Message to Shareholders..................................................    1
Selected Consolidated Financial Data.....................................    2
Management's Discussion and Analysis.....................................    3
Independent Auditor's Report.............................................   19
Consolidated Statement of Financial Condition............................   20
Consolidated Statement of Income.........................................   21
Consolidated Statement of Changes in
     Stockholders' Equity................................................   22
Consolidated Statement of Cash Flows.....................................   23
Notes to Consolidated Financial Statements...............................   24
Directors and Officers...................................................   35
Shareholder Information..................................................   37

         Home  Financial  Bancorp (the  "Holding  Company" and together with the
Bank (as defined below), 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. 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) NOW accounts;  (xi) passbook savings accounts;  and (xii)
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,  originating  approximately
13% of the  mortgages  recorded in Owen County  during the  calendar  year ended
December 31, 1996.

<PAGE>
[WATERMARK OF BANK APPEARS ON THIS PAGE]


TO OUR SHAREHOLDERS:

         We are  pleased to present  the 1997  Annual  Report of Home  Financial
Bancorp,  the holding company for Owen Community Bank, s.b.  Throughout the past
year, residential and non-residential real estate mortgage loan demand continued
to be strong  resulting in loan growth of $7,074,000  or 25.8%.  This growth was
primarily  funded with stock  conversion  proceeds  and  Federal  Home Loan Bank
borrowings.  Our fiscal year earnings were impacted by a one-time mandatory FDIC
special  premium  assessment in the amount of $142,000.  The good news resulting
from the assessment is that current and future deposit  insurance  premiums have
been significantly reduced.

         Our new 6,000 square foot annex  building was completed this summer and
now provides office space for the Bank's subsidiary,  collections and compliance
operations. Space is ample and will accommodate additional future growth.

         Efforts toward building a bank branch in our  neighboring  community of
Cloverdale  continue to move forward.  Our branch  application  submitted to the
Indiana  Department of Financial  Institutions was recently  approved while site
and building plans currently  remain under  discussion.  We are optimistic about
the  Cloverdale  market and look forward to offering our host of services to the
area. Our target for the branch opening is slated for some time in the summer of
1998.  It is our  belief  that  Cloverdale  and  Spencer  possess  many  similar
community characteristics and that our experience and sensitivity to serving the
needs of small rural  communities will give us the proper  foundation to do well
in the  Cloverdale  community.  Currently  only one  other  bank is  located  in
Cloverdale.

         Operationally,  several  enhancements were implemented  during the past
year.  A  new  software  system  was  installed  in  March  of  this  year  with
capabilities of interfacing with our outside data processing  bureau.  The chart
of accounts was reorganized as part of this  conversion to improve  internal and
external  reporting  requirements.  Other  features  purchased with the software
package  include  automated  safety  deposit  box  administration,  fixed  asset
management and accounts payable processing. Our internal computer network system
was also  expanded  in recent  months to  accommodate  growth of  personnel  and
improve customer service.  In December 1996, we contracted with the Federal Home
Loan Bank of Indianapolis  to utilize their coin and currency  service and daily
deposit transit  service.  Both have resulted in improvements to cash management
and turn around time of items processing.

         In an effort to maximize  the use of Bank  personnel  and  minimize the
number  of  employees,  management  will  continue  outsourcing  labor-intensive
operations.

         As part of our  continuing  efforts  to  attract  new  and  lower  cost
deposits,  several new products  were  developed and  introduced  late in fiscal
1997.  These new deposit  products  include  IRAs,  Statement  Savings and Money
Management Accounts. A new non-interest-bearing  commercial checking account and
a family of personal checking accounts will be introduced in the near future. We
will  continue  to  aggressively  promote our new  deposit  products  which will
eventually allow us to pay down borrowings and reduce our average cost of funds.

         We continue to look for new growth  opportunities  to enhance the value
of  your  Home  Financial  Bancorp  stock   investment.   Contributing  to  your
shareholder value, we declared our first quarterly dividend in the second fiscal
quarter  ending  December  31, 1996 and  continued to declare  dividends  during
ensuing  quarters.  We have also seen our stock price  appreciate  from a low of
$9.75 to a recent high of $15.75.

         As always,  we  appreciate  your past  confidence  and look  forward to
serving you in the future.

                                                           Sincerely,

                                                           /s/ Kurt J. Meier
                                                           Kurt J. Meier
President

<PAGE>

                     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.  In the  opinion  of  management  of the  Company,  all
adjustments,  consisting only of normal recurring  adjustments,  necessary for a
fair presentation of results for and such periods have been included.

<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA
At  June 30                                            1997         1996         1995         1994         1993
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                   <C>           <C>          <C>          <C>           <C>    
Summary of Financial Condition:
Total assets.......................................   $42,508       $39,426      $30,839      $26,008       $23,460
Loans receivable, net..............................    34,117        27,125       25,547       21,479        19,368
Cash and cash equivalents..........................     4,184         5,721        1,386        1,237         1,343
Securities available for sale......................     2,102         4,901          934          ---           ---
Securities held to maturity........................       ---           ---        1,827        2,414         1,833
Deposits...........................................    26,157        28,726       22,500       21,451        20,174
Federal Home Loan Bank advances....................     9,000         7,200        5,000        1,500           500
Stockholders' equity - substantially restricted....     7,197         3,410        3,159        2,850         2,589
</TABLE>

<TABLE>
<CAPTION>

Year Ended June 30                                      1997          1996         1995         1994         1993
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                    <C>           <C>          <C>          <C>           <C>   
Summary of Operating Results:
Interest and dividend income.....................      $3,397        $2,955       $2,420       $2,023        $1,958
Interest expense.................................       1,703         1,593        1,174          949           993
                                                      -------       -------      -------      -------       -------
   Net interest income...........................       1,694         1,362        1,246        1,074           965
Provision for losses on loans....................          85            94           36           14             6
                                                      -------       -------      -------      -------       -------
   Net interest income after provision for
        losses on loans..........................       1,609         1,268        1,210        1,060           959
                                                      -------       -------      -------      -------       -------
Other income:
   Service charges on deposit accounts...........          43            37           27           23            22
   Gain on sale of real estate acquired
        for development..........................          31            57           78          145           117
   Net realized gain on sales of available 
      for sale securities........................          37           ---           ---        ---       ---
   Other.........................................          53            47           43           33            28
                                                      -------       -------      -------      -------       -------
      Total other income.........................         164           141          148          201           167
                                                      -------       -------      -------      -------       -------
Other expense:
   Salaries and employee benefits................         563           415          404          344           254
   Net occupancy and equipment expense...........         132           123          109          109            91
   Deposit insurance expense.....................         165            54           49           48            32
   Other.........................................         508           333          304          306           255
                                                      -------       -------      -------      -------       -------
        Total other expense......................       1,368           925          866          807           632
                                                      -------       -------      -------      -------       -------
Income before income tax and cumulative
   effect of change in accounting principle......         405           484          492          454           494
Income tax expense...............................         153           196          203          169           186
Cumulative effect of change 
     in accounting principle.....................         ---          ---          ---           (24)       ---
                                                      -------       -------      -------      -------       -------
   Net income....................................     $   252       $   288      $   289      $   261       $   308
                                                      =======       =======      =======      =======       =======
Supplemental Data:
Return on assets (1) ............................          .63%         .84%        1.00%        1.03%         1.34%
Return on equity (2).............................         3.31         8.71         9.59         9.46         12.55
Interest rate spread (3) ........................         3.56         3.78         4.19         4.11          4.11
Net yield on interest-earning assets (4).........         4.41         4.13         4.54         4.42          4.43
Other expenses to average assets ................         3.40         2.70         2.99         3.17          2.75
Net interest income to other expenses............         1.24x        1.47x        1.44x        1.33x         1.53x
Equity-to-assets (5).............................        16.93         8.65        10.24        10.96         11.04
Average equity capital to
   average total assets..........................        18.90         9.64        10.42        10.85         10.69
Average interest-earning assets to average
   interest-bearing liabilities..................         1.19x        1.07x        1.08x        1.08x         1.07x
Non-performing assets to total assets............         1.76         1.03          .32          .10           ---
Non-performing loans to total loans..............         1.65         1.32          .39          .13           ---
Loan loss allowance to total loans, net..........          .68          .55          .22          .12           .06
Loan loss allowance to non-performing loans......        30.88        41.78        57.00       108.33           ---
Net charge-offs to average loans ................          .01            *          .02            *           .04
</TABLE>

(1)  Net income divided by average total assets.
(2)  Net income divided by average total equity.
(3)  Interest rate spread is calculated by subtracting combined weighted average
     interest rate cost from combined  weighted average interest rate earned for
     the period indicated.
(4)  Net interest income divided by average interest-earning assets.
(5)  Total equity divided by total assets.
*    Less than .01%

<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 Bank include deposits,  payments on loans, borrowings and income provided
from operations.

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.

         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.

         At June 30, 1997,  it was estimated  that the Bank's MV would  decrease
5.2% and  13.7% in the  event of 200 and 400  basis  point  increases  in market
interest rates, respectively. The Bank's MV at the same date would increase 2.3%
and 5.4% in the  event of 200 and 400 basis  point  decreases  in market  rates,
respectively.


<PAGE>

Presented below, as of June 30, 1997, 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.

<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>      
    + 400 bp*                $5,254       $ (831)        (13.66)%      13.48%     (121)  bp
    + 200 bp                  5,769         (317)         (5.20)       14.32       (37)  bp
        0 bp                  6,085            0           0.00        14.69       ---     
    - 200 bp                  6,223          138           2.26        14.66         3   bp
    - 400 bp                  6,414          329           5.41        14.74         5   bp
</TABLE>

             Interest Rate Risk Measures: 200 Basis Point Rate Shock

 Pre-Shock MV Ratio: MV as % of PV of Assets................       14.69%
 Exposure Measure: Post-Shock MV Ratio......................       14.32%
 Sensitivity Measure: Change in MV Ratio....................          37 bp
 Change in MV as % of PV of Assets..........................        5.19%
 Interest Rate Risk Capital Component.......................         ---

*Basis points.

<PAGE>

AVERAGE BALANCES, INTEREST RATES AND YIELDS

         The following table  presents,  for the years ended June 30, 1997, 1996
and  1995,  the  month-end  average  balances  of each  category  of the  Bank'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,                            1997                        1996                          1995
------------------------------------------------------------------------------------------------------------------------
                                    Average             Yield/    Average           Yield/     Average            Yield/
                                    Balance  Interest    Cost     Balance Interest   Cost      Balance  Interest   Cost    
                                   -------------------------------------------------------------------------------------  
(Dollars in thousands)
Assets:
Interest-earning assets:
<S>                                <C>       <C>         <C>   <C>        <C>        <C>    <C>       <C>           <C>  
   Interest-earning deposits.......$  2,692  $   137     5.09% $  2,782   $  136     4.89%  $  1,298  $     77      5.93%
   Mortgage-backed
     securities (1)................  2,523       185     7.33     1,628       90     5.53      1,556        93      5.98 
   Other investment securities (1).  2,376       130     5.47     1,291       89     6.89      1,032        67      6.49 
   Loans receivable (2)............ 30,418     2,912     9.57    26,970    2,619     9.71     23,329     2,167      9.29 
   Stock in FHLB of Indianapolis...    433        33     7.63       274       21     7.66        224        16      7.14 
                                    ------     -----             ------    -----              ------     -----   
     Total interest-earning assets. 38,442     3,397     8.84    32,945    2,955     8.97     27,439     2,420      8.82 
                                               -----                       -----                         -----      
Non-interest earning assets, net of
   allowance for loan losses 
   and including unrealized 
   gain (loss) on securities
   available for sale..............  1,804                        1,367                        1,495
                                   -------                      -------                      -------
     Total assets..................$40,246                      $34,312                      $28,934
                                   =======                      =======                      =======
Liabilities and 
   stockholders' equity:
Interest-bearing liabilities:
   Savings accounts................$ 3,930       114     2.90  $  4,235      117     2.76   $  4,460       138      3.09 
   NOW accounts....................  2,162        70     3.24     2,320       58     2.50      2,349        62      2.64 
   Certificates of deposit......... 18,465     1,032     5.59    18,672    1,086     5.82     15,145       763      5.04 
   Other borrowings................    ---       ---      ---        15        1     6.67        102        10      9.80 
   FHLB advances...................  7,725       487     6.30     5,475      331     6.05      3,321       201      6.05 
                                    ------     -----             ------    -----              ------     -----   
     Total interest-bearing 
       liabilities................. 32,282     1,703     5.28    30,717    1,593     5.19     25,377     1,174      4.63 
                                               -----                       -----                         -----      
Other liabilities..................    358                          289                          543
                                   -------                     --------                     --------
     Total liabilities............. 32,640                       31,006                       25,920
                                   -------                     --------                     --------
   Stockholders' equity............  7,601                        3,305                        3,007
   Net unrealized gain on securities
     available for sale............      5                            1                            7
                                   -------                     --------                     --------
     Total stockholders' equity....  7,606                        3,306                        3,014
                                   -------                     --------                     --------
     Total liabilities and
         stockholders' equity......$40,246                      $34,312                      $28,934
                                   =======                      =======                      =======
Net interest-earning assets........$ 6,160                     $  2,228                     $  2,062
                                   =======                     ========                     ========
Net interest income................          $ 1,694                      $1,362                        $1,246
                                             =======                      ======                        ======
Interest rate spread...............                       3.56%                      3.78%                          4.19%
Net yield on weighted average
   interest-earning assets.........                       4.41%                      4.13%                          4.54%
Average interest-earning 
   assets to average interest-
   bearing liabilities............. 118.99%                      107.25%                     108.13%
</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.

<PAGE>

INTEREST RATE SPREAD

         The Bank's results of operations have been determined  primarily by net
interest income,  and to a lesser extent, fee income,  miscellaneous  income and
general and administrative  expenses  including  provisions for losses on loans.
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  Bank  on  its  loan,   investment  portfolios  and  total
interest-earning assets. The table also includes weighted average effective cost
of the Bank's deposits and borrowings, the interest rate spread of the Bank, 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>
                                                     At June 30,                        Year Ended June 30,
                                                        1997                    1997           1996           1995
--------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                     <C>             <C>            <C>  
Weighted average interest rate earned on:
   Interest-earning deposits.........................   5.21%                   5.09%           4.89%          5.93%
   Mortgage-backed securities........................   7.55                    7.33            5.53           5.98
   Other investment securities.......................   6.31                    5.47            6.89           6.49
   Loans receivable..................................   9.51                    9.57            9.71           9.29
   Stock in FHLB of Indianapolis.....................   7.85                    7.63            7.66           7.14
     Total interest-earning assets...................   8.97                    8.84            8.97           8.82

Weighted average interest rate cost of:
   Savings accounts..................................   3.00                    2.90            2.76           3.09
   NOW and money market accounts.....................   3.13                    3.24            2.50           2.64
   Certificates of deposit...........................   5.36                    5.59            5.82           5.04
   Other borrowings..................................    ---                     ---            6.67           9.80
   FHLB advances.....................................   6.29                    6.30            6.05           6.05
     Total interest-bearing liabilities..............   5.37                    5.28            5.19           4.63

Interest rate spread (1).............................   3.60%                   3.56%           3.78%          4.19%
Net yield on weighted average
   interest-earning assets (2).......................   4.41%                   4.13%           4.54%
</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,
     1997 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
Bank'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.

<PAGE>

                              RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>

                                                                   Increase (Decrease) in Net Interest Income
                                                                 Total Net           Due to              Due to
                                                                  Change              Rate               Volume
YEAR ENDED JUNE 30, 1997  COMPARED  
TO YEAR ENDED JUNE 30,  1996 
(In  thousands)
Interest-earning assets:
<S>                                                             <C>               <C>                  <C>     
   Interest-earning deposits..............................      $    1            $     5              $    (4)
   Mortgage-backed securities.............................          95                 35                   60
   Other investment securities............................          41                (21)                  62
   Loans receivable.......................................         293                (43)                 336
   Stock in FHLB of Indianapolis..........................          12                ---                   12
                                                                  ----             ------                 ----
     Total................................................         442                (24)                 466
                                                                  ----             ------                 ----
Interest-bearing liabilities:
   Savings accounts.......................................          (3)                 5                   (8)
   NOW and money market accounts..........................          12                 16                   (4)
   Certificates of deposit................................         (54)               (42)                 (12)
   Other borrowings.......................................          (1)               ---                   (1)
   FHLB advances..........................................         156                 15                  141
                                                                  ----             ------                 ----
     Total................................................         110                 (6)                 116
                                                                  ----             ------                 ----
Change in net interest income.............................        $332             $  (18)                $350
                                                                  ====             ======                 ====

YEAR ENDED JUNE 30, 1996
COMPARED TO YEAR ENDED JUNE 30, 1995
Interest-earning assets:
   Interest-earning deposits..............................       $  59          $     (16)               $  75
   Mortgage-backed securities.............................          (3)                (7)                   4
   Other investment securities............................          22                  3                   19
   Loans receivable.......................................         452                102                  350
   Stock in FHLB of Indianapolis..........................           5                  1                    4
                                                                  ----             ------                 ----
     Total................................................         535                 83                  452
                                                                  ----             ------                 ----
Interest-bearing liabilities:
   Savings accounts.......................................         (21)               (14)                  (7)
   NOW and money market accounts..........................          (4)                (3)                  (1)
   Certificates of deposit................................         323                129                  194
   Other borrowings.......................................          (9)                (2)                  (7)
   FHLB advances..........................................         130                ---                  130
                                                                  ----             ------                 ----
     Total................................................         419                110                  309
                                                                  ----             ------                 ----
Change in net interest income.............................      $  116             $  (27)              $  143
                                                                ======             ======               ======

YEAR ENDED JUNE 30, 1995  
COMPARED TO YEAR ENDED JUNE 30, 1994  
Interest-earning assets:
   Interest-earning deposits..............................       $  33             $   28               $    5
   Mortgage-backed securities.............................         (13)               ---                  (13)
   Other investment securities............................          21                  4                   17
   Loans receivable.......................................         353                 76                  277
   Stock in FHLB of Indianapolis..........................           3                  3                  ---
                                                                  ----             ------                 ----
     Total................................................         397                111                  286
                                                                  ----             ------                 ----
Interest-bearing liabilities:
   Savings accounts.......................................         (28)                 2                  (30)
   NOW and money market accounts..........................          (5)                (1)                  (4)
   Certificates of deposit................................          83                  6                   77
   Other borrowings.......................................           2                  3                   (1)
   FHLB advances..........................................         173                 32                  141
                                                                  ----             ------                 ----
     Total................................................         225                 42                  183
                                                                  ----             ------                 ----
Change in net interest income.............................        $172             $   69                 $103
                                                                  ====             ======                 ====
</TABLE>

<PAGE>

CHANGES IN FINANCIAL  POSITION  AND RESULTS OF  OPERATIONS - YEAR ENDED JUNE 30,
1997, COMPARED TO YEAR ENDED JUNE 30, 1996:

         General.  Total assets increased $3.1 million at June 30, 1997 compared
to June 30,  1996.  The  increase  was the net result of an  increase  in loans,
combined with decreases in investment  securities and cash and cash equivalents.
Loans increased by $7.0 million or 25.8%, while the sale of securities decreased
investment securities by $2.8 million and cash and cash equivalents decreased by
$1.5  million to fund the  increase  in loans.  The  increase  in loans was also
funded by  additional  advances of $1.8  million from the Federal Home Loan Bank
("FHLB") of Indianapolis.

         Average assets increased from $34.3 million for the year ended June 30,
1996,  to $40.2  million for the year ended June 30, 1997, an increase of 17.2%.
Average interest-earning assets represented 96.0% of average assets for the year
ended June 30, 1996 compared to 95.5% for the year ended June 30, 1997.  Average
loans  experienced  the largest  increase  amounting to $3.4 million while other
interest-earning  assets increased to a lesser extent. Average  interest-bearing
liabilities  as a percentage of average  interest-earning  assets were 84.0% for
1997 compared to 93.2% for 1996.

         Investment    Securities.    Average    investment    securities    and
mortgage-backed  securities increased $1.1 million and $895,000 respectively for
the year ended June 30, 1997 compared to the year ended June 30, 1996  primarily
due to the initial investment of conversion  proceeds in securities.  During the
year  ended  June  30,  1997,  mortgage-backed  securities  and  selected  other
securities  were sold primarily to fund loan growth.  Consequently,  at June 30,
1997, the total of  mortgage-backed  securities and other investment  securities
decreased $2.8 million compared to June 30, 1996. All investments are classified
as available for sale to provide maximum  flexibility in managing the investment
portfolio.  At June  30,  1997  and  1996  the net  unrealized  gain  (loss)  on
securities available for sale was $42,000 and ($28,000), respectively.

          [Bar chart with area shaded that signifies conversion period]

<TABLE>
<CAPTION>

                                  June,       September,    December,       March,        June,  
                                  1996          1996          1996          1997          1997
                                 -------       -------       -------       -------       -------
<S>                              <C>           <C>           <C>           <C>           <C>    
Mortgage Backed Securities       $ 3,119       $ 3,791       $ 3,239       $ 2,266       $   795
Loans Receivable                 $26,828       $27,655       $28,949       $31,647       $33,419
</TABLE>

Loans and Allowance for Loan Losses. Average loans increased  approximately $3.4
million from the year ended June 30, 1996 to June 30, 1997.  The growth in loans
was  funded  by  decreases  in  other  earning  assets  and  increased   average
borrowings.  Average loans were $30.4 million for the period ended June 30, 1997
compared to $27.0  million for the period ended June 30, 1996.  The average rate
on loans was 9.57% for the year ended June 30,  1997  compared  to 9.71% for the
year ended June 30, 1996, a decrease of 14 basis points.  The allowance for loan
losses as a percentage of net loans increased to .68% from .55% as a result of a
monthly  provision  for loan  losses and nominal  charge-offs.  The ratio of the
allowance  for loan  losses to  nonperforming  loans was 41.1% at June 30,  1997
compared to 41.8% at June 30, 1996.

         Residential  mortgage  loans  increased by $1.7  million and  comprised
57.2%  of  total  loans  at June 30,  1997  compared  to  66.1% a year  earlier.
Nonresidential  mortgage  loans  increased by $4.4 million to $6.9  million,  or
19.8% of total loans at June 30, 1997,  compared to 9.22% of total loans at June
30, 1996.

                           LOAN MIX AT JUNE 30, 1997
                                  [pie chart]

                            1-4 Residential     57%
                            Non residential     20
                            Mobile w/land       12
                            Mobile home          4
                            Multifamily          3
                            Commercial           2
                            Consumer             2


<PAGE>

Premises and Equipment. Premises and equipment increased approximately $451,000,
net of depreciation  from June 30, 1996 to June 30, 1997. The largest  increases
were  related to the  purchase  of a property  for a proposed  branch  office in
Cloverdale,  Indiana  and  building  construction  for  expanded  facilities  on
property adjacent to the Bank.

         Deposits.  Deposits  decreased  $2.5 million from $28.7 million at June
30, 1996 to $26.2 million at June 30, 1997.  Passbook savings accounts decreased
approximately $4.7 million, substantially all of which was attributable to funds
withdrawn for the purchase of common stock related to the conversion of the Bank
from a mutual to a stock institution.  All other deposits increased $2.2 million
during this period.  Average total deposits  decreased $670,000 to $24.5 million
for the year ended June 30, 1997  compared  to $25.2  million for the year ended
June 30, 1996.

         Interest-bearing demand deposits and money market deposits totaled $3.7
million or 14.1% of total  deposits at June 30,  1997,  compared to $2.4 million
and 8.3% of total  deposits  at June 30,  1996.  Savings  deposits,  which  were
unusually high at June 30, 1996,  comprised  11.3% of total deposits at June 30,
1997  compared to 26.8% a year  earlier.  Savings  deposits,  at June 30,  1996,
included  approximately $4.7 million of conversion  proceeds for the purchase of
stock.  Certificates  of deposits  increased to $19.5  million or 74.7% of total
deposits  at June 30, 1997  compared  to $16.0  million and 64.9% of deposits at
June 30, 1996.

                        DEPOSIT MIX AS OF JUNE 30, 1997
                                  [pie chart]

                                 C.D.'s         75
                                 Checking       14
                                 Savings        11

Borrowed Funds. Borrowed funds increased $1.8 million from June 30, 1996 to June
30,  1997.  The  increase  in  borrowed  funds was used to fund a portion of the
Bank's loan growth. The weighted average interest rate on advances from the FHLB
of Indianapolis increased from 6.05% at June 30, 1996 to 6.30% at June 30, 1997.
Average  borrowed  funds  increased to $7.7 million for the year ended June 1997
from $5.5 million for the year ended June 1996.

         Stockholders'  Equity.  Stockholders'  equity increased $3.8 million to
$7.2  million  at June 30,  1997  compared  to $3.4  million  at June  30,  1996
primarily due to conversion  proceeds and net income during the period.  On July
1, 1996,  the Bank  completed the conversion and the formation of Home Financial
Bancorp as the  holding  company  of the Bank.  As part of the  conversion,  the
Company issued 505,926 shares of common stock at $10 per share,  of which 40,474
shares were issued to an Employee  Stock  Ownership  Plan.  Net  proceeds of the
Company's stock issuance, after costs, were approximately $4.7 million, of which
$2.5 million was used to acquire 100% of the stock and ownership of the Bank.

         During the period  ended June 30, 1997,  36,400  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
469,526 at June 30, 1997, and the $565,000 cost represented a reduction in total
stockholders' equity.

<PAGE>

CHANGES IN FINANCIAL  POSITION  AND RESULTS OF  OPERATIONS - YEAR ENDED JUNE 30,
1996, COMPARED TO YEAR ENDED JUNE 30, 1995:

         General.  Total assets increased $8.6 million at June 30, 1996 compared
to June 30, 1995. The increase was primarily a result of an increase in cash and
cash equivalents of $4.3 million. In addition,  investment  securities increased
$2.1 million and net loans  increased  $1.6 million.  These  increases in assets
were  funded by  increased  deposits  of $6.2  million  or 27.6% and  additional
advances  of  $2.2  million  from  the  Federal  Home  Loan  Bank   ("FHLB")  of
Indianapolis. The increase in deposits included $4.7 million of funds related to
the sale of common stock associated with the conversion of the Bank from a state
mutual  savings bank to a state stock savings bank.  The  conversion and related
formation of a bank holding company were completed effective July 1, 1996.

         Average  assets  increased from $28.9 million for the period ended June
30, 1995,  to $34.3  million for the period ended June 30, 1996,  an increase of
18.7%. Average  interest-earning  assets represented 94.8% of average assets for
the year ended June 30, 1995 compared to 96.0% for the year ended June 30, 1996.
Average loans  experienced the largest increase  amounting to $3.6 million while
other   interest-earning   assets   increased  to  a  lesser   extent.   Average
interest-bearing  liabilities as a percentage of average interest-earning assets
were 93.2% for the year ended June 30,  1996  compared to 92.5% for the June 30,
1995.

         Investment   Securities.   Total  securities  increased  $2.1  million,
primarily in  mortgage-backed  securities  at June 30, 1996 compared to June 30,
1995.  The Bank availed  itself of the  opportunity in December 1995 to transfer
all of its held-to-maturity securities to available-for-sale as permitted by the
Financial  Accounting  Standards Board ("FASB").  All subsequent  purchases have
been  classified as available for sale. The Bank believes that  maintaining  all
investment  securities as available for sale  provides the most  flexibility  in
managing the investment portfolio.

         Loans  and   Allowance  for  Loan  Losses.   Average  loans   increased
approximately $3.6 million from the period ended June 30, 1995 to June 30, 1996.
The growth in loans was  funded by  increased  average  deposits  and  increased
average borrowings. Average loans were $27.0 million for the year ended June 30,
1996  compared to $23.3  million for the year ended June 30,  1995.  The average
rate on loans was 9.71% for the year ended June 30,  1996  compared to 9.29% for
the year ended June 30, 1995, an increase of 42 basis points.  The allowance for
loan losses as a percentage of net loans increased to .55% from .22% as a result
of a larger provision for loan losses and nominal charge-offs.  The ratio of the
allowance  for loan  losses to  nonperforming  loans was 41.7% at June 30,  1996
compared to 57.0% at June 30, 1995.

         Premises and Equipment.  Premises and equipment increased approximately
$41,000,  net of  depreciation  and the  disposition of a possible  location for
future  expansion,  from June 30, 1995 to June 30, 1996.  The largest  increases
were related to the  purchase of a property  adjacent to the Bank and a property
across the street from the Bank.  The Bank  utilizes  one-half  of the  location
adjacent to the main office  primarily for  additional  office space and storage
for the Bank.  The  property  located  across the street from the main office is
used for employee parking. A location purchased for a loan origination office in
a nearby  community  was sold on contract  for a nominal  gain after  management
determined that a full service branch was more desirable.

         Deposits.  Deposits  increased  $6.2 million from $22.5 million at June
30, 1995 to $28.7 million at June 30, 1996. Increased deposits were used to fund
loans  and  increases  in  other  earning  assets.  Savings  accounts  increased
approximately $4 million,  substantially  all of which was attributable to funds
on deposit for the purchase of common  stock  related to the  conversion  of the
Bank from a mutual to a stock  institution.  NOW  accounts and  certificates  of
deposit  increased  $2.3 million  during this  period.  Average  total  deposits
increased  $3.3  million  to $25.2  million  for the year  ended  June 30,  1996
compared $22.0 million for the year ended June 30, 1995.

         Borrowed  Funds.  Borrowed  funds  increased $2.2 million from June 30,
1995 to June 30, 1996. The increase in borrowed funds was used to fund a portion
of the Bank's loan growth.  The weighted  average interest rate on advances from
the FHLB of Indianapolis  decreased from 6.36% at June 30, 1995 to 6.08% at June
30, 1996.  Average  borrowed funds  increased to $5.5 million for the year ended
June 30, 1996 from $3.4 million for the year ended June 30, 1995.

         Equity Capital.  Equity capital  increased  $251,000 to $3.4 million at
June 30, 1996  compared to $3.2  million at June 30, 1995  primarily  due to net
income during the period.

COMPARISON OF OPERATING  RESULTS FOR FISCAL YEARS ENDED JUNE 30, 1997,  1996 AND
1995

         General.  Net income for the fiscal  year ended June 30,  1997  totaled
$252,000  compared to $288,000 for the year ended June 30, 1996,  representing a
$36,000 or 12.5%  decrease.  The  decline in net income was due  primarily  to a
one-time special  assessment of $142,000  ($86,000 after tax) imposed by federal
legislation to recapitalize the Savings  Association  Insurance Fund (SAIF). The
return on average  assets for the year ended June 30,  1997 was .63% as compared
to .84% and 1.00% for the prior  years  ended June 30,  1996 and June 30,  1995,
respectively.

         The  return on  average  equity  was 3.31% for the year  ended June 30,
1997,  as  compared  to  8.71%  and  9.59%  for the  years  ended  1996 and 1995
respectively.  Primary  earnings per share were $.53 for the year ended June 30,
1997, based on 477,164 average shares of common stock outstanding.

         Net income  without  the special  SAIF  assessment  would have  totaled
$338,000  or $.71 per  share.  The  return on assets  and the  return on equity,
without  the  special  SAIF   assessment,   would  have  been  .84%  and  4.44%,
respectively.

         Interest  Income.  The Bank's  total  interest  income was $3.4 million
compared to $3.0 million for 1996. Average earning assets increased $5.5 million
from $32.9 million to $38.4  million from 1996 to 1997.  The increase in average
earning  assets was  accompanied  by a decrease in average  yields from 8.97% in
1996 to 8.84% in 1997.  The  increase in average  loans was the  primary  factor
contributing  to the increase in total interest  income.  Total interest  income
increased  $535,000 from 1995 to 1996.  Average  earning  assets  increased $5.5
million  during the period ended June 30, 1996 compared to the period ended June
30, 1995 and the average yield increased 15 basis points to 8.97% from 8.82%.

         Interest Expense. Interest expense increased $110,000 during the fiscal
year ended June 30, 1997 compared to 1996. The increase in interest  expense was
the  result of an  increase  in  average  interest-bearing  liabilities  of $1.6
million  from $30.7  million  to $32.3  million  as well as an  increase  in the
average  cost of funds of 9 basis  points from 5.19% for 1996 to 5.28% for 1997.
The average  balances of NOW and savings accounts  decreased  $463,000 while the
average  balance of  certificates  of deposits  decreased  $207,000 during 1997.
Borrowed  funds averaged $2.3 million higher during 1997 compared to 1996 as the
Bank  continued to utilize  borrowings  from the FHLB to meet increased loan and
other asset growth. Interest expense increased $419,000 in 1996 compared to 1995
reflecting  increases  in interest  rates of $110,000  and volume  increases  of
$309,000. The average cost of interest-bearing liabilities increased to 5.19% in
1996, or 56 basis points, compared to 4.63% in 1995.

         Net  Interest  Income.  Net  interest  income  increased  approximately
$332,000 to $1.7 million for the fiscal year ended June 30, 1997 compared to the
fiscal year ended June 30, 1996. The increase was due to an increase of $350,000
due to volume while  interest  rates  accounted  for a decrease of $18,000.  The
increase of $116,000 for the year ended June 30, 1996 was the result of $143,000
due to volume while  interest  rates  accounted  for a decrease of $27,000.  The
$172,000  increase in 1995 was the result of $103,000  due to volume and $69,000
due to rates.  The Bank's  interest  spread for 1997 was 3.56% compared to 3.78%
for 1996 and 4.19 % for 1995.

         Provision for Loan Losses.  The Bank  provided  $85,000 for future loan
losses for the fiscal year ended June 30, 1997. The allowance for loan losses at
June 30, 1997 was  considered  adequate  based on historical  net chargeoffs and
other  factors  including  the  size,  condition  and  components  of  the  loan
portfolio.  Consideration was also given to the growth in the loan portfolio and
the level of the allowance  maintained  by peers.  The provision for loan losses
was $94,000 for 1996 and $36,000 for 1995. The Bank provides a general allowance
that reflects  inherent losses based upon the types of outstanding loans as well
as the level of problem or nonperforming loans.

         Other   Income.   Service   charges  on  deposit   accounts   increased
approximately $5,000 in 1997

<PAGE>

compared to 1996  primarily as a result of an increase in the number of accounts
subject to such charges.  Service charges on deposit accounts  increased $10,000
in 1996  compared  to 1995.  The  increase  in other  income  in 1997 of  $5,000
compared  to 1996 was  primarily  the  result of an  increase  in the  number of
service fees assessed,  including ATM and safe deposit box fees. The increase of
$5,000 in 1996  compared  to 1995 was also the result of an  increase in service
fees.

         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.  BSF's gain on sales of real estate acquired for
development was $31,000, $57,000 and $78,000 for 1997, 1996 and 1995. Management
has utilized the sale of lots and residences to provide an additional  source of
income for the Bank.  The level of income  from this  source  fluctuates  widely
since it is dependent on the volume of  activity,  primarily  the number of lots
sold,  and profits on  residential  properties.  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.  BSF has ceased to acquire
land and is in process of divesting of its real estate  holdings.  BSF currently
anticipates that all non-conforming real estate will be sold within the required
disposition period. The loss of the income from this source will have an adverse
effect on net income subsequent to discontinuance of this business activity.

         Salaries and Employee  Benefits.  Salaries and benefits increased 35.7%
to $563,000 for the fiscal year ended June 30, 1997 compared to 1996  reflecting
new employee  benefit  plans,  two  additional  full-time  employees  and normal
increases in officers' and employees'  compensation and payroll taxes.  Salaries
and benefits increased 2.7% to $415,000 in 1996 compared to 1995.

         Most of the  increase in salaries and benefits in the period ended June
30, 1997 was the result of expenses related to the Employee Stock Ownership Plan
("ESOP")  adopted in July 1996 and the  Recognition and Retention Plan and Trust
("RRP")  approved by shareholders on January 8, 1997. The expense under the ESOP
was $66,000 for the year ended June 30,  1997,  while the expense  under the RRP
was $25,000.  Compensation expense related to the ESOP was recorded equal to the
fair market value of the stock when  contributions  were made by the Bank to the
ESOP.  Restricted stock awards covering up to 4% of the common stock sold in the
conversion  may be awarded to the Bank's  directors,  officers and key employees
under the RRP.

         Net Occupancy and Equipment Expenses.  Occupancy and equipment expenses
were $132,000 for 1997,  $123,000 for 1996 and $109,000 for 1995.  The increases
in 1997 and 1996 resulted primarily from increased depreciation on new equipment
placed in service for the Bank's operations.

         Deposit  Insurance  Expense.  Deposit  insurance  expense was  $165,000
during 1997; an increase of $111,000, or 206% compared to 1996.  Assessments for
1996 and 1995 were $54,000 and $49,000 respectively.

         The Bank's  deposits are presently  insured by the Savings  Association
Insurance  Fund.  A  recapitalization  plan for the SAIF was signed  into law on
September 30, 1996, which provided for a special  assessment on all SAIF-insured
institutions  to enable the SAIF to achieve its required level of reserves.  The
assessment  of .65% was  effected  based on  deposits as of June 30,  1996.  The
Company's  special  assessment  totaled  $142,000 before taxes,  and was charged
against current year income and included with deposit insurance expense.

         Other Expenses.  Expenses other than those discussed above,  consisting
primarily of expenses  related to computer  processing,  supplies,  professional
fees,  advertising,  management fees,  supervisory  examination fees, telephone,
postage and insurance expenses,  increased $174,000 or 52.1% in 1997 compared to
1996,  and  increased  $30,000  in 1996  compared  to 1995.  In  1997,  computer
processing  expenses  increased $4,000 compared to 1996 as a result of increased
usage and a higher  volume of activity.  Printing and office  supplies in fiscal
year 1997 increased  $5,000 due to increased  volume and general price increases
compared to 1996.  Legal,  accounting and professional  fees increased  $124,000
during the year ended June 30, 1997  primarily  as a result of costs  related to
the conversion of the Bank to a stock company and the  implementation of various
employee  plans.  Management  fees paid to Mr.  Stewart in  connection  with the
operations of BSF deceased  during 1996 as a result of the  termination  of such
fees effective January 1, 1997. Other increases  occurred as a result of general
increases  in a variety  of expense  categories,  including  advertising,  which
increased by $10,000 compared to 1996.

         Income Tax Expense.  Income tax expense was $152,000 for 1997  compared
to  $196,000  for 1996 and  $203,000  for  1995.  The level of tax  expense  was
consistent  with the amount of taxable  income each year. The effective tax rate
was 37.7%, 40.5% and 41.3% for 1997, 1996 and 1995, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         The  Bank's  primary  sources  of funds  are  deposits,  proceeds  from
principal and interest payments on loans and proceeds from maturing  securities.
While maturities and scheduled  amortization of loans are predictable sources of
funds,  deposit flows and mortgage prepayments are greatly influenced by general
interest rates,  economic  conditions,  competition and the restructuring of the
thrift industry.

         The  primary  investing  activity  of the  Bank is the  origination  of
mortgage  loans.  During the years ended June 30, 1997,  1996 and 1995, the Bank
originated mortgage loans in the amounts of $12.3 million, $7.6 million and $7.1
million,  respectively.  The Bank  originated  mobile  home  loans  of  $78,000,
$146,000  and  $286,000,  and  consumer  loans  of $1.0  million,  $962,000  and
$710,000,  respectively,   during  these  periods.  Loan  repayments  and  other
deductions  were  $6.0  million,  $6.8  million  and  $3.9  million  during  the
respective three one-year periods.

         During each of the years ended June 30, 1997 and 1996, the Bank and the
Holding Company purchased investment  securities in the amounts of $3.3 million.
Securities  totaling  $605,000 were purchased during 1995. During 1997, in order
to fund loan growth,  investment  securities totaling $4.8 million were sold. No
investment  securities  were  sold  in  the  prior  two  years.  Maturities  and
repayments  of  securities  were $1.3 million in 1997,  $1.1 million in 1996 and
$291,000 in 1995.

         During the year ended June 30, 1997,  deposits decreased  approximately
$2.6 million,  which resulted primarily from $4.7 million in deposit withdrawals
related  to the sale of stock  associated  with the  conversion.  The Bank  also
utilized  FHLB  advances to fund  increases in loans.  FHLB  advances  increased
during each of the years in the periods presented.

         The Bank's cash and cash equivalents  decreased $1.5 million during the
year ended June 30, 1997. However, the amount at June 30, 1996 was substantially
higher than the preceding year as a result of deposits related to the conversion
being invested short term. Cash and cash equivalents were significantly lower in
1995 compared to 1996.

         The Bank had  outstanding  loan  commitments of $1.1 million and unused
lines of credit of $9,000 at June 30, 1997.  The Bank  anticipates  that it will
have sufficient funds from loan repayments and cash and cash equivalents to meet
its current  commitments  without  borrowing  additional  funds from the FHLB of
Indianapolis. Certificates of deposit scheduled to mature in one year or less at
June 30, 1997 totaled  $11.2  million.  Management  believes  that a significant
portion of such deposits will remain with the Bank based upon historical deposit
flow data and the Bank's competitive pricing in its market area.

         Liquidity  management  is both a daily and  long-term  function  of the
Bank's  management  strategy.  In the event that the Bank should  require  funds
beyond its ability to generate them  internally,  additional funds are available
through the use of FHLB  advances  and  through  sales of  securities.  The Bank
regularly   monitors  its  interest  rate  spread   position  to  determine  the
appropriate  mix between retail and wholesale  funds  available to fund its loan
activities.  From  time-to-time  the Bank offers higher cost deposit products to
generate  funds for loans.  The Bank also  relies on  advances  from the FHLB of
Indianapolis to fund its lending activities when the cost of alternative sources
of funds  makes it  prudent  to do so. The Bank will  continue  to  monitor  its
interest rate spread position and its mix of deposits and alternative sources of
funds.  FHLB  advances  were $9.0 million at June 30,  1997.  The Bank had $22.7
million in eligible assets available as collateral for advances from the FHLB of
Indianapolis as of June 30, 1997. Based on the

<PAGE>

      Bank's  blanket   collateral   agreements,   advances  from  the  FHLB  of
Indianapolis must be collateralized by 160% of eligible assets.  Therefore,  the
Bank's eligible  collateral would have supported  approximately $14.2 million in
advances from the FHLB of Indianapolis as of June 30, 1997. However,  the Bank's
Board of Directors has by resolution limited the amount of authorized borrowings
to $13 million.

         The  following  is a summary of the Bank's  three  major  types of cash
flows.  Cash flows from  operating  activities  consist  primarily of net income
generated  by  cash.  Investing  activities  generate  cash  flows  through  the
origination and principal  collection on loans as well as purchases and sales of
securities.  Investing  activities will generally  result in negative cash flows
when the Bank is experiencing loan growth. Cash flows from financing  activities
include savings deposits,  withdrawals and maturities and changes in borrowings.
The  following  table  summarizes  cash flows for each of the three years in the
period ended June 30, 1997.

                              SUMMARY OF CASH FLOWS

Year Ended June 30,            1997      1996      1995
--------------------------------------------------------
(In thousands)
Operating activities.........$    345  $   261 $    218
                             -------   -------   ------
Investing activities:
   Investment purchases...... (3,262)   (1,918)    (605)
   Mortgage-backed
     securities purchases....    ---    (1,399)     ---
   Investment sales..........  4,825       ---      ---
   Total investment
     securities maturities
     and paydowns............  1,343     1,114      291
   Changes in loans.......... (7,372)   (1,762)  (4,134)
   Other.....................   (300)      (98)    (118)
                             -------   -------   ------
     Total................... (4,766)   (4,063)  (4,566)
                             -------   -------   ------
Financing activities:
   Deposit increases
     (decreases)............. (2,569)    6,226    1,049
   Borrowings, net
     of repayments...........  1,800     2,171    3,448
   Other.....................  3,654      (260)     ---
                             -------   -------   ------
     Total...................  2,885     8,137    4,497
                             -------   -------   ------
Net change in cash and
   cash equivalents..........$(1,536)  $ 4,335   $  149
                             =======   =======   ======

         During the years  ended June 30,  1997,  1996 and 1995,  operating  and
financing  activities  provided the most significant portion of funds to support
growth  in the loan  portfolio.  Sales of  securities  as well as  increases  in
borrowed funds funded loan growth during 1997.  Loan growth in 1996 and 1995 was
funded primarily by increases in deposits and borrowed funds.

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.

CURRENT ACCOUNTING ISSUES

         Accounting for Mortgage Servicing Rights.  During 1995, the FASB issued
Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  122,  entitled
Accounting  for  Mortgage  Servicing  Rights.  SFAS No. 122 pertains to mortgage
banking enterprises and financial  institutions that conduct operations that are
substantially   similar  to  the  primary   operations  of  a  mortgage  banking
enterprise.   This  Statement  eliminates  the  accounting  distinction  between
mortgage servicing rights that are acquired through loan origination  activities
and those acquired through  purchase  transactions.  Under this Statement,  if a
mortgage banking  enterprise sells or securitizes loans and retains the mortgage
servicing  rights,  the enterprise  must allocate the total cost of the mortgage
loans to mortgage servicing rights and loans (without the rights) based on their
relative fair values if it is practicable  to estimate those fair values.  If it
is not  practicable,  the entire cost should be allocated to the mortgage  loans
and no cost should be  allocated  to the mortgage  servicing  rights.  An entity
would  measure  impairment of mortgage  servicing  rights and loans based on the
excess of the carrying amount of the mortgage  servicing  rights  portfolio over
the fair value of that portfolio.

         The  Statement  which was to be applied  prospectively  in fiscal years
beginning  after December 15, 1995, to  transactions in which an entity acquires
mortgage  servicing  rights and to  impairment  evaluations  of all  capitalized
mortgage servicing rights.  Retroactive application is prohibited.  The adoption
of No. 122 during  1996 did not have a material  impact on either the  Company's
financial position or results of operations.

         Accounting For Stock-based  Compensation.  The FASB has issued SFAS No.
123, Accounting for Stock-based Compensation.  This Statement establishes a fair
value based method of accounting for stock-based  compensation  plans.  The FASB
encourages all entities to adopt this method for accounting for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer,  or the employer  incurs  liabilities to employees in amounts based on
the price of its stock.

         Due  to  the  extremely  controversial  nature  of  this  project,  the
Statement   permits  a  company  to  continue  the  accounting  for  stock-based
compensation  prescribed in Accounting  Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees.  If a company elects that option,  pro
forma  disclosures  of net income (and EPS, if  presented)  are  required in the
footnotes  as if the  provisions  of this  Statement  had been  used to  measure
stock-based compensation.

         The disclosure  requirements  of Opinion No. 25 have been superseded by
the disclosure requirements of this Statement.

         Once an entity  adopts the fair value based method for  accounting  for
these transactions, that election cannot be reversed.

         Equity  instruments  granted or  otherwise  transferred  directly to an
employee by a principal  stockholder are stock-based employee compensation to be
accounted for in accordance with either Opinion 25 or this Statement, unless the
transfer clearly is for a purpose other than compensation.

         The  accounting  requirements  of  this  Statement  are  effective  for
transactions  entered into in fiscal  years that begin after  December 15, 1995.
The disclosure  requirements  are effective for financial  statements for fiscal
years  beginning  after  December 15, 1995. Pro forma  disclosures  required for
entities  that elect to continue to measure  compensation  cost using Opinion 25
must include the effects of all awards  granted in fiscal years that begin after
December 15, 1994.

         During the  initial  phase-in  period,  the  effects of  applying  this
Statement  are not likely to be  representative  of the effects on reported  net
income for future years because  options vest over several years and  additional
awards generally are made each year. If that situation  exists,  the entity must
include a statement to that effect.

         Accounting  for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishments of Liabilities. Statement No. 125 breaks new ground in resolving
long-standing  questions about whether  transactions  should be accounted for as
secured borrowings or as sales. The Statement provides consistent  standards for
distinguishing  transfers of financial assets that are sales from transfers that
are considered secured borrowings.

<PAGE>

         A  transfer  of  financial  assets in which the  transferor  surrenders
control  over  those  assets  is  accounted  for as a sale  to the  extent  that
consideration  other than  beneficial  interests  in the  transferred  assets is
received in exchange.  The transferor has surrendered  control over  transferred
assets only if all of the following conditions are met:

         The  transferred  assets have been isolated from the  transferor -- put
presumptively  beyond the reach of the  transferor  and its  creditors,  even in
bankruptcy or other receivership.

         Each transferee  obtains the right -- free of conditions that constrain
it from taking  advantage of that right -- to pledge or exchange the transferred
assets, or the transferee is a qualifying special-purpose entity and the holders
of beneficial interests in that entity have the right -- free of conditions that
constrain  them from  taking  advantage  of that right -- to pledge or  exchange
those interests.

         The transferor does not maintain effective control over the transferred
assets  through an agreement  that both entitles and obligates the transferor to
repurchase or redeem them before their  maturity,  or an agreement that entitles
the transferor to repurchase or redeem  transferred  assets that are not readily
obtainable.

         This Statement provides detailed  measurement  standards for assets and
liabilities  included in these  transactions.  It also  includes  implementation
guidance for assessing  isolation of  transferred  assets and for accounting for
transfers of partial interests, servicing of financial assets,  securitizations,
transfers of  sales-type  and direct  financing  lease  receivables,  securities
lending transactions, repurchase agreements, "wash sales", loan syndications and
participations,   risk   participations  in  banker's   acceptances,   factoring
arrangements,  transfers of receivables with recourse,  and  extinguishments  of
liabilities.

         The Statement  supersedes  FASB  Statements No. 76,  Extinguishment  of
Debt,  and No. 77,  Reporting by Transferors  for Transfers of Receivables  with
Recourse,  and No. 122, Accounting for Mortgage Servicing Rights and amends FASB
Statement  No.  115,  Accounting  for  Certain  Investments  in Debt and  Equity
Securities,  in addition to clarifying or amending a number of other  statements
and technical bulletins.

         This  Statement is effective  for  transfers and servicing of financial
assets and extinguishments of liabilities  occurring after December 31, 1996 and
is to be  applied  prospectively.  Earlier  or  retroactive  application  is not
permitted.

         The  adaption  of No.  125 did not have  any  material  effect  on 1997
financial statements.

         Earnings  per  Share.  Statement  No.  128  establishes  standards  for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly  held common  stock or  potential  common  stock,  as well as any other
entity that chooses to present EPS in its financial statements.

         This Statement  simplifies the current standards of APB Opinion No. 15,
Earnings per Share, and makes them comparable to international EPS standards. It
eliminates the  presentation  of primary EPS and requires  presentation of basic
EPS (the  principal  difference  being that  common  stock  equivalents  are not
considered in the computation of basic EPS). It also requires dual  presentation
of basic and diluted EPS on the face of the income  statement  for all  entities
with complex capital  structures and requires a reconciliation  of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation.

         Basic EPS  includes  no dilution  and is  computed  by dividing  income
available to common stockholders by the weighted-average number of common shares
outstanding  for the period.  Diluted EPS reflects the  potential  dilution that
could occur if the  potential  common  shares were  exercised or converted  into
common stock or resulted in the issuance of common stock that then shared in the
earnings of the  entity.  Diluted  EPS is  computed  similarly  to that of fully
diluted EPS pursuant to Opinion No. 15.

         SFAS No. 128 is effective for financial  statements  issued for periods
ending after December 15, 1997,  including interim periods.  Earlier application
is not permitted.  The Statement  requires  restatement of all  prior-period EPS
data presented.

<PAGE>

         Disclosure of Information  about Capital  Structure.  Statement No. 129
continues the current  requirements  to disclose  certain  information  about an
entity's capital  structure found in APB Opinion No. 10, Omnibus Opinion ( 1966,
Opinion  15,  and  SFAS  No.  47,  Disclosure  of  Long-Term   Obligations.   It
consolidates specific disclosure requirements from those standards. SFAS No. 129
is effective for financial  statements  issued for periods ending after December
15, 1997, including interim periods.

         Reporting  Comprehensive Income. In June 1997, the FASB issued SFAS No.
130, Reporting  Comprehensive Income,  establishing  standards for reporting and
display of comprehensive income and its components (revenues,  expenses,  gains,
and losses) in a full set of general-purpose  financial statements.  It requires
that all items that are required to be recognized under accounting  standards as
components of comprehensive  income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This Statement
does not require a specific  format for that  financial  statement  but requires
that an enterprise display an amount representing total comprehensive income for
the period in that financial statement.

         SFAS No. 130 also  requires that an  enterprise  (a) classify  items of
other  comprehensive  income by their  nature in a financial  statement  and (b)
display the accumulated  balance of other  comprehensive  income separately from
retained  earnings and  additional  paid-in  capital in the equity  section of a
statement of financial position.

         The Statement is effective for fiscal years  beginning  after  December
15, 1997.  Reclassification of financial statements for earlier periods provided
for comparative purposes is required.

         Disclosures  about  Segments of an  Enterprise.  In June 1997, the FASB
issued SFAS No. 131,  Disclosures  about  Segments of an Enterprise  and Related
Information,  establishing  standards  for the way public  business  enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas, and major customers.  This Statement  supersedes SFAS No. 14,
Financial  Reporting  for  Segments  of a Business  Enterprise,  but retains the
requirement to report information about major customers.  It amends SFAS No. 94,
Consolidation  of  All  Majority-Owned  Subsidiaries,   to  remove  the  special
disclosure  requirements  for  previously  unconsolidated   subsidiaries.   This
Statement does not apply to nonpublic business  enterprises or to not-for-profit
organizations.

         SFAS  No.  131  requires  that  a  public  business  enterprise  report
financial and descriptive  information about its reportable  operating segments.
Operating  segments  are  components  of  an  enterprise  about  which  separate
financial  information  is available  that is  evaluated  regularly by the chief
operating  decision maker in deciding how to allocate resources and in assessing
performance.  Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.

         This  Statement  requires that a public  business  enterprise  report a
measure of segment profit or loss,  certain  specific revenue and expense items,
and segment assets. It requires reconciliations of total segment revenues, total
segment profit or loss,  total segment assets,  and other amounts  disclosed for
segments to corresponding amounts in the enterprise's  general-purpose financial
statements.  This  Statement  also  requires that a public  business  enterprise
report  descriptive  information about the way that the operating  segments were
determined,  the  products  and  services  provided by the  operating  segments,
differences  between the measurements used in reporting segment  information and
those used in the enterprise's general-purpose financial statements, and changes
in the measurement of segment amounts from period to period.

         SFAS  No.  131  is  effective  for  financial  statements  for  periods
beginning  after  December  15,  1997.  In  the  initial  year  of  application,
comparative information for earlier years is to be restated. This Statement need
not be  applied to  interim  financial  statements  in the  initial  year of its
application, but comparative information for interim periods in the initial year
of application is to be reported in financial  statements for interim periods in
the second year of application.

<PAGE>

         Accounting  for Employee Stock Plans.  In November  1993,  AICPA issued
Statement of Position  ("SOP") 93-6 which addresses the accounting for shares of
stock issued to employees by an ESOP. SOP 93-6 requires that the employer record
compensation expense in an amount equal to the fair value of shares committed to
be released to employees  from the ESOP.  SOP 93-6 is effective for fiscal years
beginning  after  December  15, 1993 and relates to shares  purchased by an ESOP
after  December 31, 1992.  Assuming  shares of Common Stock  appreciate in value
over time, the adoption of SOP 93-6 will likely  increase  compensation  expense
relative to the Company's ESOP established in connection with the Conversion, as
compared  with prior  guidance  which would have  required  the  recognition  of
compensation expense based on the cost of shares acquired by the ESOP.



<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  (formerly Owen  Community  Bank, s. b.) and subsidiary as of
June 30,  1997 and 1996,  and the  related  consolidated  statements  of income,
changes in  stockholders'  equity and cash flows for each of the three  years in
the period ended June 30, 1997. 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, 1997 and 1996, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended June 30, 1997, in conformity  with  generally  accepted  accounting
principles.


Geo. S. Olive & Co. LLC


Indianapolis, Indiana
July 25, 1997
<PAGE>

                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                  CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
June 30,                                                             1997            1996
---------------------------------------------------------------------------------------------         
ASSETS
<S>                                                                 <C>             <C>      
   Cash                                                          $    296,805    $    385,824
   Short-term interest-bearing deposits                             3,887,498       5,334,796
                                                                 ------------    ------------
     Total cash and cash equivalents                                4,184,303       5,720,620
   Investment securities--available for sale                        2,101,734       4,901,120
   Loans                                                           34,348,648      27,274,557
   Allowance for loan losses                                         (231,397)       (149,833)
                                                                 ------------    ------------
     Net loans                                                     34,117,251      27,124,724
   Real estate acquired for development                                20,758         171,580
   Premises and equipment                                             963,657         512,768
   Federal Home Loan Bank stock                                       500,000         360,000
   Interest receivable                                                268,648         235,678
   Prepaid stock conversion costs                                     260,067
   Other assets                                                       351,876         139,754
                                                                 ------------    ------------
     TOTAL ASSETS                                                $ 42,508,227    $ 39,426,311
                                                                 ============    ============

LIABILITIES
   Interest-bearing deposits                                     $ 26,156,516    $ 28,725,700
   Federal Home Loan Bank advances                                  9,000,000       7,200,000
   Other liabilities                                                  154,577          90,539
                                                                 ------------    ------------
     TOTAL LIABILITIES                                             35,311,093      36,016,239
                                                                 ------------    ------------
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
     Issued--469,526                                                4,389,698
   Retained earnings--substantially restricted                      3,409,288       3,427,201
   Unearned compensation                                             (264,781)
   Unearned ESOP shares                                              (364,264)
   Net unrealized gain (loss) on securities available for sale         27,193         (17,129)
                                                                 ------------    ------------
     TOTAL STOCKHOLDERS' EQUITY                                     7,197,134       3,410,072
                                                                 ------------    ------------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $ 42,508,227    $ 39,426,311
                                                                 ============    ============

</TABLE>
See notes to consolidated financial statements.

<PAGE>

                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                        CONSOLIDATED STATEMENT OF INCOME


<TABLE>
<CAPTION>
Year Ended June 30                                                      1997              1996             1995
-------------------------------------------------------------------------------------------------------------------
INTEREST INCOME
<S>                                                                   <C>              <C>               <C>       
   Loans                                                              $2,912,085       $2,618,394        $2,166,726
   Deposits with financial institutions                                  136,538          135,553            76,678
   Investment securities
     Taxable                                                             279,869          161,258           143,426
     Tax exempt                                                           30,073           18,206            17,745
   Other interest and dividend income                                     38,105           21,210            15,728
                                                                       ---------        ---------         ---------
   Total interest and dividend income                                  3,396,670        2,954,621         2,420,303
                                                                       ---------        ---------         ---------
INTEREST EXPENSE
   Deposits                                                            1,210,207        1,261,043           962,764
   Federal Home Loan Bank advances                                       487,217          330,458           201,463
   Other interest expense                                                  5,758            1,282             9,994
                                                                       ---------        ---------         ---------
   Total interest expense                                              1,703,182        1,592,783         1,174,221
                                                                       ---------        ---------         ---------
NET INTEREST INCOME                                                    1,693,488        1,361,838         1,246,082
   Provision for losses on loans                                          85,000           94,000            36,134
NET INTEREST INCOME AFTER PROVISION FOR LOSSES ON LOANS                1,608,488        1,267,838         1,209,948

OTHER INCOME
Service charges on deposit accounts                                       42,494           37,478            27,345
   Gain on sale of real estate acquired for development                   31,437           56,944            78,499
   Net realized gain on sales of available-for-sale securities            37,155
   Other income                                                           52,750           47,535            42,567
                                                                       ---------        ---------         ---------
Total other income                                                       163,836          141,957           148,411
                                                                       ---------        ---------         ---------
OTHER EXPENSES
Salaries and employee benefits                                           563,142          414,986           403,787
   Net occupancy expenses                                                 70,825           67,213            73,761
   Equipment expenses                                                     61,044           55,436            35,302
   Deposit insurance expense                                             164,550           53,686            49,444
   Computer processing fees                                               59,152           55,410            47,945
   Printing and office supplies                                           38,274           33,479            32,215
   Legal and professional fees                                           171,674           47,324            35,125
   Advertising expense                                                    34,004           24,346            25,518
   Management fees                                                                         22,998            33,005
   Other expenses                                                        204,901          150,563           129,824
                                                                       ---------        ---------         ---------
Total other expenses                                                   1,367,566          925,441           865,926
                                                                       ---------        ---------         ---------
INCOME BEFORE INCOME TAX                                                 404,758          484,354           492,433
   Income tax expense                                                    152,441          195,964           203,210
                                                                       ---------        ---------         ---------
NET INCOME                                                             $ 252,317        $ 288,390         $ 289,223
                                                                       =========        =========         =========

NET INCOME PER SHARE                                                        $.53

WEIGHTED AVERAGE SHARES OUTSTANDING                                      477,164
</TABLE>

See notes to consolidated financial statements.

<PAGE>

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

                                                    Net Unrealized
                                                                                    Unearned    Securities
                                    Common Stock          Retained     Unearned       ESOP       Available
                                 Shares       Amount      Earnings   Compensation    Shares      For Sale       Total
-----------------------------------------------------------------------------------------------------------------------
<S>                           <C>       <C>             <C>            <C>       <C>              <C>       <C>       
Balances, July 1, 1994                                   $2,849,588                                          $2,849,588
   Net income for 1995                                      289,223                                             289,223
   Cumulative effect of change
     in method of accounting
     for securities                                                                                $ 6,912        6,912
   Net change in unrealized
     gain (loss) on securities
     available for sale                                                                             13,439       13,439
                               ----------------------------------------------------------------------------------------
Balances, June 30, 1995                                   3,138,811                                 20,351    3,159,162
   Net income for 1996                                      288,390                                             288,390
   Net change in unrealized
     gain (loss) on securities
     available for sale                                                                            (37,480)     (37,480)
                               ----------------------------------------------------------------------------------------
Balances, June 30, 1996                                   3,427,201                                (17,129)   3,410,072
   Net income for 1997                                      252,317                                             252,317
   Common stock issued in
     conversion, net of costs  505,926   $4,728,294                                                           4,728,294
   Cash dividends
      ($.15 per share)                                      (68,818)                                            (68,818)
   Net change in unrealized
     gain (loss) on securities
     available for sale                                                                             44,322       44,322
   Contributions for unearned
     ESOP shares                                                                  $(404,740)                   (404,740)
   ESOP shares earned                        25,404                                  40,476                      65,880
   Contribution for
     unearned RRP shares                                                $(290,172)                             (290,172)
   RRP shares earned                                                       25,391                                25,391
   Purchase of stock           (36,400)    (364,000)       (201,412)                                           (565,412)
                               ----------------------------------------------------------------------------------------
Balances, June 30, 1997        469,526   $4,389,698      $3,409,288     $(264,781)$(364,264)       $27,193   $7,197,134
                               ========================================================================================
</TABLE>

See notes to consolidated financial statements.

<PAGE>

                      HOME FINANCIAL BANCORP AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended June 30,                                                  1997             1996             1995
---------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S>                                                            <C>                 <C>              <C>       
   Net income                                                  $    252,317        $  288,390       $  289,223
   Adjustments to reconcile net income to
     net cash provided by operating activities
   Provision for loan losses                                         85,000            94,000           36,134
   Investment securities amortization, net                            2,630               464              683
   ESOP shares earned                                                65,880
   RRP shares earned                                                 25,391
   Depreciation and amortization                                     83,193            74,367           58,813
   Deferred income tax benefit                                      (35,294)          (41,460)            (198)
   Gain on sale of real estate acquired for development             (31,437)          (56,944)         (78,499)
   Gain on sale of other real estate                                (21,964)           (3,250)         (11,019)
   Gain on sale of securities available for sale                    (37,155)
   Change in
     Interest receivable                                            (32,970)          (49,069)         (74,994)
     Other assets                                                   (74,794)          (10,361)         (13,636)
   Other adjustments                                                 64,038           (34,852)          11,360
                                                                 ----------        ----------         -------- 
     Net cash provided by operating activities                      344,835           261,285          217,867
                                                                 ----------        ----------         -------- 
INVESTING ACTIVITIES
   Purchases of securities available for sale                    (3,261,591)       (3,316,533)        (399,719)
   Purchase of securities held to maturity                                                            (205,000)
   Proceeds from sales of securities available for sale           4,824,600
   Proceeds from maturities and paydowns of
     securities available for sale                                1,342,922         1,002,691
   Proceeds from maturities and paydowns of
     securities held to maturity                                                      111,071          290,803
   Net changes in loans                                          (7,371,895)       (1,761,684)      (4,134,319)
   Improvements to real estate owned                                (12,621)
   Proceeds from real estate owned sales                            204,501            44,202           41,284
   Purchase of premises and equipment                              (569,082)         (164,998)        (173,327)
   Proceeds from disposal of premises and equipment                  35,000            58,000
   Purchase of real estate acquired for development                  (2,911)          (38,421)        (231,464)
   Proceeds from sale of real estate acquired for development       185,170           112,170          274,247
   Purchase of FHLB of Indianapolis stock                          (140,000)         (110,000)         (28,500)
                                                                 ----------        ----------         -------- 
     Net cash used by investing activities                       (4,765,907)       (4,063,502)      (4,565,995)
                                                                 ----------        ----------         -------- 
FINANCING ACTIVITIES
   Net change in
     NOW and savings deposits                                    (3,456,237)        4,309,021       (1,774,297)
     Certificates of deposit                                        887,053         1,916,677        2,822,850
   Advances from Federal Home Loan Bank of Indianapolis           4,300,000         2,200,000        3,500,000
   Payments on advances from Federal 
     Home Loan Bank of Indianapolis                              (2,500,000)
   Other borrowings                                                                                     75,000
   Payments on other borrowings                                                       (28,773)        (126,400)
   Sale of stock                                                  4,578,341
   Prepaid stock conversion costs                                                    (260,067)
   Purchase of stock                                               (565,412)
   Dividends paid                                                   (68,818)
   Contribution of RRP shares                                      (290,172)
                                                                 ----------        ----------         -------- 
     Net cash provided by financing activities                    2,884,755         8,136,858        4,497,153
                                                                 ----------        ----------         -------- 
NET CHANGE IN CASH AND CASH EQUIVALENTS                          (1,536,317)        4,334,641          149,025
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                      5,720,620         1,385,979        1,236,954
                                                                 ----------        ----------         -------- 
CASH AND CASH EQUIVALENTS, END OF YEAR                           $4,184,303        $5,720,620       $1,385,979
                                                                 ==========        ==========       ==========
ADDITIONAL CASH FLOWS AND SUPPLEMENTARY INFORMATION
   Interest paid                                                 $1,703,182        $1,592,783       $1,174,221
   Income tax paid                                                  178,988           179,305          144,375
   Transfers from loans to other real estate                        294,368
   Stock issuance costs transferred from other
     assets to stockholder's equity                                 254,787
   Common stock issued to ESOP leveraged with an employer loan      404,740
</TABLE>

See notes to consolidated financial statements.

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

--   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 bank holding company whose  principal  activity is the
ownership and management of the Bank. Commencing July 1, 1997, the Bank operates
under a state thrift  charter,  known as a stock savings bank, and provides full
banking services.  Prior to July 1, 1997, the Bank operated as an Indiana mutual
savings bank. As a state-chartered  thrift, the Bank is subject to regulation by
the  Department  of  Financial  Institutions,  State of Indiana  and the Federal
Deposit Insurance Corporation ("FDIC").

         The Bank generates  mortgage and consumer  loans and receives  deposits
from customers  located primarily in Owen 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
debt. 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.  BSF has ceased land acquisitions and is in process of divesting of
its real estate  holdings.  BSF's net income for the years ended June 30,  1997,
1996 and 1995,  included  in the  Company's  consolidated  net  income,  totaled
$35,000, $59,000, and $59,000.

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

         Investment  Securities--The  Company  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 115,  Accounting for Certain  Investments in
Debt and Equity Securities, on July 1, 1994.

         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 stockholders'
equity.

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

          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.  Payments  with
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.

         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, 1997,  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 Federal Home Loan Bank system. The required
investment in the common stock is based on a predetermined formula.


<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

         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.

         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  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
outstanding.


--   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 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.

--    INVESTMENT SECURITIES
                                         1997
                    ---------------------------------------------
                                   Gross        Gross
                     Amortized   Unrealized   Unrealized    Fair
June 30,                Cost       Gains        Losses      Value
------------------------------------------------------------------
Available for sale
  U.S. Treasury      $   825       $  2                    $  827
Federal agencies         100          4                       104
Marketable
   equity securities     344         34                       378
Mortgage-backed 
   securities            788          5                       793   
                      --------------------------------------------
  Total investment
     securities       $2,057        $45                    $2,102
                      ============================================


                                          1996
                    ---------------------------------------------
                                   Gross        Gross
                     Amortized   Unrealized   Unrealized    Fair
June 30,                Cost       Gains        Losses      Value
------------------------------------------------------------------
Available for sale
  Federal agencies    $1,100         $ 5                    $1,105
  State and
   municipal             678           4           $ 5         677
  Mortgage-backed
   securities          3,151          23            55       3,119
                    ----------------------------------------------
   Total investment
    securities        $4,929         $32           $60      $4,901
                    ==============================================



<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

         The amortized  cost and fair value of securities  available for sale at
June 30, 1997, 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.

                                     1997
                           -------------------------
                              Available for Sale
                           -------------------------
                           Amortized           Fair
                             Cost              Value
                           -------------------------
Maturity Distribution
at June 30
----------------------------------------------------
Within one year              $  475          $   475
One to five years               450              456
                                925              931
Marketable equity
  securities                    344              378
Mortgage-backed
  securities                    788              793
                             ------           ------
  Totals                     $2,057           $2,102
                             ======           ======

         Securities  with a  carrying  value of  $788,000  and  $3,119,000  were
pledged at June 30, 1997 and 1996 to secure FHLB advances.

         Proceeds from sales of  securities  available for sale during 1997 were
$4,825,000.  Gross gains of $71,000 and gross losses of $34,000 were realized on
those sales.

         On December 26, 1995, the Bank transferred certain securities from held
to  maturity  to   available   for  sale  in   accordance   with  a   transition
reclassification  allowed by the  Financial  Accounting  Standards  Board.  Such
securities  had a carrying  value of $1,716,000  and a fair value of $1,707,000.
Other than the initial adoption of SFAS No. 115 and the preceding, there were no
transfers or sales of investment securities during the periods presented.

--   LOANS AND ALLOWANCE

June 30                          1997        1996
---------------------------------------------------
Real estate mortgage loans
   Residential                 $ 19,898    $ 18,240
Mobile home and land              4,396       3,513
Nonresidential                    6,896       2,544
Multi-family                        980         604
Mobile home loans1,361
                                              1,241
Commercial and industrial           634         350
Consumer loans                      612       1,094
                                 ------      ------
                                 34,777      27,586
                                 ------      ------
Undisbursed portion of loans       (430)       (319)
Deferred loan costs                   2           8
                                 ------      ------
                                   (428)       (311)
                                 ------      ------
   Total loans                  $34,349     $27,275
                                =======     =======

Year Ended June 30           1997     1996     1995
----------------------------------------------------
ALLOWANCE FOR LOAN LOSSES
  Balances, July 1          $ 150    $  57    $  26
Provision for loan losses      85       94       36
Recoveries on loans             1
Loans charged off              (4)      (1)      (6)
                            -----    -----    -----
Balances,
June 30                     $ 231    $ 150    $  57
                            =====    =====    =====

         The Bank adopted SFAS No. 114 and No. 118,  Accounting by Creditors For
Impairment  of  a  Loan  and   Accounting  by  Creditors  for  Impairment  of  a
Loan--Income Recognition and Disclosures,  on July 1, 1995. The adoption of SFAS
Nos. 114 and 118 did not have a material impact on the Bank's financial position
or results of operations.

         At  June  30,  1997  and  1996,  the  Bank  had  nonaccrual   loans  of
approximately   $562,000  and  $359,000,  for  which  impairment  had  not  been
recognized.  If  interest  on these loans had been  recognized  at the  original
interest rates,  interest income would have increased  approximately $21,000 and
$19,000.

         The Bank has no commitments to loan  additional  funds to the borrowers
of nonaccrual loans.

         Nonaccruing  loans  totaled  approximately  $71,000  at June 30,  1995.
Additional  interest  income  that  would  have  been  recorded  had  income  on
nonaccruing loans been considered collectible and

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

accounted for in accordance with their original terms was immaterial.

         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, 1996             $ 508
New loans, including renewals          14
Payments, etc. including renewals     (39)
Change in composition                 (48)
                                    -----
Balances, June 30, 1997             $ 435
                                    =====

--   PREMISES AND EQUIPMENT

June 30                            1997         1996
-----------------------------------------------------
Land                                $277         $188
Building                             991          606
Equipment                            381          321
                                     ---          ---
   Total cost                      1,649        1,115
Accumulated depreciation            (685)        (602)
                                    ----         ---- 
   Net                              $964         $513
                                    ====         ====

--   DEPOSITS

June 30                      1997      1996
--------------------------------------------
Interest-bearing demand    $ 3,682   $ 2,396
Savings                      2,942     7,684
Certificates of $100,000
   or more                   3,479     2,655
Other certificates          16,054    15,991
                           -------   -------
Total deposits             $26,157   $28,726
                           =======   =======

Certificates maturing in years ending June 30:

1998                             $11,168
1999                               3,629
2000                               3,512
2001                                 470
2002                                 754
                                 -------
                                 $19,533
                                 =======

--   FEDERAL HOME LOAN BANK ADVANCES

                                      1997
                              -----------------------
                                             Weighted
                                              Average
June 30                       Amount           Rate
------------------------------------------------------
Maturities in years ending
   1998                        $3,800         6.19%
   1999                         1,500         6.25%
   2000                         3,500         6.24%
   2006                           200         6.87%
                               ------
                               $9,000         6.29%
                               ======

         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  160  percent  of these  advances  and all  stock in the FHLB.
Advances are subject to restrictions or penalties in the event of prepayment.

--   INCOME TAX

Year Ended June 30             1997     1996    1995
------------------------------------------------------
Income tax expense
   Currently payable
     Federal                    $141    $185     $153
     State                        46      52       50
Deferred
     Federal                     (25)    (32)
     State                       (10)     (9)
                                ----    ----     ----
       Total income
         tax expense            $152    $196     $203
                                ====    ====     ====

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

Year Ended June 30         1997     1996     1995
--------------------------------------------------
Reconciliation of
   federal statutory to
   actual tax expense
   Federal statutory
     income tax at 34%    $ 138    $ 165    $ 167
Effect of state
     income taxes            24       28       33
Tax exempt interest          (9)      (5)      (5)
Other                        (1)       8        8
                          -----    -----    -----
     Actual tax expense   $ 152    $ 196    $ 203
                          =====    =====    =====

A cumulative net deferred tax asset is included in other assets at June 30, 1997
and 1996. The components of the asset are as follows:

June 30                             1997         1996
-------------------------------------------------------
Differences in
   depreciation methods             $ (3)        $ (7)
Differences in accounting
   for loan fees                      (4)          (6)
Differences in accounting
   for loan losses                    61           36
Differences in
   compensation plans                  9
State income tax                      (7)          (3)
Differences in
   accounting for securities
   available for sale                (18)          12                           
                                     ---           --                           
                                     $38          $32
                                     ===          ===
Assets                               $70          $48
Liabilities                          (32)         (16)
                                     ---          ---
                                     $38          $32
                                     ===          ===

         No valuation  allowance was necessary for the years ended June 30, 1997
and 1996.

         Retained earnings at June 30, 1997, 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, 1997
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, 1997.

--   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:

                            1997   1996
----------------------------------------
Mortgage loan commitments
   At variable rates        $563   $989
At fixed rates               515    752
Unused lines of credit         9    205

         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

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

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.

--   RESTRICTION ON DIVIDENDS

         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 net profits (as defined) for the current
year  plus  those  for the  previous  two  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,  1997,  total  stockholder's   equity  of  the  Bank  was
$5,890,000,  of which  approximately  $538,000 was  available for the payment of
dividends.

--   REGULATORY CAPITAL

         The  Bank  is  subject  to  various  regulatory  capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements  can  initiate   actions  by  the  regulatory   agencies  that,  if
undertaken,  could have a material  effect on the Bank's  financial  statements.
Under  capital  adequacy  guidelines  and the  regulatory  framework  for prompt
corrective  action,  the Bank must meet specific capital guidelines that involve
quantitative   measures  of  the  Bank's   assets,   liabilities,   and  certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's  capital  amounts  and  classification  are also  subject to  qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

         At June 30, 1997, the Bank believes that it meets all capital  adequacy
requirements  to which it is subject and the most recent  notification  from the
regulatory agency  categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action.

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

         In connection with the Bank's conversion to a  state-chartered  savings
bank, the FDIC imposed  heightened  capital  requirements on the Bank because of
the impermissible real estate development  activities of BSF. The FDIC currently
requires that the Bank maintain  capital  (after  deduction of its investment in
BSF) at levels  sufficient  for the Bank to be classified as a  well-capitalized
institution.

         The  Bank's  actual  and  required  capital  amounts  and ratios are as
follows:

<TABLE>
<CAPTION>
                                                                                1997
                                             ------------------------------------------------------------------------
                                                                              Required                  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>           <C>              
Total capital 1 (to risk weighted assets)      $6,109       25.0%         $1,952        8.0%      $2,440        10.0%
Tier I capital 1 (to risk weighted assets)      5,879       24.1             976        4.0        1,464         6.0       
Tier I capital 1 (to average assets)            5,879       14.2           1,662        4.0        2,077         5.0
</TABLE>
1 As defined by the regulatory agencies

--   EMPLOYEE BENEFIT PLANS

         The Bank is a participant in a pension fund known as the Pentegra Group
(formerly Financial Institutions Retirement Fund). 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, 1996, the date of the latest actuarial valuation.  The plan required
contributions in the amount of $13,000,  $15,700 and $17,900 for the years ended
June  30,  1997,  1996  and  1995.  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  $10,100,
$9,200, and $8,550 for the years ended June 30, 1997, 1996 and 1995.

         As part of the  conversion,  the Company  established  an ESOP covering
substantially  all employees of the Bank. The ESOP acquired 40,474 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 $65,900 for the year ended June 30,  1997.  At June 30,  1997,  the ESOP had
2,555  allocated  shares,  35,157  suspense  shares  and  2,762  committed-to-be
released shares.

         On July 23, 1997, the board of Directors  approved a Stock Option Plan.
The plan is subject to  stockholders'  approval.  Under the Stock  Option  Plan,
stock options representing an aggregate of up to 10% of Common Stock sold in the
conversion may be granted to directors,  officers and other key employees of the
Company or its subsidiary.

<PAGE>

         In January,  1997, the Company's  stockholders approved the Recognition
and Retention Plan and Trust ("RRP"). The RRP may acquire up to 20,237 shares of
the  Company's  common  stock  for  awards  to  management.  Shares  awarded  to
management  under the RRP vest at a rate of 20% at the end of each  full  twelve
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
20,237 shares of the Company's  common stock of which 15,178 shares were awarded
to management and recorded as unearned  compensation.  Expense under the RRP was
$25,391 for the year ended June 30, 1997.

--   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.

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

<TABLE>
<CAPTION>

                                                            1997                               1996
                                                 --------------------------------------------------------------
                                                 Carrying            Fair           Carrying            Fair
June 30                                           Amount             Value           Amount             Value
---------------------------------------------------------------------------------------------------------------
ASSETS
<S>                                               <C>                 <C>             <C>                <C>   
   Cash and cash equivalents                      $ 4,184             $4,184          $5,721             $5,721
   Securities available for sale                    2,102              2,102           4,901              4,901
   Loans, net                                      34,117             33,703          27,125             27,183
   Stock in FHLB                                      500                500             360                360
   Interest receivable                                269                269             236                236

LIABILITIES
   Deposits                                        26,157             26,281          28,726             28,856
   FHLB advances                                    9,000              9,018           7,200              7,236

OFF-BALANCE SHEET ASSETS
   Commitments to extend credit

</TABLE>
(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                                           1997
-------------------------------------------------------
ASSETS
Cash                                            $    25
Securities available for sale                     1,205
Premises and equipment                               15
Investment in subsidiary                          5,890
Other assets                                        103
                                                 ------
Total assets                                     $7,238
                                                 ======

LIABILITIES
Other liabilities                              $     41

STOCKHOLDERS' EQUITY                              7,197
                                                 ------
Total liabilities and
   stockholders' equity                          $7,238
                                                 ======


                          CONDENSED STATEMENT OF INCOME

Year Ended June 30                              1997 
----------------------------------------------------
Income
Interest income                                $ 118
Other income                                      36
                                               -----

Total income                                     154
                                               -----
Expenses
   Salaries and employee benefits                 31
Legal and professional fees                       97
Other expenses                                    34
                                               -----
Total expenses                                   162
                                               -----
Loss before income tax benefit and
   equity in undistributed income
   of subsidiary                                  (8)
Income tax benefit                               (11)
                                               -----
Income before equity in
   undistributed income of subsidiary              3
Equity in undistributed income of subsidiary     249
                                               -----
NET INCOME                                     $ 252
                                               =====

<PAGE>
                      Home Financial Bancorp and Subsidiary
                   Notes to Consolidated Financial Statements
                       (Table Dollar Amounts in Thousands)

                        CONDENSED STATEMENT OF CASH FLOWS

Year Ended June 30                         1997
------------------------------------------------
OPERATING ACTIVITIES
Net income                              $   252
Adjustments to reconcile net income
     to net cash provided by
     operating activities                  (258)
                                        -------
Net cash used by operating activities        (6)
                                        -------
INVESTING ACTIVITIES
Purchases of securities
     available for sale                  (2,216)
   Proceeds from sales of securities
     available for sale                   1,080
   Purchases of premises
     and equipment                          (16)
                                         ------
Net cash used by investing activities    (1,152)
                                         ------
FINANCING ACTIVITIES
Sale of stock                             4,578
   Dividends                                (69)
   Purchase of stock                       (565)
   Capital contribution to Bank          (2,471)
   Contribution of RRP shares              (290)
                                         ------
       Net cash provided by
         financing activities             1,183
                                         ------
NET CHANGE IN CASH                           25

CASH AT BEGINNING OF YEAR                     0
                                         ------
CASH AT END OF YEAR                     $    25
                                         ======
ADDITIONAL CASH FLOWS
AND SUPPLEMENTARY INFORMATION
Common stock issued to ESOP
     leveraged with an employer loan    $   404


<PAGE>

DIRECTORS AND OFFICERS

                               BOARD OF DIRECTORS

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

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

Stephen Parrish
Funeral Director,
West-Parrish-Pedigo 
Funeral Home



                       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
 Chairman                                   President and
                                            Chief Executive Officer

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

 Judith A. Terrell                          Julie A. Hedden
 Mortgage Loan Officer                      Mortgage Loan Officer

 Lisa K. Sherfield
 Mortgage Loan Officer


<PAGE>

                             DIRECTORS AND OFFICERS

         Charles W.  Chambers,  (age 81) 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 69) 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 47) 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 57) 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.


         Robert W.  Raper,  (age 80) 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 39) is 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 72) 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  62) has served as a director of the  Holding  Company
since its formation and of the Bank since 1978.  Mr. Wilson is also the co-owner
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.


         There are no arrangements or understandings between the Holding Company
and any person pursuant to which that person has been selected a director of the
Holding Company.

<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"),  Small Cap Market,  under the symbol "HWEN." As of August 29,
1997,  there were  approximately  571 record  holders of the  Holding  Company's
Common Stock including shares held in broker accounts.

         Since  the  Holding  Company  has no  independent  operations  or 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 Bank (as  calculated  for
federal  income  tax  purposes),  will be  taxable  as  ordinary  income  to the
recipient and will not be deductible by the Bank. 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.

                            Stock Price      Dividends
Quarter Ended              High        Low   Per Share
September 30, 1996        13 3/4     9 3/4     $---
December 31, 1996         13 1/4    11 3/4     $.05
March 31, 1997            15 1/2    12 3/4     $.05
June 30, 1997             15 3/4    14 1/2     $.05
                                          

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 AUDITORS

Geo. S. Olive & Co. LLC
201 N. Illinois
Indianapolis, Indiana  46204

SHAREHOLDERS AND GENERAL INQUIRIES

     The  Company  is  required  to file an  Annual  Report on Form 10-K for its
fiscal year ended June 30, 1997 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