..........................     2,475         3,802        4,184        5,721         1,386
Securities available for sale......................     8,288         1,918        2,102        4,901           934
Securities held to maturity........................       ---           ---          ---          ---         1,827
Deposits...........................................    32,657        26,649       26,157       28,726        22,500
Federal Home Loan Bank advances....................    13,200         8,200        9,000        7,200         5,000
Stockholders' equity...............................     7,123         7,506        7,197        3,410         3,159


Year Ended June 30                                       1999          1998         1997         1996         1995
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Summary of Operating Results:
Interest and dividend income.....................      $3,883        $3,690       $3,397       $2,955        $2,420
Interest expense.................................       2,032         1,812        1,703        1,593         1,174
                                                       ------        ------       ------       ------        ------
   Net interest income...........................       1,851         1,878        1,694        1,362         1,246
Provision for loan losses........................          44           102           85           94            36
                                                       ------        ------       ------       ------        ------
   Net interest income after provision for
        loan losses..............................       1,807         1,776        1,609        1,268         1,210
                                                       ------        ------       ------       ------        ------
Other income:
   Service charges on deposit accounts...........          84            55           43           37            27
   Gain on sale of real estate acquired
        for development..........................           6             7           31           57            78
   Net realized gain on sales of available
       for sale securities ......................           3           141           37          ---           ---
   Other.........................................          32            64           53           47            43
                                                       ------        ------       ------       ------        ------
      Total other income.........................         125           267          164          141           148
                                                       ------        ------       ------       ------        ------
Other expenses:
   Salaries and employee benefits................         819           723          521          374           364
   Net occupancy expense.........................         110            85           71           67            74
   Equipment expense.............................         115            58           61           55            35
   Deposit insurance expense.....................          17            16          165           54            49
   Computer processing expense...................         152           120           95           75            63
   Printing and office supplies..................          65            41           38           33            32
   Advertising...................................          60            47           34           24            26
   Legal and professional fees...................         105           123          172           47            35
   Directors and committee fees..................          56            43           42           41            40
   Other.........................................         190           188          169          155           148
                                                       ------        ------       ------       ------        ------
        Total other expenses.....................       1,689         1,444        1,368          925           866
                                                       ------        ------       ------       ------        ------
Income before income tax.........................         243           599          405          484           492
Income tax expense...............................          99           206          153          196           203
                                                       ------        ------       ------       ------        ------
   Net income....................................        $144        $  393      $   252      $   288       $   289
                                                       ======        ======       ======       ======        ======

</TABLE>

                                     - 2 -
<PAGE>

<TABLE>
<CAPTION>
Year Ended June 30                                       1999          1998         1997         1996         1995
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) Supplemental Data (1):
<S>                                                    <C>           <C>           <C>          <C>           <C>
Basic earnings per share.........................        $.18       $   .47     $    .27          ---           ---
Diluted earnings per share.......................         .18           .47          .27          ---           ---
Book value per common share at end of year.......        8.04          8.08         7.66          ---           ---
Dividends per share..............................         .12           .10          .08          ---           ---
Dividend payout ratio............................       66.67%        21.28%       29.63%         ---           ---
Return on assets (2) ............................        0.30           .93          .63          .84%         1.00%
Return on equity (3).............................        1.99          5.34         3.31         8.71          9.59
Interest rate spread (4) ........................        3.61          3.87         3.56         3.78          4.19
Net yield on interest-earning assets (5).........        4.17          4.65         4.41         4.13          4.54
Other expenses to average assets ................        3.52          3.42         3.40         2.70          2.99
Net interest income to other expenses............        1.10x         1.30x        1.24x        1.47x         1.44x
Equity-to-assets (6).............................       13.41%        17.66%       16.93%        8.65%        10.24%
Average equity to average total assets...........       15.08         17.42        18.90         9.64         10.42
Average interest-earning assets to average
   interest-bearing liabilities..................        1.13x         1.17x        1.19x        1.07x         1.08x
Non-performing assets to total assets............         .16%         1.17%        1.76%        1.03%          .32%
Non-performing loans to total loans..............         .20           .81         1.65         1.32           .39
Loan loss allowance to total loans, net..........         .88           .94          .68          .55           .22
Loan loss allowance to non-performing loans......      425.32        114.70        41.10        41.78         57.00
Net charge-offs to average loans ................         .08           .04          .01            *           .02
</TABLE>

(1)  All per share  amounts have been  restated to reflect a 2-for-1 stock split
     effective January 6, 1998.
(2)  Net income divided by average total assets.
(3)  Net income divided by average total equity.
(4)  Interest rate spread is calculated by subtracting combined weighted average
     interest rate cost from combined  weighted average interest rate earned for
     the period indicated.
(5)  Net interest income divided by average interest-earning assets.
(6)  Total equity divided by total assets.
*    Less than .01%

                                     - 3 -
<PAGE>

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

         The Holding  Company was formed as an Indiana  corporation  on February
21, 1996,  for the purpose of issuing its common  stock,  without par value (the
"Common Stock") and owning all of the outstanding common stock of the Bank to be
issued in the  Conversion as a unitary bank holding  company.  As a newly formed
corporation, the Holding Company has no operating history prior to July 1, 1996.

         The  principal  business  of savings  banks,  including  the Bank,  has
historically consisted of attracting deposits from the general public and making
loans secured by residential real estate.  The Company's  earnings are primarily
dependent upon its net interest income,  the difference  between interest income
and interest expense. Interest income is a function of the balances of loans and
investments outstanding during a given period and the yield earned on such loans
and  investments.  Interest  expense is a function of the amount of deposits and
borrowings  outstanding  during the same period and interest  rates paid on such
deposits and borrowings.  The Company's earnings are also affected by provisions
for loan  losses,  service  charges  and other  non-interest  income,  operating
expenses and income taxes.

         The  Company  is   significantly   affected  by   prevailing   economic
conditions,  as well as government  policies and regulations  concerning,  among
other things,  monetary and fiscal affairs,  housing and financial institutions.
Deposit flows are  influenced by a number of factors,  including  interest rates
paid on competing  investments,  account maturities and level of personal income
and savings within the Bank's market. In addition, deposit growth is affected by
how customers  perceive the stability of the  financial  services  industry amid
various current events such as regulatory  changes,  failures of other financial
institutions and financing of the deposit insurance fund. Lending activities are
influenced by the demand for and supply of housing lenders, the availability and
cost of funds and various other items.  Sources of funds for lending  activities
of the  Company  include  deposits,  payments  on loans,  borrowings  and income
provided from operations.

STOCKHOLDER MATTERS

         The book value of HFB Common Stock was $8.04 at June 30, 1999.  On this
same date,  the price of HFB Common  Stock was $7.88 per share,  representing  a
98.0%  price-to-book  value ratio.  For the year ended June 30, 1999,  quarterly
dividends totaling $.12 per share were paid to shareholders.

         Pursuant  to  two  consecutive  repurchase  initiatives,   the  Company
purchased  and retired  42,852  shares of its Common Stock at an average cost of
$7.93 per share during  fiscal year 1999.  At June 30, 1999,  there were 886,200
shares of Common Stock outstanding.

         HFB Common  Stock is traded on the  Nasdaq  SmallCap  Market  under the
symbol HWEN. As of June 30, 1999, there were  approximately  275 shareholders of
record,  and 170  holders  who held stock in nominee or  "street"  name  through
various brokerage firms.


INCOME TAX CREDITS

         The  Company's  subsidiary  Bank entered into a  Partnership  Agreement
("Agreement") with Area Ten Development,  Inc. (the "General Partner"), a wholly
owned  subsidiary of Area 10 Council on Aging of Monroe and Owen Counties,  Inc.
to finance  construction  and development of a low income housing  project.  The
project,  Cunot  Apartments,  L.P.,  is a 24 unit  apartment  complex for senior
living. The Bank purchased a 99% limited partnership  interest for $732,000.  As
of June 30, 1999, the Bank's  investment in the Cunot project totaled  $696,000.
Funds were dispersed by installments  during  construction,  which was completed
during July 1999.  The Bank's  investment  in the project is eligible for income
tax credits over the fifteen-year life of the Agreement.

         As  of  June  30,  1999,  the  total  capitalized  building,  land  and
organizational  costs for the project was $1,373,000.  Management estimates that
the Bank will be able to utilize approximately $107,000 in low-income tax credit
annually,  beginning  in fiscal year 2000.  However,  in order to  maximize  the
benefit of the tax credits the project  must  maintain an  acceptable  occupancy
rate and prove that it qualifies for the tax credits on an annual basis.


                                     - 4 -
<PAGE>

Additionally,  there are no assurances  that changes in tax laws will not affect
the availability of low income tax credits in future years.  Recent reports from
the  General  Partner  indicate  an  occupancy  rate of  approximately  80%.  In
accordance  with  the  Agreement,   the  process  of  certifying  the  project's
eligibility for tax credits is currently underway.

THE YEAR 2000 ISSUE

         Management  and the Board of Directors  recognize and  understand  Year
2000 ("Y2K") risk and have ensured that all necessary resources are available to
address this problem. For the remainder of calendar 1999, the project management
team will test and evaluate  contingency  plans and work  closely with  critical
business  partners  to make sure their  systems  will be ready for the Year 2000
date change.

         Management  believes  that  the  key to  successfully  meeting  the Y2K
challenge is prior  testing of all affected  systems.  The testing  phase of the
Company's  Year 2000 Project  Management  Plan was  completed  prior to June 30,
1999. As part of extensive  critical  date tests,  system dates were advanced to
the Year 2000 and beyond.  No material  problems  were  encountered  during this
testing process.  The Company completed all phases of the Y2K compliance program
on schedule and has shifted attention to contingency planning.

         As  part of the Y2K  planning  process,  contingency  plans  have  been
established  for  mission-critical   systems.   These  plans  will  provide  for
alternative  methods of doing business,  which include  provisions for a back-up
power source and manual  processing  procedures,  if needed.  These  contingency
plans will continue to be reviewed, tested and refined as Year 2000 approaches.

         The Company has made,  and will  continue to make,  investments  in its
systems and  applications  to ensure,  to the degree  possible,  Y2K compliance.
Certain minor  equipment and software  changes have been made in preparation for
Year  2000.  However,  at  this  point,  management  anticipates  little  or  no
additional Y2K equipment and software changes.

         Systems testing accounted for over half of Y2K costs during fiscal year
1999.  Due to the fact that the Company uses outside data service  providers for
most of its computer processing operations, it was unnecessary to invest heavily
in system  improvements to achieve Y2K  compliance.  For the twelve months ended
June  30,  1999,  direct  costs  incurred  to  address  Y2K  compliance  totaled
approximately  $58,000.  This amount  includes  expenses for fixing or replacing
non-compliant in-house hardware and software, performing multiple systems tests,
and contracting  the assistance of information  technology  professionals.  This
figure does not include the cost of  compensation  for  existing  staff  members
involved in planning, testing and reporting on Y2K issues.

         Although  management  believes  it has  taken  the  necessary  steps to
address the Y2K compliance  issue, no assurances can be given that some problems
will not  occur or that  the  Company  will  not  incur  significant  additional
expenses in future periods. In the event that the Company is ultimately required
to purchase  replacement computer systems,  programs and equipment,  or to incur
substantial  expenses to make its current  systems,  programs and  equipment Y2K
compliant,  its financial  position and results of operations could be adversely
impacted.  Amounts  expensed  in  fiscal  1997 and 1998 for Y2K  readiness  were
immaterial.

ASSET/LIABILITY MANAGEMENT

         The Bank's  profitability  is  dependent to a large extent upon its net
interest  income,  which  is the  difference  between  its  interest  income  on
interest-earning assets, such as loans and securities,  and its interest expense
on interest-bearing liabilities, such as deposits and borrowings. The Bank, like
other  financial  institutions,  is subject to interest  rate risk to the degree
that its  interest-earning  assets reprice differently than its interest-bearing
liabilities.  The Bank manages its mix of assets and liabilities  with the goals
of limiting its exposure to interest rate risk, ensuring adequate liquidity, and
coordinating its sources and uses of funds.

         The Bank seeks to control its interest  rate risk  exposure in a manner
that will allow for  adequate  levels of earnings  and  capital  over a range of
possible  interest rate  environments.  The Bank has adopted formal policies and
practices to monitor and manage  interest  rate risk  exposure.  As part of this
effort, the Bank uses the market value ("MV") methodology to gauge interest rate
risk exposure.


                                     - 5 -
<PAGE>

         Generally, MV is the discounted present value of the difference between
incoming  cash flows on  interest-earning  assets and other  assets and outgoing
cash  flows  on   interest-bearing   liabilities  and  other  liabilities.   The
application of the  methodology  attempts to quantify  interest rate risk as the
change in the MV which would result from a  theoretical  200 and 400 basis point
(1 basis point equals .01%) change in market  interest  rates.  Both 200 and 400
basis  point  increases  in market  interest  rates and 200 and 400 basis  point
decreases in market interest rates are considered.

         It is estimated that at June 30, 1999, MV would decrease 9.5% and 26.2%
in the event of 200 and 400 basis  point  increases  in  market  interest  rates
respectively,  compared  to 3.9% and  19.4% for the same  increases  at June 30,
1998. The Bank's MV at June 30, 1999 would decrease 10.9% and 19.5% in the event
of 200 and 400 basis  point  decreases  in  market  rates  respectively.  A year
earlier,  200 and 400 basis point decreases in market rates would have decreased
MV 8.7% and 14.4% respectively.

         Differences  in MV  performance  resulting from changes in market rates
reflect  increases  and  decreases  in cash flow for each  asset  and  liability
category.  Changes  in  asset  and  liability  mix,  pricing  assumptions,  loan
prepayment rates,  transaction account decay rates, and other influences account
for modified cash flows from one period to another.

         Presented  below,  as of June 30, 1999 and 1998,  is an analysis of the
Bank's  interest  rate risk as measured by changes in MV for  instantaneous  and
sustained  parallel  shifts  of 200 and 400  basis  point  increments  in market
interest rates.

                                  JUNE 30, 1999
                        MARKET VALUE SUMMARY PERFORMANCE
<TABLE>
<CAPTION>


                                                                                                     MV as % of
                                                                                                 Present Value (PV)
      Change                                   Market Value                                           of Assets
     In Rates              $ Amount              $ Change              % Change              MV Ratio               Change
--------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>   <C>                    <C>                <C>                     <C>                   <C>              <C>
    + 400 bp*                $4,956             $(1,762)                (26.23)%              10.22%           (248)  bp
    + 200 bp                  6,077                (641)                 (9.54)               11.94             (76)  bp
        0 bp                  6,718                   0                   0.00                12.70             ---
    - 200 bp                  5,987                (731)                (10.88)               11.17            (153)  bp
    - 400 bp                  5,406              (1,312)                (19.53)                9.93            (277)  bp

</TABLE>


             Interest Rate Risk Measures: 200 Basis Point Rate Shock

  Pre-Shock MV Ratio: MV as % of PV of Assets....................       12.70%
  Exposure Measure: Post-Shock MV Ratio..........................       11.17%
  Sensitivity Measure: Change in MV Ratio........................         153bp




                                     - 6 -
<PAGE>

<TABLE>
<CAPTION>
                                  JUNE 30, 1998
                        MARKET VALUE SUMMARY PERFORMANCE

                                                                                                     MV as % of
                                                                                                 Present Value (PV)
      Change                                   Market Value                                           of Assets
     In Rates              $ Amount              $ Change              % Change              MV Ratio               Change
--------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>   <C>                    <C>               <C>                      <C>                   <C>              <C>
    + 400 bp*                $5,058            $ (1,220)                (19.44)%              13.26%           (191)  bp
    + 200 bp                  6,035                (243)                 (3.87)               15.05             (12)  bp
        0 bp                  6,278                   0                   0.00                15.17             ---
    - 200 bp                  5,734                (544)                 (8.67)               13.68            (149)  bp
    - 400 bp                  5,376                (902)                (14.37)               12.59            (258)  bp



             Interest Rate Risk Measures: 200 Basis Point Rate Shock

    Pre-Shock MV Ratio: MV as % of PV of Assets................       15.17%
    Exposure Measure: Post-Shock MV Ratio......................       13.68%
    Sensitivity Measure: Change in MV Ratio....................         149 bp
--------
* Basis points.
</TABLE>

                                     - 7 -
<PAGE>

AVERAGE BALANCES, INTEREST RATES AND YIELDS

         The following  table  presents for the years ended June 30, 1999,  1998
and 1997,  the  month-end  average  balances of each  category of the  Company's
interest-earning assets and interest-bearing liabilities, and the average yields
earned and  interest  rates  paid on such  balances.  Such  yields and costs are
determined  by dividing  income or expense by the  average  balance of assets or
liabilities, respectively, for the periods presented.

                      AVERAGE BALANCE SHEET/YIELD ANALYSIS
<TABLE>
<CAPTION>

Year Ended June 30,                            1999                        1998                          1997
----------------------------------------------------------------------------------------------------------------------------
                                    Average             Yield/    Average           Yield/     Average            Yield/
                                    Balance  Interest    Cost     Balance Interest   Cost      Balance  Interest   Cost
                                    ----------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                <C>       <C>         <C>   <C>      <C>          <C>    <C>        <C>          <C>
Assets:
Interest-earning assets:
   Interest-earning deposits.......$ 3,242   $   157     4.84% $  3,214 $    177     5.51%  $  2,692   $   137      5.09%
   Investment securities (1).......  6,022       335     5.55     2,318      167     7.20      4,899       315      6.43
   Loans receivable (2)............ 34,547     3,346     9.69    34,366    3,306     9.62     30,418     2,912      9.57
   Stock in FHLB of Indianapolis...    562        45     8.01       500       40     8.00        433        33      7.62
                                    ------     -----             ------    -----              ------     -----
     Total interest-earning assets. 44,373     3,883     8.75    40,398    3,690     9.13     38,442     3,397      8.84
                                              ------                     -------                       -------
Non-interest earning assets, net of
   allowance for loan losses
   and including unrealized gain
   (loss) on securities
   available for sale..............  3,676                        1,860                        1,804
                                   -------                     --------                     --------
     Total assets..................$48,049                      $42,258                      $40,246
                                   =======                     ========                     ========
Liabilities and stockholders' equity:
Interest-bearing liabilities:
   Savings accounts................$ 3,559        97     2.73    $3,399      103     3.03   $  3,930       114      2.90
   NOW accounts....................  4,402       123     2.79     3,998      124     3.10      2,162        70      3.24
   Certificates of deposit......... 21,364     1,215     5.69    18,482    1,056     5.71     18,465     1,032      5.59
   FHLB advances................... 10,242       597     5.83     8,592      529     6.16      7,725       487      6.30
                                    ------     -----             ------    -----              ------     -----
     Total interest-bearing
        liabilities...............  39,567     2,032     5.14    34,471    1,812     5.26     32,282     1,703      5.28
                                              ------                     -------                       -------
Other liabilities..................  1,237                          426                          358
                                   -------                     --------                     --------
     Total liabilities............. 40,804                       34,897                       32,640
                                   -------                     --------                     --------
Stockholders' equity...............  7,376                        7,316                        7,601
Net unrealized gain/(loss)
   on securities
   available for sale..............   (131)                          45                            5
                                   -------                     --------                     --------
     Total stockholders' equity....  7,245                        7,361                        7,606
                                   -------                     --------                     --------
     Total liabilities and
         stockholders' equity......$48,049                      $42,258                      $40,246
                                   =======                     ========                     ========
Net interest-earning assets........$ 4,806                     $  5,927                     $  6,160
                                   =======                     ========                     ========
Net interest income................           $1,851                     $ 1,878                       $ 1,694
                                              ======                     =======                       =======
Interest rate spread...............                       3.61                       3.87                           3.56
Net yield on weighted average
   interest-earning assets.........                       4.17                       4.65                           4.41
Average interest-earning
   assets to average interest-
   bearing liabilities.............  112.97%                    117.19%                       119.08%

</TABLE>

(1)  Yields for mortgage-backed  securities and other investments  available for
     sale are computed based upon amortized  cost. (2)  Non-accruing  loans have
     been included in average balances.

     In the foregoing table, no adjustment of interest on tax-exempt  securities
to a tax-equivalent basis was made since the adjustment was less than $10,000 in
each period presented.



                                     - 8 -
<PAGE>

INTEREST RATE SPREAD

         The Company's results of operations have been impacted primarily by net
interest  income.  Net interest income is determined by the interest rate spread
between  the  yields  earned on  interest-earning  assets  and the rates paid on
interest-bearing  liabilities  and by the relative  amounts of  interest-earning
assets and interest-bearing liabilities.

         The following table sets forth the weighted average effective  interest
rate  earned  by the  Company  on its  loan,  investment  portfolios  and  total
interest-earning assets. The table also includes weighted average effective cost
of the  Company's  deposits  and  borrowings,  the  interest  rate spread of the
Company, and the net yield on weighted average  interest-earning  assets for the
periods  and as of the date  shown.  Average  balances  are  based on  month-end
average balances.

                          INTEREST RATE SPREAD ANALYSIS
<TABLE>
<CAPTION>
                                                                                       Year Ended June 30,
                                                     At June 30,               -------------------------------------
                                                        1999                    1999           1998           1997
--------------------------------------------------------------------------------------------------------------------

Weighted average interest rate earned on:
<S>                                                     <C>                     <C>             <C>            <C>
   Interest-earning deposits.........................   5.45%                   4.84%           5.51%          5.09%
   Investment securities.............................   5.79                    5.55            7.20           6.43
   Loans receivable..................................   9.35                    9.69            9.62           9.57
   Stock in FHLB of Indianapolis.....................   8.00                    8.01            8.00           7.62
     Total interest-earning assets...................   8.49                    8.75            9.13           8.84

Weighted average interest rate cost of:
   Savings accounts..................................   2.57                    2.73            3.03           2.90
   NOW and money market accounts.....................   2.61                    2.79            3.10           3.24
   Certificates of deposit...........................   5.36                    5.69            5.71           5.59
   FHLB advances.....................................   5.68                    5.83            6.16           6.30
     Total interest-bearing liabilities..............   4.94                    5.14            5.26           5.28

Interest rate spread (1).............................   3.55                    3.61            3.87           3.56
Net yield on weighted average
   interest-earning assets (2).......................                           4.17            4.65           4.41
</TABLE>


(1)  Interest rate spread is calculated by subtracting weighted average interest
     rate cost  from  weighted  average  interest  rate  earned  for the  period
     indicated.  Interest rate spread figures must be considered in light of the
     relationship   between   the   amounts  of   interest-earning   assets  and
     interest-bearing liabilities.

(2)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.  No net yield percentage is presented at June 30,
     1999, because the computation of net yield is applicable only over a period
     rather than at a specific date.

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-related  assets and  liabilities  have
affected the Company's interest income and expense during the periods indicated.
For each category of interest-earning  assets and interest-bearing  liabilities,
information  is provided on changes  attributable  to (1) changes in rate (i.e.,
changes in rate  multiplied  by old  volume)  and (2)  changes in volume  (i.e.,
changes in volume multiplied by old rate). Changes attributable to both rate and
volume have been  allocated  proportionally  to the change due to volume and the
change due to rate.



                                     - 9 -
<PAGE>

                              RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
                                                                 Increase (Decrease) in Net Interest Income
                                                               -------------------------------------------------
                                                               Due to               Due to             Total Net
                                                               Volume                Rate               Change
                                                               -------------------------------------------------
YEAR ENDED JUNE 30, 1999
COMPARED  TO YEAR ENDED JUNE 30,  1998
----------------------------------------------------------------------------------------------------------------
(In thousands) Interest-earning assets:
<S>                                                            <C>                  <C>                  <C>
   Interest-earning deposits..............................       $   2              $ (22)               $ (20)
   Investment securities..................................         214                (46)                 168
   Loans receivable.......................................          17                 23                   40
   Stock in FHLB of Indianapolis..........................           5                ---                    5
                                                                 -----              -----                -----
     Total................................................         238                (45)                 193
                                                                 -----              -----                -----
Interest-bearing liabilities:
   Savings accounts.......................................           5                (11)                  (6)
   NOW and money market accounts..........................          12                (12)                 ---
   Certificates of deposit................................         164                 (6)                 158
   FHLB advances..........................................          97                (29)                  68
                                                                 -----              -----                -----
     Total................................................         278                (58)                 220
                                                                 -----              -----                -----
Change in net interest income.............................       $ (40)             $  13                $ (27)
                                                                 =====              =====                =====

YEAR ENDED JUNE 30, 1998
COMPARED  TO YEAR ENDED JUNE 30,  1997
----------------------------------------------------------------------------------------------------------------
(In thousands) Interest-earning assets:
   Interest-earning deposits..............................       $  28             $   12               $   40
   Investment securities..................................        (186)                38                 (148)
   Loans receivable.......................................         380                 14                  394
   Stock in FHLB of Indianapolis..........................           5                  2                    7
                                                                 -----              -----                -----
     Total................................................         227                 66                  293
                                                                 -----              -----                -----
Interest-bearing liabilities:
   Savings accounts.......................................         (16)                 5                  (11)
   NOW and money market accounts..........................          57                 (4)                  53
   Certificates of deposit................................           1                 24                   25
   FHLB advances..........................................          54                (12)                  42
                                                                 -----              -----                -----
     Total................................................          96                 13                  109
                                                                 -----              -----                -----
Change in net interest income.............................        $131              $  53                 $184
                                                                 =====              =====                =====

YEAR ENDED JUNE 30, 1997
COMPARED TO YEAR ENDED JUNE 30, 1996
----------------------------------------------------------------------------------------------------------------
Interest-earning assets:
   Interest-earning deposits..............................      $   (4)           $     5               $    1
   Investment securities..................................         122                 14                  136
   Loans receivable.......................................         336                (43)                 293
   Stock in FHLB of Indianapolis..........................          12                ---                   12
                                                                 -----              -----                -----
     Total................................................         466                (24)                 442
                                                                 -----              -----                -----
Interest-bearing liabilities:
   Savings accounts.......................................          (8)                 5                   (3)
   NOW and money market accounts..........................          (4)                16                   12
   Certificates of deposit................................         (12)               (42)                 (54)
   Other borrowings.......................................          (1)               ---                   (1)
   FHLB advances..........................................         141                 15                  156
                                                                 -----              -----                -----
     Total................................................         116                 (6)                 110
                                                                 -----              -----                -----
Change in net interest income.............................        $350              $ (18)                $332
                                                                 =====              =====                =====
</TABLE>


                                     - 10 -
<PAGE>

CHANGES IN FINANCIAL  POSITION  AND RESULTS OF  OPERATIONS - YEAR ENDED JUNE 30,
1999, COMPARED TO YEAR ENDED JUNE 30, 1998:

         General.  HFB earned net income  totaling  $144,000  for the year ended
June 30,  1999  compared  to  $393,000  for the year  ended June 30,  1998.  The
investment of current  resources for the goal of long-term  growth and expansion
lowered  net  earnings  for the year.  During  fiscal  year  1999,  the  Company
experienced various cost increases  associated with constructing and operating a
new  branch  office as well as  higher  overall  interest  expenses  related  to
leveraged loan and investment growth.

         The return on average assets for the year ended June 30, 1999 was .30%,
compared to .93% the prior year.  The return on average equity was 1.99% for the
year ended June 30,  1999,  compared  to 5.34% for the prior year ended June 30,
1998. Earnings per share were $.18 for the year ended June 30, 1999 and $.47 for
the year ended June 30, 1998.

         Assets.  Total  assets at June 30, 1999 were  $53,136,000,  compared to
total  assets  of  $42,560,000  at June 30,  1998.  Cash  and  cash  equivalents
decreased  $1,327,000  or 34.9%,  to  $2,475,000  at June 30, 1999,  compared to
$3,802,000 a year earlier.  The decrease in cash and cash  equivalents  combined
with cash  inflows  from  deposits  and new  borrowings  were  used to  purchase
mortgage-backed securities, fund loan growth and acquire additional premises and
equipment.  Investment securities increased $6,370,000 to $8,288,000 at June 30,
1999, compared to $1,918,000 at June 30, 1998. Total loans increased  $4,295,000
or 12.5%  during  fiscal  1999.  At June 30, 1999 total  loans were  $38,574,000
compared to $34,279,000 at prior year-end June 30, 1998.

         The  year-end  level  of stock  in the  FHLB of  Indianapolis  stood at
$660,000  and  $500,000  for 1999  and  1998,  respectively.  Net  premises  and
equipment  increased  $298,000 or 17.7%, to $1,985,000 at June 30, 1999 compared
to $1,687,000 at June 30, 1998. This increase is due to costs for the completion
of  construction  for the Bank's  first branch  office,  which is located in the
Putnam County town of Cloverdale.  Foreclosed real estate and repossessed assets
decreased $214,000 or 97.3% to $6,000 compared to $220,000 at June 30, 1998. The
total at June 30, 1999 consists of one mobile home.

         Average assets  increased  $5,791,000 or 13.7%,  to $48,049,000 for the
year ended June 30, 1999,  compared to $42,258,000 for the prior year-ended June
30, 1998.  Average  interest-earning  assets  increased  $4,300,000 or 10.6%, to
$44,373,000  for the year ended  June 30,  1999 and  represented  92.4% of total
average assets. The increase was due to average mortgage-backed securities which
increased $4,295,000 to $4,982,000 for the year ended June 30, 1999, compared to
$687,000  for the  year  ended  June  30,  1998.  The  average  level  of  other
interest-earning  assets  was  $39,391,000  for the year  ended  June 30,  1999,
compared to $39,711,000  for the same period a year ago. Much of the loan growth
in fiscal year 1999 occurred in the fourth  quarter,  reducing the impact on the
average loans receivable calculation for the year.

         Liabilities  and  Stockholders'  Equity.   Primarily  attributed  to  a
successful beginning for the new branch, all deposit categories posted increases
as of June  30,  1999,  as  compared  to a year  earlier.  Total  deposits  were
$32,657,000 at June 30, 1999, a $6,008,000 or 22.5% increase from $26,649,000 at
June 30,  1998.  The  change is  traced to a  $4,809,000  or 25.2%  increase  in
certificates of deposit to $23,867,000 at June 30, 1999, compared to $19,058,000
at June 30, 1998.  Passbook and statement savings deposits increased by $511,000
or 15.6%. Transaction deposits increased by $561,000 or 20.0% while money market
deposits  also  increased by $203,000 or 13.4%.  In addition to  deposits,  FHLB
advances are an important  source of both  short-term and long-term  funding for
the Bank. FHLB advances increased $5,000,000 and totaled $13,200,000 at June 30,
1999, compared to $8,200,000 at June 30, 1998.

         Average liabilities  increased  $5,907,000 or 16.9%, to $40,804,000 for
the year ended June 30, 1999,  compared to $34,897,000 for the prior  year-ended
June 30, 1998.  Average  interest-bearing  liabilities  increased  $5,096,000 or
14.8%,  to  $39,567,000  for the year  ended June 30,  1999.  The  increase  was
primarily due to increases in average certificates of deposit and FHLB advances.
Average  certificates of deposit  increased by $2,882,000 or 15.6% to $21,364,00
for the year ended June 30,  1999,  compared to  $18,482,000  for the year ended
June 30,  1998.  Average  FHLB  advances  increased  by  $1,650,000  or 19.2% to
$10,242,000  for the year ended June 30, 1999,  compared to  $8,592,000  for the
prior year ended June 30, 1998.



                                     - 11 -
<PAGE>

         HFB's stockholders' equity decreased $383,000 or 5.1%, to $7,123,000 at
June 30, 1999,  compared to  $7,506,000  at June 30, 1998.  Contributing  to the
decrease  were  common  stock  repurchases  totaling  $340,000,  an  increase of
$216,000 in net  unrealized  losses on securities  available for sale,  and cash
dividends  of  $94,000.  The  decrease  was  partially  offset by net  income of
$144,000 and the  amortization of employee stock ownership  plans.  The ratio of
stockholders'  equity  to total  assets  decreased  to  13.4%  at June 30,  1999
compared to 17.6% at June 30, 1998.

         Net Interest Income.  Net interest income decreased by $27,000 or 1.4%,
to $1,851,000  for the year ended June 30, 1999,  compared to $1,878,000 for the
year ended June 30, 1998.  Impacting  net  interest  income were  interest  rate
changes on rate-sensitive  assets and liabilities  during the current period and
average balance increases or decreases applicable to the rate-sensitive  portion
of the  balance  sheet.  As a result of these  factors,  total  interest  income
increased by $193,000 or 5.2% while total interest expense increased by $220,000
or 12.1%, compared to the same period a year earlier.

         Interest income on loans totaled $3,346,000 for the year ended June 30,
1999,  compared to  $3,306,000  for the year ended June 30, 1998; an increase of
$40,000 or 1.2%. The increase can be attributed to a larger  average  balance of
loans receivable outstanding for the current year and an increase in the average
yield earned, compared to the same period one year ago.

         Interest and dividend income from total investments  increased $266,000
to $334,000 for the year ended June 30, 1999,  compared to $167,000 for the year
ended June 30,  1998.  The  increase  can be  attributed  to an  increase in the
average balance  outstanding for the current year, which was partially offset by
an decline in the average yield  compared to the same period a year earlier.  At
June 30, 1999,  investment securities included an average balance of $946,000 in
equity  stock,  some of which earned  dividends.  Dividend  income on FHLB stock
totaled  $45,000 for the year ended June 30,  1999,  compared to $40,000 for the
year ended June 30,  1998;  an increase of $5,000 or 12.5%.  The increase can be
attributed to a larger average balance outstanding compared to the same period a
year  earlier.   The  combined   weighted   average  yield  on  the  balance  of
interest-earning  assets  outstanding for the year ended June 30, 1999 decreased
to 8.75%, compared to 9.13% for the prior year ended June 30, 1998.

         Interest expense on deposits increased $152,000 or 11.8%, to $1,435,000
for the year ended June 30, 1999, compared to $1,283,000 for the year ended June
30,  1998.  The change  was the result of an  increase  in the  average  deposit
balance  outstanding  for the  current  year  compared to the same period a year
earlier.  The average cost of deposits declined to 4.89% for the year ended June
30,  1999,  compared  to 4.96% for the year  ended  1998.  Interest  expense  on
borrowings  increased  by $68,000 or 12.9%,  to $597,000 for the year ended June
30, 1999,  compared to $529,000  for the year ended June 30, 1998.  The increase
was the result of a larger  average  balance  outstanding  for the current year,
which was partially  offset by a decline in the average cost of borrowings.  The
combined  weighted average rate paid on deposits and borrowings was 5.1% for the
year ended June 30, 1999, compared to 5.3% for the prior year.

         The Bank's interest rate spread  decreased 26 basis points to 3.61% for
the year  ended  June 30,  1999,  compared  to 3.87% for the year ended June 30,
1998.  The net  interest  margin  decreased to 4.17% for the year ended June 30,
1999,  compared  to 4.65% for the year ended June 30,  1998.  Decreases  in both
interest rate spread and interest rate margin were the result of larger  average
balances of mortgage-backed securities and a decline in the average yield earned
on all investment securities. The decreases in interest rate spread and interest
rate margin were partially offset by larger average balances in loans receivable
earning a higher average yield than a year earlier,  and larger average balances
in lower costing liabilities, such as transaction accounts.

         Provisions for Loan Losses.  For the year ended June 30, 1999, the Bank
provided  $44,000 for future loan losses.  During the prior year,  provisions of
$102,000 were made.  The allowance for loan losses  totaled  $336,000 or .88% of
net loans at June 30,  1999,  compared  to $320,000 or .94% of net loans at June
30,  1998;  an  increase  of $16,000 or 5.0%.  Management  considers  the Bank's
allowance for loan losses to be adequate based on general  economic  conditions,
historical  net  charge-offs  and other factors such as the size,  condition and
characteristics  of  the  loan  portfolio.  In  assessing  loan  loss  allowance
adequacy,  consideration  is also given to the volume  and  composition  of loan
portfolio growth as well as the level of allowances maintained by peers.



                                     - 12 -
<PAGE>

         Noninterest  Income.  Noninterest income decreased by $142,000 or 53.2%
to $125,000 for the year ended June 30, 1999, compared to $267,000 for the prior
year  ended  June 30,  1998.  A major  reason  for the  decrease  was a $138,000
decrease in gains on the sale of  investments  to $3,000 for the year ended June
30,  1999,  compared to  $141,000  for the year ended June 30,  1998.  Partially
offsetting  this  decrease  and a decrease  in other  income was an  increase of
$29,000  or 52.7% in service  fee income to $84,000  for the year ended June 30,
1999 compared to $55,000 for the same period a year ago.

         BSF Inc.,  the  Bank's  service  corporation  subsidiary  ("BSF"),  was
organized in 1989 and has historically  engaged in the purchasing and developing
of large  tracts of real  estate.  Management  has utilized the sale of lots and
residences  to  provide  an  additional  source of income  for the  Company.  In
connection with the Bank's conversion to an Indiana mutual savings bank in 1996,
the FDIC required the Bank to cease BSF's land  acquisitions and divest of BSF's
non-conforming  real estate holdings within five years,  among other conditions.
In  order  to  permit  the  Company  to  continue  its  profitable  real  estate
development activities through BSF, the Company and the Bank successfully sought
charter conversions under authority granted to the Office of Thrift Supervision.
Effective May 1, 1999 the Company became a federally  chartered savings and loan
holding company and the Bank became a federal stock savings bank.

         The level of income from BSF  fluctuates  widely  since it is primarily
dependent  on the volume of lots sold,  and profits on  residential  properties.
Income from this source  declined in recent years due to operating  restrictions
imposed by the Bank's charter.  Gains on the sale of real estate for development
was $6,000  for the year ended June 30,  1999 and $7,000 for the year ended June
30, 1998.  Management is hopeful that the resumption of BSF activity will have a
favorable impact on future net income.

         Noninterest  Expense.  Noninterest  expense  increased  by  $245,000 or
17.0%,  to $1,689,000  for the year ended June 30, 1999,  compared to $1,444,000
for the year  ended  June 30,  1998.  The  increase  can be  traced  to  expense
increases  for staff,  equipment  and general  overhead to support the Company's
growth  during  the  fiscal  year ended June 30,  1999.  Salaries  and  employee
benefits  increased  $96,000  or 13.3% to  $819,000  for the year ended June 30,
1999,  compared to $723,000 for the prior year ended June 30, 1998. The increase
was primarily  the result of new staff  members hired for the Bank's  Cloverdale
branch. Also related to the new branch,  equipment expenses increased $57,000 or
98.3% to $115,000 for the year ended June 30, 1999,  compared to $58,000 for the
year ended June 30, 1998. Further, computer processing fees increased $32,000 or
26.7% to  $152,000  compared to $120,000  for the prior  year.  Other  increases
related to net occupancy,  advertising,  and director fees. These increases were
partially  offset by a decline  in legal and  professional  fees of  $18,000  or
14.6%,  to $105,000 for the year ended June 30,  1999,  compared to $123,000 for
the year ended June 30, 1998.

         Income Tax Expense.  Income tax expense decreased $107,000 or 51.9%, to
$99,000 for the year ended June 30,  1999,  compared  to $206,000  for the prior
year ended June 30, 1998.  The  decrease was due to a decrease in income  before
taxes of $356,000 or 59.4% and an increase in the effective combined federal and
state  income tax rate to 40.9% for the year ended June 30,  1999,  compared  to
34.4% for the same period a year ago.



                                     - 13 -
<PAGE>

CHANGES IN FINANCIAL  POSITION  AND RESULTS OF  OPERATIONS - YEAR ENDED JUNE 30,
1998, COMPARED TO YEAR ENDED JUNE 30, 1997:

         General.  HFB earned record net income  totaling  $393,000 for the year
ended June 30, 1998,  representing  a $141,000 or 55.7%  increase  from the year
ended  June 30,  1997,  in which  net  income  of  $252,000  was  earned.  Major
contributions to improved  earnings for the year were higher net interest income
and lower deposit insurance expense.

         The return on average assets for the year ended June 30, 1998 was .93%,
compared to .63% the prior year June 30, 1997.  The return on average equity was
5.34% for the year ended  June 30,  1998,  compared  to 3.31% for the prior year
ended  June 30,  1997.  Earnings  per share was $.47 for the year ended June 30,
1998,  compared  to $.27 for the year ended June 30,  1997.  Without the special
assessment  imposed by federal  legislation to recapitalize the SAIF, net income
for the prior year ended June 30, 1997 would have been  $338,000  for returns on
average assets and average equity of .84% and 4.45% respectively.

         Assets.  Total  assets at June 30, 1998 were  $42,560,000,  compared to
total  assets  of  $42,508,000  at June 30,  1997.  Cash  and  cash  equivalents
decreased  $382,000  or 9.1%,  to  $3,802,000  at June  30,  1998,  compared  to
$4,184,000 a year earlier.  The decrease in cash and cash  equivalents  combined
with cash inflows from deposits and sales of investment  securities were used to
repay  borrowings  and acquire  additional  premises and  equipment.  Investment
securities  decreased $184,000 or 8.8% to $1,918,000 at June 30, 1998,  compared
to  $2,102,000 at June 30, 1997.  Total loans at June 30, 1998 were  $34,279,000
compared to total loans of $34,349,000 at prior year-end June 30, 1997.

         The year-end  level of stock in the Federal Home Loan Bank  ("FHLB") of
Indianapolis  stood at $500,000 for 1998 and 1997.  Net  premises and  equipment
increased $724,000 or 75.1%, to $1,687,000 at June 30, 1998 compared to $964,000
at June  30,  1997.  The  increase  is due to  costs  for the  nearly  completed
construction of the Bank's first branch office site in the Putnam County town of
Cloverdale,  as well as  costs  for  finishing  construction  on new  facilities
adjacent  to the Bank's  main  office in  Spencer.  Foreclosed  real  estate and
repossessed  assets increased  $33,000 or 17.6% to $220,000 compared to $187,000
at June 30,  1997.  The total at June 30,  1998  consists  of three  residential
single family properties and one mobile home.

         Average assets  increased  $2,012,000 or 5.0%, to  $42,258,000  for the
year ended June 30, 1998,  compared to $40,246,000 for the prior year-ended June
30, 1997.  Average  interest-earning  assets  increased  $1,956,000  or 5.1%, to
$40,398,000  for the year ended  June 30,  1998 and  represented  95.6% of total
average assets. The increase was due to average loans receivable which increased
$3,948,000 or 13.0%, to $34,366,000  for the year ended June 30, 1998,  compared
to  $30,418,000  for the year ended June 30,  1997.  The average  level of other
interest-earning  assets  decreased  $1,992,000 or 24.8%,  to $6,032,000 for the
year ended June 30, 1998, compared to $8,024,000 the same period a year earlier.

         Liabilities and Stockholders'  Equity.  Total deposits were $26,649,000
at June 30, 1998, a $492,000 or 1.9% increase from $26,157,000 at June 30, 1997.
The change is traced to a $1,339,000 or 91.0% increase in  transaction  deposits
to  $2,810,000  at June 30,  1998,  compared  to  $1,471,000  at June 30,  1997.
Passbook and statement  savings  deposits  also  increased by $330,000 or 11.2%.
These  increases  were offset by declines of $705,000 or 31.8%,  and $473,000 or
2.4%, in money market  deposits and  certificates of deposit,  respectively.  In
addition to deposits,  FHLB advances are an important  source of both short-term
and long-term funding for the Bank. FHLB advances totaled $8,200,000 at June 30,
1998, compared to $9,000,000 at June 30, 1997.

         Average  liabilities  increased  $2,257,000 or 6.9%, to $34,897,000 for
the year ended June 30, 1998,  compared to $32,640,000 for the prior  year-ended
June 30, 1997.  Average  interest-bearing  liabilities  increased  $2,189,000 or
6.8%,  to  $34,471,000  for the  year-ended  June 30,  1998.  The  increase  was
primarily due to average  transaction  and money market  deposits which together
increased  $1,836,000  or  84.9%,  to  $3,998,000  for  the  1998,  compared  to
$2,162,000 for the prior year.

         HFB's stockholders' equity increased $309,000 or 4.3%, to $7,506,000 at
June 30, 1998, compared to $7,197,000 at June 30, 1997. Contributing to the


                                     - 14 -
<PAGE>

increase was net income of $393,000.  The increase was partially  offset by cash
dividends  of  $85,000  paid for the year  ended  June 30,  1998.  The  ratio of
stockholders'  equity  to total  assets  increased  to  17.6% at June 30,  1998,
compared to 16.9% at June 30, 1997.

         During the year ended June 30, 1998, 10,000 shares of Common Stock were
purchased and retired by the Company pursuant to a 10% stock repurchase program.
These repurchases reduced total outstanding shares of Common Stock to 929,052 at
June 30,  1998.  The $78,000  cost of these  repurchased  shares  represented  a
reduction in total stockholders' equity.

         Net  Interest  Income.  Net  interest  income  increased by $185,000 or
10.9%,  to $1,878,000  for the year ended June 30, 1998,  compared to $1,693,000
for the year ended June 30, 1997.  Impacting  net interest  income were interest
rate changes on rate-sensitive  assets and liabilities during the current period
and average  balance  increases or decreases  applicable  to the  rate-sensitive
portion of the  balance  sheet.  As a result of these  factors,  total  interest
income increased by $294,000 or 8.6% while total interest  expense  increased by
$109,000 or 6.4%, compared to the same period a year earlier.

         Interest income on loans totaled $3,306,000 for the year ended June 30,
1998,  compared to  $2,912,000  for the year ended June 30, 1997; an increase of
$394,000 or 13.5%. The increase can be attributed to a larger average balance of
loans receivable outstanding for the current year and an increase in the average
yield earned,  compared to the same period one year  earlier.  At June 30, 1998,
investment   securities  included  $1,320,000  in  equity  stocks  which  earned
dividends rather than interest  income.  Interest and dividend income from total
investments  decreased $141,000 or 40.4% to $207,000 for the year ended June 30,
1998  compared to $348,000 for the year ended June 30, 1997.  The decline can be
attributed to a decrease in average balance  outstanding for the year ended June
30,  1998,  which was  partially  offset by an  increase  in the  average  yield
compared  to the same  period a year  earlier.  Interest  income  on FHLB  stock
totaled  $40,000 for the year ended June 30,  1998,  compared to $33,000 for the
year ended June 30,  1997;  an increase of $7,000 or 21.2%.  The increase can be
attributed  to a larger  average  balance  outstanding  and an  increase  in the
average yield earned,  compared to the same period a year earlier.  The combined
weighted average yield on the balance of interest-earning assets outstanding for
the year ended June 30, 1998 increased to 9.13%, compared to 8.84% for the prior
year ended June 30, 1997.

         Interest expense on deposits  increased  $73,000 or 6.0%, to $1,283,000
for the year ended June 30, 1998, compared to $1,210,000 for the year ended June
30,  1997.  The change  was the result of an  increase  in the  average  deposit
balance outstanding for the year ended June 30, 1998 compared to the same period
a year  earlier.  The  average  cost of  deposits  remained  unchanged  at 5.0%.
Interest expense on borrowings increased by $42,000 or 8.6%, to $529,000 for the
year ended June 30, 1998, compared to $487,000 for the year ended June 30, 1997.
The increase was the result of a larger average  balance  outstanding for fiscal
year  1998,  which was  partially  offset by a decline  in the  average  cost of
borrowings.  The combined  weighted average rate paid on deposits and borrowings
was 5.3% for the year ended June 30, 1998 and the prior year.

         The  Company's  interest  rate spread  increased  to 3.87% for the year
ended June 30, 1998, compared to 3.56% for the year ended June 30, 1997. The net
interest margin increased to 4.65% for the year ended June 30, 1998, compared to
4.41% for the year ended June 30, 1997.  Increases in both  interest rate spread
and  interest  rate margin were the result of larger  average  balances in loans
receivable,  which are the Company's highest yielding assets, and larger average
balances in lower costing liabilities, such as transaction accounts.

         Provisions for Loan Losses.  For the year ended June 30, 1998, the Bank
provided $102,000 for future loan losses.  During the prior year,  provisions of
$85,000 were made. The allowance for loan losses totaled $320,000 or .94% of net
loans at June 30,  1998,  compared  to $231,000 or .68% of net loans at June 30,
1997, an increase of $89,000 or 38.5%.

         Noninterest  Income.  Noninterest income increased by $103,000 or 62.9%
to $267,000 for the year ended June 30, 1998, compared to $164,000 for the prior
year ended June 30, 1997. A major  contributor to the increase was a $104,000 or
279.3%  increase in gains on the sale of  investments  to $141,000  for the year
ended  June 30,  1998,  compared  to $37,000  for the year ended June 30,  1997.
Partially  offsetting  this increase and an increase in service fee income was a
decline of $24,000 in gains on the sale of real estate  acquired for development
to $7,000 for the year ended June 30,  1998,  compared  to $31,000  for the same
period a year earlier.



                                     - 15 -
<PAGE>

         Noninterest Expense.  Noninterest expense increased by $77,000 or 5.6%,
to $1,444,000  for the year ended June 30, 1998,  compared to $1,368,000 for the
year ended June 30, 1997. The increase can be primarily  attributed the $202,000
or 38.8%  increase in salaries  and  employee  benefits to $723,000 for the year
ended June 30,  1998,  compared  to  $521,000  for the prior year ended June 30,
1997.  The  increase  was the result of new staff  members  hired for the Bank's
Cloverdale  branch and costs  associated  with  employee  benefit  plans adopted
during  fiscal  year 1997.  Partially  offsetting  this  increase  was a drop in
deposit  insurance  expense of $149,000 or 90.3%,  to $16,000 for the year ended
June 30, 1998,  compared to $165,000  for the year ended June 30, 1997.  Deposit
insurance expense for the year ended June 30, 1997 included the one-time special
assessment  expense of $142,000  imposed by federal  legislation to recapitalize
the  SAIF.  Other  increases  related  to  occupancy,  advertising,   foreclosed
property, and data processing expenses. These increases were partially offset by
a decline in legal and  professional  fees of $48,000 or 28.2%,  to $123,000 for
the year ended June 30,  1998,  compared to $172,000 for the year ended June 30,
1997.

         Income Tax Expense.  Income tax expense  increased $54,000 or 35.3%, to
$206,000  for the year ended June 30,  1998,  compared to $152,000 for the prior
year ended June 30, 1997.  The increase was due to an increase in income  before
taxes of  $194,000  or 48.0%,  which was  partially  offset by a decline  in the
effective combined federal and state income tax rate to 34.4% for the year ended
June 30, 1998, compared to 37.7% for the same period a year ago.

IMPACT OF INFLATION

         The  consolidated  financial  statements  presented  herein  have  been
prepared in accordance  with generally  accepted  accounting  principles.  These
principles  require the measurement of financial  position and operating results
in terms of  historical  dollars,  without  considering  changes in the relative
purchasing power of money over time due to inflation.

         The primary assets and  liabilities of financial  institutions  such as
the Bank are  monetary  in  nature.  As a  result,  interest  rates  have a more
significant  impact on the Bank's performance than the effects of general levels
of inflation.  Interest  rates,  however,  do not  necessarily  move in the same
direction or with the same  magnitude as the price of goods and services,  since
such prices are affected by inflation.  In a period of rapidly  rising  interest
rates, the liquidity and maturity structure of the Bank's assets and liabilities
are critical to the maintenance of acceptable performance levels.

         The principal effect of inflation,  as distinct from levels of interest
rates, on earnings is in the area of noninterest expense.  Such expense items as
employee  compensation,  employee benefits and occupancy and equipment costs may
be  subject to  increases  as a result of  inflation.  An  additional  effect of
inflation  is the  possible  increase  in the  dollar  value  of the  collateral
securing loans made by the Bank. The Bank is unable to determine the extent,  if
any, to which  properties  securing the Bank's loans have  appreciated in dollar
value due to inflation.



                                     - 16 -
<PAGE>

CURRENT ACCOUNTING ISSUES

     Accounting for Derivative Instruments and Hedging Activities.  Statement of
Financial  Accounting  Standards  ("SFAS") No. 133 requires  companies to record
derivatives  on the  balance  sheet  at their  fair  value.  SFAS  No.  133 also
acknowledges  that the method of  recording a gain or loss depends on the use of
the derivative.  If certain conditions are met, a derivative may be specifically
designated  as (a) a hedge of the  exposure  to  changes  in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction,  or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation,  an
unrecognized   firm   commitment,   an   available-for-sale   security,   or   a
foreign-currency-denominated forecasted transaction.

     o    For a derivative  designated as hedging the exposure to changes in the
          fair value of a recognized  asset or  liability  or a firm  commitment
          (referred to as a fair value hedge), the gain or loss is recognized in
          earnings in the period of change  together with the offsetting loss or
          gain on the hedged item  attributable  to the risk being  hedged.  The
          effect of that  accounting  is to  reflect in  earnings  the extent to
          which the hedge is not  effective in achieving  offsetting  changes in
          fair value.

     o    For a derivative  designated  as hedging the exposure to variable cash
          flows of a forecasted  transaction (referred to as a cash flow hedge),
          the effective  portion of the  derivative's  gain or loss is initially
          reported  as  a  component  of  other  comprehensive  income  (outside
          earnings)  and  subsequently   reclassified  into  earnings  when  the
          forecasted  transaction  affects earnings.  The ineffective portion of
          the gain or loss is reported in earnings immediately.

     o    For a derivative  designated as hedging the foreign currency  exposure
          of a net  investment  in a  foreign  operation,  the  gain  or loss is
          reported in other  comprehensive  income (outside earnings) as part of
          the cumulative translation adjustment. The accounting for a fair value
          hedge described above applies to a derivative designated as a hedge of
          the foreign currency exposure of an unrecognized firm commitment or an
          available-for-sale security. Similarly, the accounting for a cash flow
          hedge described above applies to a derivative designated as a hedge of
          the  foreign  currency  exposure  of  a   foreign-currency-denominated
          forecasted transaction.

     o    For a derivative not designated as a hedging  instrument,  the gain or
          loss is recognized in earnings in the period of change.

     The new Statement  applies to all entities.  If hedge accounting is elected
by the  entity,  the  method  of  assessing  the  effectiveness  of the  hedging
derivative   and  the   measurement   approach   of   determining   the  hedge's
ineffectiveness must be established at the inception of the hedge.

     SFAS No. 133 amends SFAS No. 52 and supercedes  SFAS Nos. 80, 105, and 119.
SFAS  No.  107 is  amended  to  include  the  disclosure  provisions  about  the
concentrations  of credit risk from SFAS No. 105.  Several  Emerging Issues Task
Force  consensuses  are also changed or nullified by the  provisions of SFAS No.
133.

     SFAS No. 133 was to be effective for all fiscal years  beginning after June
15, 1999. The implementation date has been deferred and SFAS No. 133 will now be
effective for all fiscal  quarters for all fiscal years beginning after June 15,
2000.  The  adoption  of this  Statement  is not  currently  expected  to have a
material  impact on the Company's  financial  statements.  Early  application is
encouraged;  however,  this  Statement  may  not  be  applied  retroactively  to
financial statements of prior periods.


                                     - 17 -
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT



Board of Directors
Home Financial Bancorp
Spencer, Indiana


We have  audited the  consolidated  statement  of  financial  condition  of Home
Financial  Bancorp and  subsidiary as of June 30, 1999 and 1998, and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the  three  years in the  period  ended  June 30,  1999.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  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 consolidated  financial  statements described above present
fairly, in all material  respects,  the consolidated  financial position of Home
Financial  Bancorp and  subsidiary as of June 30, 1999 and 1998, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended June 30, 1999, in conformity  with  generally  accepted  accounting
principles.


Olive LLP


/s/ Olive LLP
Indianapolis, Indiana
July 23, 1999


                                     - 18 -
<PAGE>

                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
June 30                                                             1999               1998
----------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>
Assets
     Cash                                                      $    296,490       $    318,043
     Short-term interest-bearing deposits                         2,178,313          3,484,060
                                                               --------------------------------
          Total cash and cash equivalents                         2,474,803          3,802,103
     Investment securities-- available for sale                   8,288,028          1,917,734
     Loans, net of allowance for loan losses of
        $336,235 and $319,595                                    38,237,683         33,959,130
     Premises and equipment                                       1,984,842          1,687,355
     Federal Home Loan Bank stock                                   660,000            500,000
     Interest receivable                                            318,241            263,859
     Other assets                                                 1,172,853            429,562
                                                               --------------------------------
               Total assets                                    $ 53,136,450       $ 42,559,743
                                                               ================================

Liabilities
     Deposits
          Noninterest bearing                                  $    578,267       $    510,423
          Interest-bearing deposits                              32,079,166         26,138,187
                                                               --------------------------------
               Total deposits                                    32,657,433         26,648,610
     Federal Home Loan Bank advances                             13,200,000          8,200,000
     Other liabilities                                              155,794            205,227
                                                               --------------------------------
               Total liabilities                                 46,013,227         35,053,837
                                                               --------------------------------
Commitments and Contingencies

Stockholders' Equity Preferred stock, without par value:
          Authorized and unissued
          - 2,000,000 shares
     Common stock,
          without par value Authorized - 5,000,000 shares
          Issued - 886,200 and 929,052 shares                     4,100,034          4,314,294
     Additional paid-in capital                                      88,667             58,327
     Retained earnings                                            3,613,425          3,689,484
     Unearned compensation                                         (181,456)          (228,169)
     Unearned ESOP shares                                          (257,908)          (304,310)
     Accumulated other comprehensive loss                          (239,539)           (23,720)
                                                               --------------------------------
              Total stockholders' equity                          7,123,223          7,505,906
                                                               --------------------------------
              Total liabilities and stockholders' equity       $ 53,136,450       $ 42,559,743
                                                               ================================

</TABLE>
See notes to consolidated financial statements.


                                     - 19 -
<PAGE>


                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>

Year Ended June 30                                                     1999              1998             1997
----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>             <C>             <C>
Interest Income
     Loans                                                            $3,346,281      $3,305,864      $2,912,085
     Deposits with financial institutions                                156,845         177,192         136,538
     Investment securities
       Taxable                                                           334,463         166,965         284,785
       Tax exempt                                                         30,073
     Federal
     Home Loan Bank stock                                                 44,994          40,315          33,189
                                                                      ------------------------------------------
          Total interest and dividend income                           3,882,583       3,690,336       3,396,670
                                                                      ------------------------------------------
Interest Expense
     Deposits                                                          1,434,612       1,282,778       1,210,207
     Federal Home Loan Bank advances                                     596,927         529,325         487,217
     Other interest expense                                                                                5,758
                                                                      ------------------------------------------
          Total interest expense                                       2,031,539       1,812,103       1,703,182
                                                                      ------------------------------------------
Net Interest Income                                                    1,851,044       1,878,233       1,693,488
     Provision for loan losses                                            44,000         102,000          85,000
                                                                      ------------------------------------------
Net Interest Income After Provision for Loan Losses                    1,807,044       1,776,233       1,608,488
                                                                      ------------------------------------------
Other Income
     Service charges on deposit accounts                                  84,148          55,182          42,494
     Gain on sale of real estate acquired for development                  5,973           7,108          31,437
     Net realized gain on sales of available-for-sale securities           3,325         140,925          37,155
     Other income                                                         31,963          63,736          52,750
                                                                      ------------------------------------------
          Total other income                                             125,409         266,951         163,836
                                                                      ------------------------------------------
Other Expenses
     Salaries and employee benefits                                      819,296         722,886         521,142
     Net occupancy expenses                                              110,326          84,653          70,825
     Equipment expenses                                                  115,268          57,932          61,044
     Deposit insurance expense                                            16,510          15,881         164,550
     Computer processing fees                                            151,936         120,133          94,869
     Printing and office supplies                                         64,670          40,839          38,274
     Legal and professional fees                                         104,660         123,218         171,674
     Director and committee fees                                          56,450          43,450          42,000
     Advertising expense                                                  60,403          46,931          34,004
     Other expenses                                                      189,597         188,217         169,184
                                                                      ------------------------------------------
          Total other expenses                                         1,689,116       1,444,140       1,367,566
                                                                      ------------------------------------------
Income Before Income Tax                                                 243,337         599,044         404,758
     Income tax expense                                                   99,603         206,266         152,441
                                                                      ------------------------------------------
Net Income                                                            $  143,734      $  392,778      $  252,317
                                                                      ==========================================
Net Income Per Share
     Basic                                                            $      .18      $      .47      $      .27
     Diluted                                                                 .18             .47             .27

</TABLE>
See notes to consolidated financial statements.


                                     - 20 -
<PAGE>



                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>


                                                                Additional                                             Unearned
                                            Common Stock          Paid-in    Comprehensive  Retained      Unearned       ESOP
                                         Shares      Amount       Capital       Income      Earnings    Compensation    Shares
---------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>      <C>            <C>                      <C>            <C>          <C>
Balances, July 1, 1996                                                                    $3,427,201
Comprehensive income
Net income                                                                     $252,317      252,317
Other comprehensive income (loss),
       net of tax
Unrealized gains on securities,
         net of reclassification adjustment                                      44,322
                                                                               --------
   Comprehensive income                                                        $296,639
                                                                               ========
Common stock issued in conversion,
     net of costs                      1,011,852  $4,728,294
Cash dividends ($.075 per share)                                                             (68,818)
Contributions for unearned ESOP shares                                                                                $(404,740)
ESOP shares earned                                               $25,404                                                 40,476
Contribution for unearned RRP shares                                                                     $(290,172)
RRP shares earned                                                                                           25,391
Purchase of stock                        (72,800)   (364,000)                               (201,412)
                                         -------------------------------                  ---------------------------------------

Balances, June 30, 1997                  939,052   4,364,294      25,404                   3,409,288      (264,781)    (364,264)
Comprehensive income
Net income                                                                     $392,778      392,778
Other comprehensive income (loss),
       net of tax
Unrealized loss on securities, net of
         reclassification adjustment                                            (50,913)
                                                                               --------
   Comprehensive income                                                        $341,865
                                                                               ========
Cash dividends ($.10 per share)                                                              (85,082)
ESOP shares earned                                                32,923                                                 59,954
RRP shares earned                                                                                           36,612
Purchase of stock                        (10,000)    (50,000)                                (27,500)
                                         -------------------------------                  ---------------------------------------

Balances, June 30, 1998                  929,052   4,314,294      58,327                   3,689,484      (228,169)    (304,310)
Comprehensive income
Net income                                                                     $143,734      143,734
Other comprehensive income (loss), net of tax
Unrealized loss on securities,
         net of reclassification adjustment                                    (215,819)
                                                                               --------
   Comprehensive loss                                                         $ (72,085)
                                                                               ========
Cash dividends ($.115 per share)                                                             (94,386)
ESOP shares earned                                                23,718                                                 46,402
RRP shares earned                                                                                           46,713
Purchase of stock                        (42,852)   (214,260)                               (125,407)
Tax benefit on RRP shares                                          6,622
                                         -------------------------------                  ---------------------------------------

Balances, June 30, 1999                  886,200  $4,100,034     $88,667                  $3,613,425     $(181,456)   $(257,908)
                                         ===============================                  =======================================
</TABLE>



                                             Accumulated
                                                Other
                                            Comprehensive
                                            Income (Loss)     Total
-------------------------------------------------------------------
Balances, July 1, 1996                     $  (17,129)    $3,410,072
Comprehensive income
Net income                                                   252,317
Other comprehensive income (loss),
       net of tax
Unrealized gains on securities,
         net of reclassification adjustment    44,322         44,322

   Comprehensive income

Common stock issued in conversion,
     net of costs                                          4,728,294
Cash dividends ($.075 per share)                             (68,818)
Contributions for unearned ESOP shares                      (404,740)
ESOP shares earned                                            65,880
Contribution for unearned RRP shares                        (290,172)
RRP shares earned                                             25,391
Purchase of stock                                           (565,412)
                                         ---------------------------

Balances, June 30, 1997                        27,193      7,197,134
Comprehensive income
Net income                                                   392,778
Other comprehensive income (loss),
       net of tax
Unrealized loss on securities, net of
         reclassification adjustment          (50,913)       (50,913)

   Comprehensive income

Cash dividends ($.10 per share)                              (85,082)
ESOP shares earned                                            92,877
RRP shares earned                                             36,612
Purchase of stock                                            (77,500)
                                         ---------------------------

Balances, June 30, 1998                       (23,720)     7,505,906
Comprehensive income
Net income                                                   143,734
Other comprehensive income (loss), net of
Unrealized loss on securities,
         net of reclassification adjustment  (215,819)      (215,819)

   Comprehensive loss

Cash dividends ($.115 per share)                             (94,386)
ESOP shares earned                                            70,120
RRP shares earned                                             46,713
Purchase of stock                                           (339,667)
Tax benefit on RRP shares                                      6,622
                                         ---------------------------

Balances, June 30, 1999                     $(239,539)    $7,123,223
                                         ===========================

See notes to consolidated financial statements.

<TABLE>
<CAPTION>

                                     - 21 -
<PAGE>


                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended June 30                                                             1999              1998             1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>               <C>              <C>
Operating Activities
   Net income                                                              $    143,734      $   392,778      $    252,317
   Adjustments to reconcile net income to net cash provided
     by operating activities
     Provision for loan losses                                                   44,000          102,000            85,000
     Investment securities amortization, net                                     46,163              981             2,630
     ESOP shares earned                                                          70,120           92,877            65,880
     RRP shares earned                                                           46,713           36,612            25,391
     Depreciation and amortization                                              149,874           87,912            83,193
     Deferred income tax benefit                                                 (4,336)         (50,485)          (35,294)
     Gain on sale of real estate acquired for development                        (5,973)          (7,108)          (31,437)
     Gain on sale of other real estate                                          (37,466)         (35,016)          (21,964)
     Gain on sale of securities available for sale                               (3,325)        (140,925)          (37,155)
     Change in
       Interest receivable                                                      (54,382)           4,789           (32,970)
       Other assets                                                            (154,877)          62,331           (74,794)
     Other adjustments                                                          (42,811)          50,372            64,038
                                                                           ------------------------------------------------
       Net cash provided by operating activities                                197,434          597,118           344,835
                                                                           ------------------------------------------------
Investing Activities
     Purchases of securities available for sale                              (8,658,915)      (1,905,142)       (3,261,591)
     Proceeds from sales of securities available for sale                       568,350        1,895,041         4,824,600
     Proceeds from maturities and paydowns of
       securities available for sale                                          1,320,049          250,523         1,342,922
     Net changes in loans                                                    (4,090,925)        (258,317)       (7,371,895)
     Improvements to real estate owned                                                           (31,552)          (12,621)
     Proceeds from real estate owned sales                                       13,000          345,119           204,501
     Purchase of premises and equipment                                        (447,361)        (811,610)         (569,082)
     Proceeds from disposal of premises and equipment                                                               35,000
     Purchase of real estate acquired for development                                                               (2,911)
     Proceeds from sale of real estate acquired for development                   6,298            7,108           185,170
     Purchase of FHLB of Indianapolis stock                                    (160,000)                          (140,000)
     Other investing activities                                                (650,000)
                                                                           ------------------------------------------------
       Net cash used by investing activities                                (12,099,504)        (508,830)       (4,765,907)
                                                                           ------------------------------------------------

Financing Activities
     Net change in
       NOW and savings deposits                                               1,199,675         (467,983)       (3,456,237)
       Certificates of deposit                                                4,809,148          960,077           887,053
     Advances from Federal Home Loan Bank of Indianapolis                     7,000,000        5,000,000         4,300,000
     Payments on advances from Federal Home Loan Bank of Indianapolis        (2,000,000)      (5,800,000)       (2,500,000)
     Sale of stock                                                                                               4,578,341
     Purchase of stock                                                         (339,667)         (77,500)         (565,412)
     Dividends paid                                                             (94,386)         (85,082)          (68,818)
     Contribution of RRP shares                                                                                   (290,172)
                                                                           ------------------------------------------------
       Net cash provided (used) by financing activities                      10,574,770         (470,488)        2,884,755
                                                                           ------------------------------------------------

Net Change in Cash and Cash Equivalents                                      (1,327,300)        (382,200)       (1,536,317)

Cash and Cash Equivalents, Beginning of Year                                  3,802,103        4,184,303         5,720,620
                                                                           ------------------------------------------------
Cash and Cash Equivalents, End of Year                                       $2,474,803       $3,802,103        $4,184,303
                                                                           ================================================
Additional Cash Flows and Supplementary Information
     Interest paid                                                           $2,021,539       $1,805,250        $1,703,182
     Income tax paid                                                            211,053          174,710           178,988
     Transfers from loans to other real estate                                 (231,628)         314,438           294,368
     Stock issuance costs transferred from other assets
       to stockholders' equity                                                                                     254,787
     Common stock issued to ESOP leveraged with an employer loan                                                   404,740
</TABLE>


See notes to consolidated financial statements.



                                     - 22 -
<PAGE>

                        [**THE FOLLOWING HEADING APPEARS
                AT THE TOP OF EVERY PAGE THROUGHOUT THE NOTES**]

                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       (TABLE DOLLAR AMOUNTS IN THOUSANDS)

Note 1 -- Nature of Operations and Summary of Significant Accounting Policies

The accounting and reporting policies of Home Financial Bancorp  ("Company") and
its wholly owned  subsidiary,  Owen Community Bank, s.b. ("Bank") and the Bank's
wholly owned  subsidiary,  BSF,  Inc.  ("BSF"),  conform to  generally  accepted
accounting  principles and reporting  practices followed by the thrift industry.
The more significant of the policies are described below.

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.

The Company is a savings and loan holding  company whose  principal  activity is
the  ownership  and  management of the Bank.  Commencing  May 1, 1999,  the Bank
operates under a federal thrift charter,  known as a federal stock savings bank,
and provides  full banking  services.  Prior to May 1, 1999,  the Bank  operated
under a state thrift  charter,  known as a stock  savings  bank.  As a federally
chartered  thrift,  the Bank is  subject to  regulation  by the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation ("FDIC").

The Bank  generates  mortgage and  consumer  loans and  receives  deposits  from
customers located primarily in Owen, Putnam and surrounding counties. The Bank's
loans are  generally  secured by specific  items of  collateral  including  real
property and consumer assets.

BSF engages in purchasing and developing large tracts of real estate. After land
is purchased,  BSF subdivides the real estate into lots, makes improvements such
as  streets,  and sells  individual  lots,  usually  on  contract  for deed.  In
connection with the Bank's conversion to an Indiana mutual savings bank in 1995,
the FDIC  required  the Bank to cease BSF's land  acquisitions,  divest of BSF's
nonconforming  real estate holdings by November 16, 2000 and maintain the Bank's
capital  at  levels  sufficient  to  classify  the  Bank  as a  well-capitalized
institution.  Prior to May 1, 1999, BSF had ceased land  acquisitions and was in
the process of divesting of its real estate holdings.  Effective with the Bank's
change to a federal thrift charter on May 1, 1999 discussed  above,  BSF resumed
its normal activities.

Consolidation--The consolidated financial statements include the accounts of the
Company  and  subsidiary   after   elimination  of  all  material   intercompany
transactions and accounts.

Investment  Securities--Debt  securities are classified as held to maturity when
the  Company  has the  positive  intent and  ability to hold the  securities  to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities  not  classified as held to maturity are  classified as available for
sale.  Securities  available for sale are carried at fair value with  unrealized
gains  and  losses  reported  separately,  net  of  tax,  in  accumulated  other
comprehensive income.

Amortization  of premiums  and  accretion of  discounts  are recorded  using the
interest  method as interest income from  securities.  Realized gains and losses
are  recorded  as net  security  gains  (losses).  Gains and  losses on sales of
securities are determined on the specific-identification method.

Loans are carried at the principal amount outstanding.  A loan is impaired when,
based on current  information  or events,  it is probable  that the Bank will be
unable to collect all amounts due  (principal  and  interest)  according  to the
contractual terms of the loan agreement. Loans whose payments have insignificant
delays not exceeding 90 days outstanding are not considered  impaired.  The Bank
considers its investment in one-to-four  family  residential  loans and consumer
loans to be homogeneous and therefore excluded from separate  identification for
evaluation of impairment.  Interest income is accrued on the principal  balances
of  loans.  The  accrual  of  interest  on  impaired  and  nonaccrual  loans  is
discontinued when, in management's  opinion,  the borrower may be unable to meet
payments as they become due. When interest accrual is  discontinued,  all unpaid
accrued interest is reversed when considered  uncollectible.  Interest income is
subsequently  recognized only to the extent cash payments are received.  Certain
loan fees and direct costs are being  deferred and amortized as an adjustment of
yield on the loans over the contractual  lives of the loans. When a loan is paid
off or sold, any unamortized loan origination fee balance is credited to income.



                                     - 23 -
<PAGE>

Allowance  for  loan  losses  is  maintained  to  absorb  loan  losses  based on
management's  continuing  review and  evaluation  of the loan  portfolio and its
judgment  as to  the  impact  of  economic  conditions  on  the  portfolio.  The
evaluation by management includes consideration of past loss experience, changes
in the composition of the portfolio,  the current  condition and amount of loans
outstanding,  and the probability of collecting all amounts due.  Impaired loans
are  measured by the present  value of expected  future cash flows,  or the fair
value of the collateral of the loan, if collateral dependent.

The  determination  of the adequacy of the allowance for loan losses is based on
estimates  that are  particularly  susceptible  to  significant  changes  in the
economic environment and market conditions.  Management believes that as of June
30,  1999,  the  allowance  for loan  losses is  adequate  based on  information
currently  available.  A worsening or  protracted  economic  decline in the area
within which the Bank  operates  would  increase the  likelihood  of  additional
losses due to credit and market risks and could  create the need for  additional
loss reserves.

Real estate  acquired  for  development  is carried at the lower of cost or fair
value.  Costs relating to development and improvements of property are allocated
to  individual  lots and  capitalized,  whereas  costs  relating  to holding the
property  are  expensed.   Gains  on  sales  of  lots  are   determined  on  the
specific-identification method.

Premises  and  equipment  are carried at cost net of  accumulated  depreciation.
Depreciation is computed using the accelerated and  straight-line  methods based
principally on the estimated useful lives of the assets. Maintenance and repairs
are expensed as incurred while major additions and improvements are capitalized.
Gains and losses on dispositions are included in current operations.

Federal Home Loan Bank ("FHLB") stock is a required  investment for institutions
that are members of the FHLB system. The required investment in the common stock
is based on a predetermined formula.

Pension  plan costs are based on actuarial  computations  and charged to current
operations.  The funding policy is to pay at least the minimum amounts  required
by ERISA.

Stock  options are granted for a fixed  number of shares with an exercise  price
equal to the fair value of the shares at the date of grant. The Company accounts
for and will continue to account for stock option grants in accordance  with APB
Opinion No. 25,  Accounting  for Stock Issued to  Employees,  and,  accordingly,
recognizes no compensation expense for the stock option grants.

Income tax in the consolidated  statement of income includes deferred income tax
provisions or benefits for all significant  temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. The Company
and Bank file consolidated tax returns.

Earnings per share have been  computed  based upon the weighted  average  common
shares and potential common shares  outstanding  during the period subsequent to
the Bank's conversion to a stock savings bank on July 1, 1996. Unearned Employee
Stock  Ownership Plan ("ESOP") shares have been excluded from the computation of
average common shares and potential common shares outstanding.

Reclassifications  of  certain  amounts  in  the  1998  consolidated   financial
statements have been made to conform to the 1999 presentation.

Note 2 -- Conversion to State Stock Savings Bank

On July 1, 1996, the Bank completed the conversion from a state chartered mutual
savings bank to a state  chartered  stock  savings bank and the formation of the
Company as the  holding  company  of the Bank.  As part of the  conversion,  the
Company issued 505,926 (before restatement for the 2 for 1 stock split discussed
in Note 10)  shares  of  common  stock at $10 per  share.  Net  proceeds  of the
Company's  stock  issuance,  after costs and excluding the shares issued for the
ESOP, were approximately $4,320,000 of which $2,472,548 was used to acquire 100%
of the stock and ownership of the Bank.  Costs  associated  with the  conversion
were  deducted from the proceeds of stock sold by the Company.  The  transaction
was accounted for in a manner similar to a pooling of interests.



                                     - 24 -
<PAGE>

Note 3 -- Investment Securities
<TABLE>
<CAPTION>


                                                                                  1999
                                                      ------------------------------------------------------------
                                                                         Gross             Gross
                                                      Amortized       Unrealized        Unrealized          Fair
June 30                                                 Cost             Gains            Losses            Value
------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>            <C>                <C>
Available for sale
  Federal agencies                                     $  100              $1                                $  101
  Marketable equity securities                            813               2             $(198)                617
  Mortgage-backed securities                            7,771               3              (204)              7,570
                                                      -------------------------------------------------------------
              Total investment securities              $8,684              $6             $(402)             $8,288
                                                      =============================================================


                                                                                  1998
                                                      ------------------------------------------------------------
                                                                         Gross             Gross
                                                      Amortized       Unrealized        Unrealized          Fair
June 30                                                 Cost             Gains            Losses            Value
------------------------------------------------------------------------------------------------------------------
Available for sale
  Federal agencies                                    $   100              $3                               $   103
  Marketable equity securities                          1,320                              $(48)              1,272
  Mortgage-backed securities                              537               6                                   543
                                                      -------------------------------------------------------------
              Total investment securities              $1,957              $9              $(48)             $1,918
                                                      =============================================================
</TABLE>


                                     - 25 -
<PAGE>

The amortized  cost and fair value of securities  available for sale at June 30,
1999, by contractual maturity,  are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                         1999
                                ------------------------
Maturity Distribution           Amortized        Fair
at June 30                        Cost           Value
--------------------------------------------------------
One to five years               $   100         $   101
Marketable equity
   securities                       813             617
Mortgage-backed
   securities                     7,771           7,570
                                ------------------------
       Totals                    $8,684          $8,288
                                ========================

Securities with a carrying value of $7,600,000 and $528,000 were pledged at June
30, 1999 and 1998 to secure FHLB advances.

Proceeds from sales of securities  available for sale during 1999, 1998 and 1997
were $569,000,  $1,895,000 and $4,825,000.  Gross gains of $12,000, $141,000 and
$71,000 in 1999,  1998 and 1997 and gross  losses of $8,700 and  $34,000 in 1999
and 1997 were  realized on the sales.  The tax expense for net gains on security
transactions  for June 30, 1999, 1998 and 1997 was $1,300,  $55,800 and $14,700,
respectively.

Note 4 -- Loans and Allowance

<TABLE>
<CAPTION>
June 30                                            1999              1998
---------------------------------------------------------------------------
Real estate mortgage loans
<S>                                             <C>               <C>
  Residential                                   $ 20,952          $ 19,563
  Mobile home and land                             5,331             4,666
  Nonresidential                                   9,323             7,614
  Multi-family                                     1,096               904
Mobile home loans                                    950               831
Commercial and industrial                            538               242
Consumer loans                                       999               655
                                              -----------------------------
                                                  39,189            34,475
                                              -----------------------------

Undisbursed portion of loans                        (619)             (198)
Deferred loan costs                                    4                 2
Allowance for loan losses                           (336)             (320)
                                              -----------------------------
                                                    (951)             (516)
                                              -----------------------------
       Total loans                              $ 38,238          $ 33,959
                                              =============================



Year Ended June 30                             1999          1998          1997
--------------------------------------------------------------------------------
Allowance for loan losses
<S>                                           <C>           <C>           <C>
   Balances, July 1                           $ 320         $ 231         $ 150
   Provision for loan losses                     44           102            85
   Loans charged off                            (28)          (13)           (4)
                                             -----------------------------------
   Balances, June 30                          $ 336         $ 320         $ 231
                                             ===================================


Note 5 -- Premises and Equipment

June 30                                              1999              1998
--------------------------------------------------------------------------------
<S>                                               <C>               <C>
Land                                              $   302           $   302
Buildings                                           1,846             1,697
Equipment                                             749               450
                                              -----------------------------
       Total cost                                   2,897             2,449
Accumulated depreciation                             (912)             (762)
                                              -----------------------------
       Net                                        $ 1,985           $ 1,687
                                              =============================

</TABLE>


                                     - 26-
<PAGE>

Note 6 -- Deposits

June 30                                              1999            1998
--------------------------------------------------------------------------------
Noninterest bearing demand                         $   578         $   510
Interest-bearing demand                              2,715           2,298
Money market deposits                                1,715           1,512
Savings                                              3,782           3,271
Certificates of $100,000 or more                     5,148           3,319
Other certificates                                  18,719          15,739
                                                -----------------------------
       Total deposits                              $32,657         $26,649
                                                =============================



Certificates maturing in years ending June 30:

2000                                $17,803
2001                                  2,739
2002                                    844
2003                                    982
2004                                  1,499
                                    -------

                                    $23,867
                                    =======


Note 7 -- Federal Home Loan Bank Advances

                                                             1999
                                                     ---------------------------
                                                                   Weighted
                                                                    Average
June 30                                               Amount         Rate
--------------------------------------------------------------------------------
Maturities in years ending
2000                                                 $  3,000        5.85%
2001                                                    3,000        5.90
2002                                                    5,000        5.17
2003                                                    2,000        5.85
2006                                                      200        6.86
                                                      -------

                                                      $13,200        5.61%
                                                      =======

The terms of the security  agreement with the FHLB require the Bank to pledge as
collateral for advances qualifying first mortgage loans in an amount equal to at
least 170  percent of these  advances  and all stock in the FHLB.  Advances  are
subject to restrictions or penalties in the event of prepayment.

Note 8 -- Income Tax

Year Ended June 30                             1999          1998          1997
--------------------------------------------------------------------------------
Income tax expense
     Currently payable
        Federal                              $  82         $ 199         $ 141
        State                                   22            57            46
     Deferred
        Federal                                 (6)          (39)          (25)
        State                                    2           (11)          (10)
                                             -----------------------------------
           Total income tax expense          $ 100         $ 206         $ 152
                                             ===================================



Year Ended June 30                            1999          1998          1997
--------------------------------------------------------------------------------
Reconciliation of federal
   statutory to actual
   tax expense
   Federal statutory
     income tax at 34%                       $  83         $ 204         $ 138
   Effect of state
     income taxes                               16            31            24
   Tax exempt dividends
     and interest                               (5)          (24)           (9)
   Other                                         6            (5)           (1)
                                             -----------------------------------
       Actual tax expense                    $ 100         $ 206         $ 152
                                             ===================================


A cumulative net deferred tax asset is included in other assets.  The components
of the asset are as follows:

June 30                                                 1999          1998
--------------------------------------------------------------------------------
Assets
     Allowance for loan losses                          $117          $ 98
     Deferred compensation                                23            26
     Securities available for sale                        78            16
     Other                                                 1             1
                                                    -------------------------
          Total assets                                   219           141
                                                    -------------------------
Liabilities
     Depreciation                                         19             6
     State income tax                                     10            10
     Loan fees                                             2             3
                                                    -------------------------
          Total liabilities                               31            19
                                                    -------------------------
                                                        $188          $122
                                                    =========================

No valuation allowance was necessary for the years ended June 30, 1999 and 1998.



                                     - 27 -
<PAGE>

Retained earnings at June 30, 1999, include approximately  $700,000 for which no
deferred  federal  income  tax  liability  has  been  recognized.   This  amount
represents an  allocation  of income to bad debt  deductions as of June 30, 1988
for tax purposes only. Reduction of amounts so allocated for purposes other than
tax bad debt losses including  redemption of bank stock or excess dividends,  or
loss of "bank status" would create  income for tax purposes  only,  which income
would be subject to the  then-current  corporate income tax rate. The unrecorded
deferred  federal  income tax liability on the above  amounts was  approximately
$280,000 at June 30, 1999.


Note 9 -- Other Comprehensive Income
<TABLE>
<CAPTION>


                                                                                  1999
                                                         ------------------------------------------------------
                                                         Before-Tax                Tax               Net-of-Tax
Year Ended June 30                                         Amount                Benefit               Amount
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>                  <C>
Unrealized gains (losses) on securities
     Unrealized holding losses arising during the year     $(354)                 $140                 $(214)
     Less: reclassification adjustment for gains
         realized in net income                                3                    (1)                    2
                                                         ------------------------------------------------------
     Other comprehensive loss                              $(357)                 $141                 $(216)
                                                         ======================================================



                                                                                  1998
                                                         ------------------------------------------------------
                                                         Before-Tax                Tax               Net-of-Tax
Year Ended June 30                                         Amount                Benefit               Amount
-------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities
     Unrealized holding gains arising during the year        $84                  $(33)                  $51
     Less: reclassification adjustment for gains
         realized in net income                              141                   (39)                  102
                                                         ------------------------------------------------------
     Other comprehensive loss                               $(57)                 $  6                  $(51)
                                                         ======================================================



                                                                                  1997
                                                         ------------------------------------------------------
                                                         Before-Tax                Tax               Net-of-Tax
Year Ended June 30                                         Amount                Benefit               Amount
-------------------------------------------------------------------------------------------------------------
Unrealized gains (losses) on securities:
     Unrealized holding gains arising during the year       $110                  $(44)                  $66
     Less: reclassification adjustment for
         gains realized in net income                         37                   (15)                   22
                                                         ------------------------------------------------------
     Other comprehensive income                              $73                  $(29)                  $44
                                                         ======================================================

</TABLE>

                                     - 28 -
<PAGE>

Note 10 -- Commitments and Contingent Liabilities

In  the  normal  course  of  business  there  are  outstanding  commitments  and
contingent  liabilities,  such as commitments  to extend  credit,  which are not
included in the accompanying financial statements. The Bank's exposure to credit
loss  in the  event  of  nonperformance  by the  other  party  to the  financial
instruments  for  commitments to extend credit is represented by the contractual
or notional amount of those instruments.  The Bank uses the same credit policies
in making such  commitments as it does for instruments  that are included in the
consolidated statement of financial condition.

Financial instruments whose contract amount represents credit risk as of June 30
were as follows:

                                               1999             1998
--------------------------------------------------------------------------------
Mortgage loan commitments
     At variable rates                         $747             $827
     At fixed rates                             348              553
Unused lines of credit                          717              510

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash  requirements.  The Bank evaluates each customer's  credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's  credit
evaluation.  Collateral held varies, but may include residential real estate, or
other assets of the borrower.

The Bank has entered  into  agreements  with three  officers  which  provide for
salary  continuation  for  a  three-year  period  under  certain  circumstances,
primarily related to change of control of the Bank, as defined.  Under the terms
of the agreements, these payments could occur if, following a change of control,
such officers are terminated  other than for cause or  unreasonable  changes are
made in their employment  relationships.  These agreements extend  automatically
for one year on each anniversary date unless certain  conditions are met. One of
the agreements was effective  January 1, 1996 and the other two agreements  were
effective July 1, 1996.

The  Company  and Bank are also  subject  to claims  and  lawsuits  which  arise
primarily in the ordinary  course of business.  It is the opinion of  management
that the  disposition  or  ultimate  determination  of such  possible  claims or
lawsuits will not have a material adverse effect on the  consolidated  financial
position of the Company.

Note 11 -- Year 2000

Like all entities,  the Company and subsidiaries are exposed to risks associated
with  the Year  2000  Issue,  which  affects  computer  software  and  hardware;
transactions  with  customers,   vendors,  and  other  entities;  and  equipment
dependent upon microchips.  The Company has completed the process of identifying
and remediating  potential Year 2000 problems. It is not possible for any entity
to guarantee the results of its own remediation efforts or to accurately predict
the impact of the Year 2000 Issue on third  parties  with which the  Company and
subsidiaries do business. If remediation efforts of the Company or third parties
with which the Company and subsidiaries do business are not successful, the Year
2000 Issue could have negative effects on the Company's  financial condition and
results of operations in the near term.

Note 12 -- Stockholders' Equity

On December 9, 1997,  the Company  approved a 2-for-1  stock split,  under which
every share of its common stock outstanding at the close of business on December
23,  1997  was  converted  into two  shares  of  common  stock.  The  additional
certificates were distributed to stockholders on January 6, 1998. As a result of
the stock  split,  the number of shares  outstanding  increased  from 464,526 to
929,052 shares.  Unless  otherwise noted, all share and per share data have been
restated for the 2-for-1 stock split.



                                     - 29 -
<PAGE>

The Company's board of directors has approved the repurchase of up to 15 percent
of the Company's outstanding shares of common stock. Such purchases will be made
subject to market  conditions in open market or block  transactions.  During the
years ended June 30, 1999,  1998 and 1997, the Company had  repurchased  42,852,
10,000 and 72,800 of its outstanding shares.

Note 13 -- Dividends and Capital Restrictions

The  Company is not  subject to any  regulatory  restriction  on the  payment of
dividends to its stockholders.

Without prior approval,  current  regulations allow the Bank to pay dividends to
the Company not exceeding  retained net profits for the current calendar year to
date plus those for the previous two calendar years. The Bank normally restricts
dividends to a lesser amount because of the need to maintain an adequate capital
structure.

At the time of conversion,  a liquidation  account was  established in an amount
equal to the Bank's net worth as reflected in the latest  statement of condition
used in its final  conversion  offering  circular.  The  liquidation  account is
maintained  for the benefit of eligible  deposit  account  holders who  maintain
their deposit account in the Bank after  conversion.  In the event of a complete
liquidation (and only in such event),  each eligible deposit account holder will
be entitled to receive a liquidation  distribution from the liquidation  account
in the  amount of the then  current  adjusted  subaccount  balance  for  deposit
accounts  then  held,  before  any  liquidation  distribution  may  be  made  to
stockholders.  Except for the repurchase of stock and payment of dividends,  the
existence of the liquidation account will not restrict the use or application of
net worth. The initial balance of the liquidation account was $3,295,000.

At June 30, 1999,  total  stockholder's  equity of the Bank was  $6,242,000,  of
which approximately $669,000 was available for the payment of dividends.

Note 14 -- Regulatory Capital

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies and is assigned to a capital category. The assigned
capital  category is largely  determined  by three  ratios  that are  calculated
according to the regulations:  total risk adjusted capital,  Tier 1 capital, and
Tier 1 leverage  ratios.  The ratios are intended to measure capital relative to
assets and  credit  risk  associated  with those  assets and  off-balance  sheet
exposures of the entity.  The capital category assigned to an entity can also be
affected by  qualitative  judgments  made by regulatory  agencies about the risk
inherent in the entity's activities that are not part of the calculated ratios.

There are five capital categories defined in the regulations,  ranging from well
capitalized to critically  undercapitalized.  Classification of a bank in any of
the  undercapitalized  categories can result in actions by regulators that could
have a material  effect on a bank's  operations.  At June 30, 1999 and 1998, the
Bank is categorized as well  capitalized  and met all subject  capital  adequacy
requirements.  There  are no  conditions  or  events  since  June 30,  1999 that
management believes has changed the Bank's classification.



                                     - 30 -
<PAGE>

The Bank's actual and required capital amounts and ratios are as follows:
<TABLE>
<CAPTION>


                                                                     1999
                                   -----------------------------------------------------------------------------
                                                                   Required
                                                                 for Adequate                 To Be Well
                                         Actual                    Capital 1                 Capitalized 1
June 30                            Amount        Ratio       Amount        Ratio          Amount        Ratio
----------------------------------------------------------------------------------------------------------------
<S>                                <C>            <C>        <C>            <C>            <C>          <C>
Total risk-based capital1
   (to risk weighted assets)       $6,699         21.6%      $2,476         8.0%           $3,095       10.0%

Tier I capital1
   (to risk weighted assets)        6,363         20.6        2,476         8.0             3,095       10.0
Core capital1
   (to adjusted tangible assets)    6,363         12.1        2,103         4.0             3,154        6.0

Core capital1 (to adjusted total)   6,363         12.1        2,103         4.0             2,629        5.0



                                                                     1998
                                                                   Required
                                                                 for Adequate                 To Be Well
                                         Actual                    Capital 1                 Capitalized 1
June 30                            Amount        Ratio       Amount        Ratio          Amount        Ratio
----------------------------------------------------------------------------------------------------------------
Total capital1
   (to risk weighted assets)       $6,543         26.2%      $1,994         8.0%           $2,493       10.0%

Tier I capital1
   (to risk weighted assets)        6,223         25.0          997         4.0             1,496        6.0

Tier I capital1
   (to average assets)              6,223         15.1        1,648         4.0             2,060        5.0
</TABLE>

1 As defined by the regulatory agencies


Note 15 -- Employee Benefit Plans

The Bank is a participant  in a pension fund known as the Pentegra  Group.  This
plan is a multi-employer  plan; separate actuarial  valuations are not made with
respect to each participating  employer.  According to the plan  administrators,
the market value of the fund's assets  exceeded the value of vested  benefits in
the aggregate as of June 30, 1999, the date of the latest  actuarial  valuation.
The plan required contributions in the amount of $11,900, $2,700 and $13,000 for
the years ended June 30, 1999, 1998 and 1997. The plan provides pension benefits
for substantially all of the Bank's employees.

The Bank has a retirement savings Section 401(k) plan in which substantially all
employees may participate. The Bank matches employees' contributions at the rate
of 50 percent of the first 6 percent of base salary contributed by participants.
The Bank's expense for the plan was $8,900 and $12,000 and $10,100 for the years
ended June 30, 1999, 1998 and 1997.

As  part  of  the   conversion,   the  Company   established  an  ESOP  covering
substantially  all  employees  of the Bank.  The ESOP  acquired  40,474  (before
restatement  for the 2 for 1 stock  split  discussed  in Note 12)  shares of the
Company common stock at $10 per share in the conversion with funds provided by a
loan from the Company. Accordingly, the $404,740 of common stock acquired by the
ESOP is shown as a reduction  of  stockholders'  equity.  Shares are released to
participants  proportionately  as the loan is  repaid.  Dividends  on  allocated
shares are recorded as dividends and charged to retained earnings.  Dividends on
unallocated  shares,  which will be distributed to participants,  are treated as
compensation expense.  Compensation expense is recorded equal to the fair market
value of the stock when  contributions,  which are  determined  annually  by the
Board of Directors of the Bank, are made to the ESOP. The expense under the ESOP
was  $70,100,  $93,000 and $66,000 for the years ended June 30,  1999,  1998 and
1997.  At June 30,  1999 and 1998,  the ESOP had  24,374  and  15,094  allocated
shares,  52,051 and 61,096 suspense  shares and 4,523 and 4,758  committed-to-be
released shares. The fair value of the unearned ESOP shares at June 30, 1999 and
1998 was $229,415 and $547,758.



                                     - 31 -
<PAGE>

In January  1997,  the  Company's  stockholders  approved  the  Recognition  and
Retention Plan and Trust ("RRP"). The RRP may acquire up to 40,474 shares of the
Company's  common stock for awards to  management.  Shares awarded to management
under the RRP vest at a rate of 20  percent at the end of each full 12 months of
service  with the Bank  after the date of grant.  During the year ended June 30,
1997, the Bank contributed $290,172 to the RRP for the purchase of 40,474 shares
of the Company's  common stock of which 30,356 shares were awarded to management
and  recorded  as  unearned  compensation.  Expense  under the RRP was  $47,000,
$37,000 and $25,000 for the years ended June 30, 1999, 1998 and 1997.

Note 16 -- Related Party Transactions

The Bank has entered into transactions with certain directors and officers. Such
transactions  were made in the ordinary course of business on substantially  the
same terms and conditions,  including  interest rates and  collateral,  as those
prevailing at the same time for comparable  transactions  with other  customers,
and did not, in the opinion of management,  involve more than normal credit risk
or  present  other  unfavorable  features.  The  aggregate  amount of loans,  as
defined, to such related parties were as follows:


--------------------------------------------------------------------------------
Balances, June 30, 1998                                                   $ 409
     New loans, including renewals                                           65
     Payments, etc. including renewals                                     (146)
                                                                         -------
     Balances, June 30, 1999                                              $ 328
                                                                         =======

Deposits  from  related  parties  held  by the  Bank at June  30,  1999  totaled
$609,882.


Note 17 -- Stock Option Plan

On October 14, 1997, the  stockholders  approved a stock option plan,  reserving
101,184  shares  of  Company  stock  for the  granting  of  options  to  certain
directors,  officers and other key employees of the Company and its  subsidiary.
The plan is accounted for in accordance with Accounting Principles Board Opinion
(APB)  No.  25,   Accounting   for  Stock  Issued  to  Employees,   and  related
interpretations.

Since the plan's  adoption,  incentive stock options for 55,000 shares of common
stock have been granted  with ten year terms that expire  October 13, 2007 and a
exercise price of $8.50 per share.  These options became  exercisable in full on
April 14, 1998. In addition,  non-qualified  options for 15,000 shares and 1,500
shares have been  granted  with ten year terms that expire  October 14, 2007 and
August  25,  2008  with  an  exercise  price  of  $8.50  and  $8.25  per  share,
respectively.  These  options  were  exercisable  in full on April 14,  1998 and
February  25, 1999.  The  exercise  price of each option was equal to the market
price of the Company's  stock on the date of grant;  therefore,  no compensation
expense was recognized.



                                     - 32 -
<PAGE>

Although the Company has elected to follow APB No. 25, SFAS No. 123 requires pro
forma  disclosures  of net income and  earnings  per share as if the Company had
accounted for its employee stock options under that Statement. The fair value of
each option grant was estimated on the grant date using an option-pricing  model
with the following assumptions:

                                                        1999              1998
--------------------------------------------------------------------------------
Risk-free interest rates                                5.07%             6.12%
Dividend yields                                         1.42%             1.17%
Volatility factors of
   expected market price
   of common stock                                     20.5%             16.67%
Weighted-average expected
   life of the options                               6 years           6 years

Under  SFAS No.  123,  compensation  cost is  recognized  in the  amount  of the
estimated  fair value of the options and  amortized to expense over the options'
vesting  period.  The pro forma  effect on net income and  earnings per share of
this statement are as follows:

                                                        1999       1998
--------------------------------------------------------------------------------
Net income                          As reported         $144       $393
                                    Pro forma            140        238
Basic earnings
   per share                        As reported          .18        .47
                                    Pro forma            .17        .28
Diluted earnings
   per share                        As reported          .18        .47
                                    Pro forma            .17        .28

The following is a summary of the status of the Company's  stock option plan and
changes in that plan as of and for the years ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>
Year Ended June 30                                        1999                                  1998
---------------------------------------------------------------------------------------------------------------------
                                                                   Weighted-                            Weighted-
                                                                    Average                              Average
    Options                                       Shares        Exercise Price            Shares     Exercise Price
---------------------------------------------------------------------------------------------------------------------
<S>                                                <C>              <C>
Outstanding, beginning of year                     70,000           $8.50
Granted                                             1,500            8.25                  70,400         $8.50
Forfeited                                          (2,200)           8.50                    (400)         8.50
                                                  --------                                --------
Outstanding and exercisable, end of year           69,300            8.50                  70,000          8.50
                                                  ========                                ========
Weighted-average fair value of options
   granted during the year                                          $2.22                                 $2.41
</TABLE>


As of June 30, 1999, 67,800 options  outstanding have an exercise price of $8.50
and a remaining  contractual  life of nine years and 1,500  options  outstanding
have an exercise prices of $8.25 and a remaining  contractual life of ten years.
There were 31,884 shares available for grant at June 30, 1999.



                                     - 33 -
<PAGE>

Note 18 -- Earnings Per Share

<TABLE>
<CAPTION>
Earnings per share were computed as follows:

                                                                        Year Ended June 30, 1999
                                                           --------------------------------------------------
                                                                                Weighted                Per-
                                                             Net                 Average                Share
                                                           Income                Shares                Amount
--------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>                    <C>
Basic Earnings Per Share
   Income available to common stockholders                  $144                 814,803                $.18

Effect of Dilutive Securities
   Stock options and awards                                                        631
                                                           -------------------------------
Diluted Earnings Per Share
   Income available to common stockholders
     and assumed conversions                                $144                 815,434                $.18
                                                           ==================================================


                                                                        Year Ended June 30, 1998
                                                           --------------------------------------------------
                                                                                Weighted                Per-
                                                             Net                 Average                Share
                                                           Income                Shares                Amount
--------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share
   Income available to common stockholders                  $393                 837,087                $.47

Effect of Dilutive Securities
   Stock options and awards                                                       4,737
                                                           -------------------------------
Diluted Earnings Per Share
   Income available to common stockholders
     and assumed conversions                                $393                 841,824                $.47
                                                           ==================================================


                                                                        Year Ended June 30, 1997
                                                           --------------------------------------------------
                                                                                Weighted                Per-
                                                             Net                 Average                Share
                                                           Income                Shares                Amount
--------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share
   Income available to common stockholders                  $252                 923,972                $.27

Effect of Dilutive Securities
   Stock options and awards                                                       1,864
                                                           -------------------------------
Diluted Earnings Per Share
   Income available to common stockholders
     and assumed conversions                                $252                 925,836                $.27
                                                           ==================================================
</TABLE>


                                     - 34 -
<PAGE>

Note 19 --     Fair Values of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instrument:

Cash  and  Cash  Equivalents--The  fair  value  of  cash  and  cash  equivalents
approximates carrying value.

Securities Available for Sale--Fair values are based on quoted market prices.

Loans--For both short-term loans and variable-rate loans that reprice frequently
and with no significant change in credit risk, fair values are based on carrying
values. The fair value for other loans, are estimated using discounted cash flow
analyses,  using interest rates  currently  being offered for loans with similar
terms to borrowers of similar credit quality.

FHLB  Stock--Fair  value of FHLB  stock is based on the price at which it may be
resold to the FHLB.

Interest Receivable--The fair values of interest receivable approximate carrying
values.

Deposits--The fair values of interest-bearing  demand, NOW, money market deposit
and savings  accounts  are equal to the amount  payable on demand at the balance
sheet date. The carrying amounts for variable rate,  fixed-term  certificates of
deposit approximate their fair values at the balance sheet date. Fair values for
fixed-rate  certificates  of deposit are estimated  using a discounted cash flow
calculation  that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on such time deposits.

FHLB  Advances--The  fair  value  of  these  borrowings  are  estimated  using a
discounted cash flow calculation,  based on current rates for similar debt. Fair
value approximates carrying value.

Off-Balance  Sheet  Commitments--Commitments  include  commitments  to originate
mortgage  loans,  and extend  lines of credit and are  generally of a short-term
nature.  The fair value of such commitments are based on fees currently  charged
to enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.

<TABLE>
<CAPTION>



                                                                     1999                          1998
                                                            -------------------------------------------------------
                                                            Carrying          Fair        Carrying          Fair
June 30                                                      Amount           Value        Amount           Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>             <C>
Assets
   Cash and cash equivalents                                  $2,475         $2,475         $3,802          $3,802
   Securities available for sale                               8,288          8,288          1,918           1,918
   Loans, net                                                 38,238         38,885         33,959          34,496
   Stock in FHLB                                                 660            660            500             500
   Interest receivable                                           318            318            264             264
Liabilities
   Deposits                                                   32,657         32,937         26,649          26,662
   FHLB advances                                              13,200         13,127          8,200           8,215
</TABLE>

Off-Balance Sheet Assets
   Commitments to extend credit




                                     - 35 -
<PAGE>

Note 20 --     Condensed Financial Information (Parent Company Only)

Presented  below is condensed  financial  information as to financial  position,
results of operations and cash flows of the Company:

                             Condensed Balance Sheet

June 30                                                     1999           1998
--------------------------------------------------------------------------------
Assets
     Cash                                                 $   34         $   12
     Securities available for sale                           692          1,213
     Premises and equipment                                   14             15
     Investment in subsidiary                              6,242          6,230
     Other assets                                            143             39
                                                         -----------------------
          Total assets                                    $7,125         $7,509
                                                         =======================
Liabilities
     Other liabilities                                    $    2         $    3

Stockholders' Equity                                       7,123          7,506
                                                         -----------------------
     Total liabilities and
       stockholders' equity                               $7,125         $7,509
                                                         =======================



                          Condensed Statement of Income

Year Ended June 30                              1999         1998        1997
--------------------------------------------------------------------------------
Income
     Interest income                           $  48        $ 137       $ 118
     Other income                                  4          141          36
                                             ---------------------------------
          Total income                            52          278         154
                                             ---------------------------------
Expenses
     Salaries and employee
        benefits                                  39           60          31
     Legal and professional fees                  38           64          97
     Other expenses                               40           56          34
                                             ---------------------------------
          Total expenses                         117          180         162
                                             ---------------------------------
Income (loss) before income
     tax benefit and equity in
     undistributed income
     of subsidiary                               (65)          98          (8)
Income tax
     benefit (expense)                           (23)           7         (11)
                                             ---------------------------------
Income before equity in
     undistributed income
     of subsidiary                               (42)          91           3
Equity in undistributed
     income of subsidiary                        186          302         249
                                             ---------------------------------

Net Income                                     $ 144        $ 393       $ 252
                                             =================================


                                     - 36 -
<PAGE>
                        Condensed Statement of Cash Flows
<TABLE>
<CAPTION>


Year Ended June 30,                                                          1999             1998              1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>              <C>               <C>
Operating Activities
     Net income                                                               $144             $393              $252
     Adjustments to reconcile net income to net cash
       provided (used) by operating activities                                (115)            (289)             (258)
                                                                           --------------------------------------------
          Net cash provided (used) by operating activities                      29              104                (6)
                                                                           --------------------------------------------

Investing Activities
     Purchases of securities available for sale                                (58)          (1,848)           (2,216)
     Proceeds from sales of securities available for sale                      485            1,895             1,080
     Purchases of premises and equipment                                                         (1)              (16)
                                                                            --------------------------------------------
          Net cash provided (used) by investing activities                     427               46            (1,152)
                                                                            --------------------------------------------

Financing Activities
     Sale of stock                                                                                              4,578
     Dividends                                                                 (94)             (85)              (69)
     Purchase of stock                                                        (340)             (78)             (565)
     Capital contributions to Bank                                                                             (2,471)
     Contribution of RRP shares                                                                                  (290)
                                                                            --------------------------------------------
          Net cash provided (used) by financing activities                    (434)            (163)            1,183
                                                                            --------------------------------------------

Net Change in Cash and Cash Equivalents                                         22              (13)               25

Cash and Cash Equivalents at Beginning of Year                                  12               25
                                                                            --------------------------------------------

Cash and Cash Equivalents at End of Year                                     $  34            $  12             $  25
                                                                            ============================================

Additional Cash Flows and Supplementary Information
     Common stock issued to ESOP leveraged with an employer loan                                              404,740
</TABLE>



                                     - 37 -
<PAGE>


                             SHAREHOLDER INFORMATION

MARKET INFORMATION

         The Bank  converted  from an Indiana  mutual savings bank to an Indiana
stock savings bank  effective  July 1, 1996,  and  simultaneously  formed a bank
holding  company,  the Holding  Company.  The Holding  Company's Common Stock is
quoted on the National  Association of Securities  Dealers  Automated  Quotation
System  ("NASDAQ"),  SmallCap Market,  under the symbol "HWEN." As of August 23,
1999, there were approximately 450 holders of the Holding Company's Common Stock
including shares held in broker accounts.

         Since the Holding  Company has limited  independent  operations  and no
other  subsidiaries to generate income,  its ability to accumulate  earnings for
the payment of cash dividends to its shareholders is directly dependant upon the
earnings  on its  investment  securities  and  the  ability  of the  Bank to pay
dividends to the Holding Company.

         Under  current  federal  income tax law,  dividend  distributions  with
respect to the Common Stock, to the extent that such dividends paid are from the
current or  accumulated  earnings and profits of the Company (as  calculated for
federal  income  tax  purposes),  will be  taxable  as  ordinary  income  to the
recipient and will not be deductible by the Company. Any dividend  distributions
in excess of current or  accumulated  earnings  and profits  will be treated for
federal income tax purposes as a distribution  from the Bank's  accumulated  bad
debt reserves,  which could result in increased federal income tax liability for
the Company.  Moreover, the Bank may not pay dividends to the Holding Company if
such  dividends  would  result  in the  impairment  of the  liquidation  account
established in connection with the Conversion.

         The Holding  Company's  ability to pay dividends on the Common Stock is
subject to certain  regulatory  restrictions.  In  addition,  Indiana  law would
prohibit the Holding  Company from paying a dividend if, after giving  effect to
the payment of that dividend,  the Holding  Company would not be able to pay its
debts as they  become due in the  ordinary  course of business or if the Holding
Company's total assets would be less than the sum of its total  liabilities plus
preferential  rights of holders of preferred  stock, if any, of which there were
none.

         The stock  information  provided below has been adjusted to reflect the
2-for-1 stock split effective January 6 ,1998.

                                    Stock Price             Dividends
Quarter Ended                   High           Low          Per Share
September 30, 1997             $8 5/8        $7 7/16         $.025
December 31, 1997               9 1/4         8 1/8           .025
March 31, 1998                  9 3/4         8 3/4           .025
June 30, 1998                   9 1/2         8 7/16          .025

September 30, 1998              9             7 5/8           .025
December 31, 1998               7 7/8         6 1/2           .030
March 31, 1999                  8             7               .030
June 30, 1999                   7 7/8         7               .030



TRANSFER AGENT AND REGISTRAR

Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza, MD - 1090F5
Cincinnati, Ohio 45202
(513) 579-5320 or (800) 837-2755

GENERAL COUNSEL

Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana  46204

INDEPENDENT AUDITOR

Olive LLP
201 N. Illinois
Indianapolis, Indiana  46204

SHAREHOLDER AND GENERAL INQUIRIES

     The  Company  is  required  to file an  Annual  Report on Form 10-K for its
fiscal year ended June 30, 1999 with the  Securities  and  Exchange  Commission.
Copies of this annual report may be obtained without charge upon written request
to:
     Kurt D. Rosenberger
     Vice President and Chief Financial Officer
     Home Financial Bancorp
     279 East Morgan Street
     Spencer, Indiana 47460

HOME PAGE AND E-MAIL

     www.hfbancorp.com
     homebanc@bluemarble.net


                                     - 38 -
<PAGE>

DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>


                               BOARD OF DIRECTORS

<S>                                 <C>                           <C>
Frank R. Stewart                    Charles W. Chambers           John T. Gillaspy
Chairman of the Board               Secretary                     President and
President, BSF, Inc.                                              Chief Executive Officer,
                                                                  Spencer Evening World, Inc.

Kurt J. Meier                       Robert W. Raper               Tad Wilson
President                           Vice Chairman of the Board    President, Metropolitan
Owen Community Bank, s.b.                                         Printing Services, Inc.

Stephen Parrish                     Kurt D. Rosenberger           Gary Michael Monnett
Funeral Director,                   Vice President                Mike Monnett, CPA
West-Parrish-Pedigo Funeral Home    Owen Community Bank, s.b.
</TABLE>


                       OFFICERS OF HOME FINANCIAL BANCORP

  Frank R. Stewart                           Kurt J. Meier
  Chairman                                   President, Chief Executive Officer
                                             and Treasurer

  Kurt D. Rosenberger                        Charles W. Chambers
  Vice President and                         Secretary
  Chief Financial Officer



                      OFFICERS OF OWEN COMMUNITY BANK, s.b.

Frank R. Stewart           Kurt J. Meier               Charles W. Chambers
Chairman                   President and               Secretary
                           Chief Executive Officer

Kurt D. Rosenberger        Judith A. Terrell           Christie Leach
Vice President and         Branch Manager and          Assistant Branch Manager
Chief Financial Officer    Mortgage Loan Officer       and Mortgage Loan Officer

Nancy Logan                Carole Eder                 Lisa K. Sherfield
Accounting Manager         Teller Supervisor           Mortgage Loan Officer

Julie A. Hedden            Lisa Wilson                 Rodger Samuels
Mortgage Loan Officer      Compliance and              Commercial Loan Officer
                           Special Projects




                                     - 39 -
<PAGE>

                             DIRECTORS AND OFFICERS

         Charles W.  Chambers  (age 84) has served as a director  of the Holding
Company since its formation  and of the Bank since 1978.  Mr.  Chambers has also
served as a staff appraiser for the Bank since 1991 and as Secretary of the Bank
since 1990. Mr. Chambers is Secretary of the Holding Company and the Bank.

         John T.  Gillaspy  (age 71) has  served as a  director  of the  Holding
Company since its formation  and of the Bank since 1986.  Mr.  Gillaspy has also
served as President and Chief  Executive  Officer of the Spencer  Evening World,
Inc., a newspaper based in Spencer, Indiana, for more than the past five years.

         Kurt J. Meier (age 49) has served as  President  and a director  of the
Holding  Company  since its  formation and as a director of the Bank since 1991.
Mr.  Meier has also served as  President  of the Bank since  1994.  From 1990 to
1994, Mr. Meier served as Managing Officer of the Bank.

         Steven Parrish (age 59) has served as a director of the Holding Company
since its formation and of the Bank since 1982. Mr. Parrish has also served as a
funeral director for the West-Parrish-Pedigo  Funeral Home in Spencer,  Indiana,
for more than five years.

         Gary  Michael  Monnett  (age 39) was named a  director  of the  Holding
Company in 1998. He has been a self-employed  certified public  accountant since
1993, providing tax and accounting services to individuals and small businesses.

         Robert W.  Raper  (age 82) has  served  as a  director  of the  Holding
Company since its formation and of the Bank since 1970, with which he has served
as Vice Chairman  since 1994.  Prior to 1994, Mr. Raper served as Vice President
of the Bank.

         Kurt D. Rosenberger (age 40) is a director and Vice President and Chief
Financial  Officer of the Holding  Company.  Mr.  Rosenberger has also served as
Vice  President  of the Bank  since  1994.  Theretofore,  he  served  as  Senior
Financial Analyst for the Office of Thrift Supervision in Indianapolis, Indiana,
from 1990 to 1994.

         Frank R.  Stewart  (age 74) has  served as a  director  of the  Holding
Company since its formation and of the Bank since 1963.  Mr.  Stewart  served as
President  of the Bank from 1982 until  1994.  Mr.  Stewart  has also  served as
President of BSF, Inc.  since its formation in 1989.  Mr.  Stewart has extensive
experience in real estate development and sales.

         Tad Wilson  (age 64) has served as a director  of the  Holding  Company
since its formation and of the Bank since 1978. Mr. Wilson is also the President
of  Metropolitan   Printing   Services,   Inc.,  a  printing  company  based  in
Bloomington, Indiana, and is the owner of a retail book store and various rental
properties located in Bloomington, Indiana.



                                     - 40 -
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                        [PHOTO OF BOARD OF DIRECTORS]