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

                         ___________________________

                                  FORM 10-Q
                         ___________________________


   (Mark One)

   [x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

   For the quarterly period ended     September 30, 1996
                                      -----------------------------

                                     or

   [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934

   For the transition period from __________________ to _______________

   Commission File Number 0-20335                                         


                             OSB Financial Corp.
         ----------------------------------------------------------
           (Exact name of registrant as specified in its charter)

   Wisconsin                                         39-1726499
   --------------------------------                  ----------
   (State or other jurisdiction of                   (I.R.S. Employer
   incorporation or organization)                    identification No.)

   420 S. Koeller Street, Oshkosh, Wisconsin         54901
   ---------------------------------------------     --------
   (Address of principal executive offices)          Zip Code

   Registrant's telephone number, 
     including area code:                            (414) 236-3680
                                                     --------------

   Indicate by check mark whether the registrant (1) has filed all
   reports required to be filed by Section 13 or 15(d) of the Securities
   Exchange Act of 1934 during the preceding twelve (12) months (or for
   such shorter period that the registrant was required to file such
   reports), and (2) has been subject to such filing requirements for the
   past ninety (90) days.

                            Yes  __X__     No ____

   As of October 31, 1996, there were 1,111,484 shares of the
   Registrant's Common Stock, $.01 par value per share, issued and
   outstanding.

<PAGE>  2



                             OSB FINANCIAL CORP

                               INDEX FORM 10-Q


   Part I - Financial Information                          Page Number
                                                           -----------

      Unaudited Consolidated Statements of Financial            3
        Condition as of September 30, 1996 and 
        December 31, 1995               

      Unaudited Consolidated Statements of Income for the       4
        Quarters Ended September 30, 1996 and 1995, and 
        Nine Month Periods Ended September 30, 1996 and 1995    

      Unaudited Consolidated Statements of Cash Flows for the   6
        Quarters Ended September 30, 1996 and 1995, 
        and Nine Month Periods Ended September 30, 1996 
        and 1995

      Notes to Consolidated Financial Statements                7

      Management's Discussion and Analysis of Financial        10
        Condition and Results of Operations


   Part II - Other Information                                 16

   Signatures                                                  17

<PAGE>  3





     Item 1. Financial Statements

     OSB FINANCIAL CORP and SUBSIDIARIES
     UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
     (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                                at September 30,   at December 31,
                                                                                      1996               1995
                                                                                ----------------   ---------------
     ASSETS
         <S>                                                                    <C>                <C>
         Cash and Cash Equivalents                                                        $1,077             $3,789 
         Investment Securities Available for Sale, at fair market value                   25,306             29,763 
         Mortgage-backed Securities Available for Sale, at fair market value              44,614             49,838 
         Loans Held for Sale                                                                 163              3,070 
         Loans Receivable                                                                170,569            165,392 
         Other Assets                                                                      8,736              8,962 
                                                                                     ------------       ------------
         TOTAL ASSETS                                                                   $250,465           $260,814 
                                                                                     ============       ============
     LIABILITIES AND STOCKHOLDERS' EQUITY                                                                           
     Liabilities:
         Deposit Accounts                                                               $161,802           $156,782 
         Borrowed Funds                                                                   50,710             64,335 
         Other Liabilities                                                                 6,907              7,064 
                                                                                     ------------       ------------
            Total Liabilities                                                            219,419            228,181 
                                                                                     ------------       ------------
     Stockholders' Equity :
         Common Stock (1,530,000 shares at $.01 par value at                                  15                 15 
            September 30, 1996; 1,518,000 shares at December 31, 1995)
         Additional Paid-in Capital                                                       17,029             16,883 
         Retained Earnings, substantially restricted                                      24,147             23,909 
         Unearned Compensation, ESOP                                                        (544)              (615)
         Unearned Compensation, MRP's                                                       (681)              (689)
         Unrealized Loss on Securities Available for Sale - Net of Tax                      (486)               (37)
                                                                                     ------------       ------------
                                                                                          39,480             39,466 
         Less: 369,866 Shares of Treasury Common Stock at
            September 30, 1996; 302,498 at December 31, 1995, at cost                     (8,434)            (6,833)
                                                                                     ------------       ------------

                Total Stockholders' Equity                                                31,046             32,633 
                                                                                     ------------       ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $250,465           $260,814 
                                                                                     ============       ============
</TABLE>






     See attached notes to Consolidated Financial Statements.

<PAGE>  4




       OSB FINANCIAL CORP and SUBSIDIARIES
       UNAUDITED CONSOLIDATED STATEMENTS OF INCOME 
       (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                         For the Quarter            For the Nine Months
                                                                       Ended September 30,          Ended Setpember 30,
                                                                        1996          1995          1996          1995
                                                                        ----          ----          ----          ----
       Interest Income on Loans                                                 
          <S>                                                          <C>            <C>           <C>           <C>
          Mortgage Loans                                                 $2,570         $2,729        $8,074        $7,834
          Other Loans                                                       706            425         1,858         1,089
                                                                    -----------     ----------    ----------    ----------
          Total Interest Income on Loans                                  3,276          3,154         9,932         8,923
                                                                    -----------    -----------    ----------    ----------
       Interest and Dividend Income on Investment Securities
          Investment Securities                                             357            450           999         1,415
          Mortgage-backed Securities                                        864            806         2,474         2,456
          Dividends - FHLB Stock                                             54             48           162           128
          Interest-bearing Deposits                                          50             14           145            29
                                                                     ----------     ----------    ----------    ----------
          Total Income on Investment Securities                           1,325          1,318         3,780         4,028
                                                                     ----------     ----------    ----------    ----------
          Total Interest and Dividend Income                              4,601          4,472        13,712        12,951
                                                                     ----------     ----------    ----------    ----------
       Interest Expense:
          Deposit Accounts                                                1,986          1,946         5,777         5,759
          Borrowed Funds                                                    728            843         2,391         2,332
                                                                     ----------     ----------    ----------    ----------
          Total Interest Expense                                          2,714          2,789         8,168         8,091
                                                                     ----------     ----------    ----------    ----------
          Net Interest Income                                             1,887          1,683         5,544         4,860
          Provision for Loan Losses                                         100             30           315           153
                                                                     ----------     ----------    ----------    ----------
          Net Interest Income after Provision for Loan Losses             1,787          1,653         5,229         4,707
                                                                     ----------     ----------    ----------    ----------
       Non-interest Operating Income:
          Loan Fees and Charges                                              88             52           273           242
          Savings Fees and Charges - net                                     88             60           239           163
          Other Income                                                       51             44           177           205
                                                                     ----------     ----------    ----------    ----------
          Total Non-interest Operating Income                                227           156           689           610
                                                                     ----------     ----------    ----------    ----------
       Gains (Losses) on Sales
          Gain (Loss) on Sale of Loans                                       42             44           178           173
          Gain (Loss) on Sale of Investments                                 (4)             7            10            12
          Gain (Loss) on Sale of Other Assets                                29              0            19             0
                                                                     ----------     ----------    ----------    ----------
          Total Gains on Sales                                               67             51           207           185
                                                                     ----------     ----------    ----------    ----------
          Net Income Before Taxes and Non-Interest Expense               $2,081         $1,860        $6,125        $5,502
                                                                     ----------     ----------    ----------    ----------

</TABLE>
     See attached notes to Consolidated Financial Statements.

<PAGE>  5




       OSB FINANCIAL CORP and SUBSIDIARIES
       UNAUDITED CONSOLIDATED STATEMENTS OF INCOME 
       (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                         For the Quarter            For the Nine Months
                                                                       Ended September 30,          Ended Setpember 30,
                                                                        1996          1995          1996          1995
                                                                        ----          ----          ----          ----
          <S>                                                       <C>            <C>           <C>           <C>
          Net Income Before Taxes and Non-Interest Expense               $2,081         $1,860        $6,125        $5,502
                                                                     ----------     ----------    ----------    ----------
       Non-Interest Expense:                                                                                              
          Compensation and Benefits                                         658            703         1,893         1,951
          Office Buildings & Equipment                                      147            182           493           551
          Data Processing Expense                                            89             78           277           231
          Federal Insurance Premium                                       1,143             92         1,335           276
          Marketing Expense                                                  53             40           166           147
          Other Expense                                                     255            299           825           846
                                                                     ----------     ----------    ----------    ----------
       Total Non-interest Expense                                         2,345          1,394         4,989         4,002
                                                                     ----------     ----------    ----------    ----------
       Income Before Income Taxes                                          (264)           466         1,136         1,500
       Income Taxes                                                        (113)           174           382           567
                                                                     ----------     ----------    ----------    ----------
       Net Income                                                          (151)           292           754           933
                                                                     ==========     ==========    ==========    ==========

          Average Common Shares Outstanding                           1,111,359      1,174,149     1,127,214     1,176,079
          Earnings Per Share                                              ($0.13)       $0.25          $0.67         $0.79 
                                                                       ==========    ==========    ==========   ===========

       Cash Dividends per Share                                            $0.16         $0.14         $0.46         $0.42 
                                                                       ==========    ==========    ==========    ==========

</TABLE>
















     See attached notes to Consolidated Financial Statements.

<PAGE>  6



     OSB FINANCIAL CORP and SUBSIDIARIES
     UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
     (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                           For the Quarter           For the Nine Months
                                                                         Ended September 30,         Ended September 30,
                                                                          1996          1995         1996          1995
                                                                          ----          ----         ----          ----

     <S>                                                               <C>           <C>           <C>           <C>
     Net cash provided by (used in) operating activities                   $1,711        $3,273        $1,199          $493
                                                                       ----------    ----------    ----------    ----------
         Cash flows from investing activities
            Proceeds from maturities of investment securities               1,500         1,021         4,500         3,558
            Proceeds from sale of investment securities                       530             0         8,158             0
            Purchase of investment securities                              (4,511)            0        (8,511)            0
            Principal repayments on mortgage-backed securities                663           497         2,196         1,313
            Purchase of mortgage-backed securities                              0        (1,652)            0        (1,652)
            Sale of mortgage backed securities                                  0             0         2,708             0
            Net (increase) decrease in loans                               (2,526)       (5,305)       (5,177)      (18,533)
            (Purchases) redemptions of FHLB Stock                               0           (72)         (101)         (906)
            Capital Expenditures                                                0           (29)          (93)         (261)
            Capital Expenditures on Real Estate held for investment             0           (49)           (1)         (294)
            Proceeds from sale of Real Estate held for investment              86           114           354           114
            Proceeds from sale of Foreclosed Properties                         0             0            47            78
                                                                       ----------    ----------    ----------    ----------
         Net cash provided by (used in) investing activities               (4,258)       (5,475)        4,080       (16,583)
                                                                       ----------    ----------    ----------    ----------
         Cash flows from financing activies
            Net increase (decrease) in deposits                               387         1,027         5,020        (3,003)
            Net increase (decrease) in borrowed funds                      (1,505)        1,350       (13,625)       17,970
            Net increase (decrease) in advance payments by
                borrowers for taxes and insurance                             766           853         2,548         2,715
            Proceeds from sale of common stock                                 35            80           169           126
            Dividends paid to stockholders                                   (182)         (166)         (502)         (494)
            Purchase of 11,000 shares of Treasury Common Stock
                from July through September, 1995                               0          (264)       (1,601)         (691)
                                                                       ----------    ----------    ----------    ----------
         Net cash provided by (used in) financing activities                 (489)        2,880        (7,991)       16,623
                                                                       ----------    ----------    ----------    ----------

         Net increase (decrease) in cash and cash equivalents              (3,036)          678        (2,712)          533
         Cash and cash equivalents at beginning                             4,113         1,305         3,789         1,450
                                                                       ----------    ----------    ----------    ----------
         Cash and cash equivalents at end                                  $1,077        $1,983        $1,077        $1,983
                                                                       ==========    ==========    ==========    ==========


</TABLE>





     See attached notes to Consolidated Financial Statements.


<PAGE>  7



                 Notes to Consolidated Financial Statements
                    OSB Financial Corp. and Subsidiaries


   1.   The accompanying consolidated financial statements include the
        accounts of OSB Financial Corp ("Holding Company"); its wholly-
        owned subsidiary, Oshkosh Savings Bank ("Bank"); and OSB
        Investments, Inc and Oshkosh Financial, Inc. (OFI), both wholly-
        owned subsidiaries of the Bank.  The data as of and for the
        periods ended September 30, 1996 and 1995 are unaudited but, in
        the opinion of management, reflect all accruals and adjustments
        necessary for a fair statement of financial condition and results
        from operations at the dates and for the periods indicated.  All
        such accruals and adjustments are of a normal, recurring nature. 
        The results of operations for the quarter ended September 30,
        1996 are not necessarily indicative of results to be expected for
        the entire year of 1996. 

   2.   On May 15, 1996 the Board of Directors authorized the repurchase
        of up to 5% of stock outstanding, or 55,974 shares.  As of
        October 31, 1996, 8,500 shares have been purchased at an average
        cost of $23.20 per share.  There were no purchases made during
        the quarter ended September 30, 1996.

   3.   As a member of the Federal Home Loan Bank (FHLB) system, the Bank
        may utilize various borrowing alternatives, secured by pledges of
        mortgage loans and FHLB stock.

        At September 30, 1996, the Bank had $50.7 million in FHLB
        Advances outstanding, $500,000 of which is on an overnight line
        of credit with the interest rate adjusted daily (5.56% on
        September 30, 1996).  The balance, $50.2 million, are fixed term
        advances ranging from 3 to 48 months.  Interest is payable
        monthly; principal at maturity.  Prepayments of principal are
        generally not allowed.

        Scheduled maturities of fixed-term advances are:

                               Fixed Rate         Variable Rate
           ($000 omitted)      ----------         -------------

                                $         %         $         %  
                               ---       ---       ---       --- 

                1996        $ 3,350     5.65%   $ 4,710     5.79%
                1997         18,400     5.28     16,900     5.56 

                1997          3,500     5.96      2,100     5.55 
                1998          1,250     5.77         --       -- 
                           --------  --------  --------  --------

                Total       $26,500     5.44%   $23,710     5.61%
                           ========  ========  ========  ========

<PAGE>  8





    4.  Effective January 1, 1996, the Bank adopted SFAS No. 122,
        "Accounting for Mortgage Servicing Rights".  SFAS No. 122
        requires accounting recognition of the rights to service mortgage
        loans for others.  The total cost of the mortgage loan will be
        allocated between the relative fair values of the loan and the
        mortgage servicing rights ("MSRs").  The cost allocated to the
        MSRs will be recognized as a separate asset and amortized over
        the period of estimated servicing income.  Activity during the
        third quarter of 1996:

             Balance 7/1/96                     $132,780
             Additions                            33,632
             Less: amortization                   <8,283>
                                                --------
             Balance 3/31/96                    $158,129
                                                ========

        Retroactive application of SFAS No. 122 was prohibited, so there
        is no effect on prior years.  Originated servicing rights
        resulting from the above adoption of SFAS No. 122, are amortized
        over the estimated lives of the loans using the level yield
        method, adjusted for prepayments.

        The Savings Bank originates mortgage servicing rights on single-
        family residential mortgage loans only.  In valuing the mortgage
        servicing rights recorded on such loans, the Savings Bank
        stratifies the loans by contractual interest rate, and original
        term to maturity.

        The value of mortgage servicing rights is subject to impairment
        as a result of changes in loan prepayment expectations and in
        market discount rates used to value the future cash flows
        associated with such assets.  If actual loan prepayment activity
        associated with serviced loans exceeds that which was estimated
        by management at the time the mortgage servicing rights were
        originally recorded, a valuation adjustment is recorded against
        such assets and against the Corporation's loan servicing fee
        income in the period of the prepayment.

   5.   In connection with the conversion on June 30, 1992, the Board of
        Directors adopted the 1992 Stock Option and Incentive Plan.  The
        Plan was approved by stockholders on April 22, 1993.

        Under the Option Plan, a number of shares equal to 10% of the
        Common Stock issued in the Conversion were reserved for future
        issuance by the Holding Company upon exercise of stock options to
        be granted to full time employees and non-employee directors of
        the Holding Company and its subsidiaries from time to time under
        the Option Plan.  The purpose of the Option Plan is to increase
        the incentive and encourage the continued employment of key
        employees by facilitating their purchase of a stock interest in
        the Holding Company.  The Option Plan provides for a term of ten
        years after which no awards may be made.

<PAGE>  9




        Plan activity includes:

             Outstanding at June 30, 1996       60,425
             Exercised July - September, 1996     <500>
                                                ------
             Balance at September 30, 1996      59,925

        As of September 30, 1996, 25,500 shares are vested and currently
        exercisable.

<PAGE>  10






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

   General
   -------

        Management's discussion and analysis of results of operations and
   financial condition is intended to assist in understanding the results
   of operations and financial condition of the Corporation and the
   Savings Bank.  The information contained in this section should be
   read in conjunction with the Consolidated Financial Statements, and
   the accompanying Notes to Consolidated Financial Statements.  


   Legislative Update
   ------------------

        On September 30, 1996 President Clinton signed the Omnibus
   spending bill (HR3610), which included the Thrift Fund Rescue and
   Relief package.  Key elements of this part of the bill include:

        -    One-Time Special Assessment to capitalize the Savings
             Association Insurance Fund (SAIF) of 65.7 basis points,
             based on March 31, 1995 deposits, to be charged in the third
             quarter of 1996; 
        -    From 1997 through 1999 SAIF members will pay annual premiums
             of 6.44 basis points, down from the current 23 basis points,
             while Bank Insurance Fund (BIF) members pay 1.29 basis
             points;
        -    SAIF and BIF will be merged on January 1, 1999.  
        -    As of January 1, 2000, all institutions will pay deposit
             premiums of 2.43 basis points;
        -    The bill also provides a number of important changes to
             reduce the regulatory burden on financial institutions.

        Management sees this as a positive for the Savings Bank and the
   thrift industry because it resolves an enormous level of uncertainty
   and alleviates a significant competitive disadvantage.

        The estimated One-Time Special Assessment is $1.05 million.  The
   assessment will be paid in November, 1996, and has been accrued as of
   September 30, 1996.  The after-tax affect is $674,000, or $0.60 per
   share.  The annual premium for deposit insurance for the years 1997
   through 1999 will decrease about $260,000 per year based on the
   current deposit base.  Beginning in the year 2000, the annual premium
   will be reduced an additional $60,000.  Thus, the payback on the One-
   Time Special Assessment is less than four years.

        The chart below shows the effect of the one time special
   assessment on the third quarter and year to date performance.  

<PAGE>  11


<TABLE>
<CAPTION>
                                                            QUARTER ENDED           NINE MONTHS ENDED
                                                            SEPTEMBER 30,             SEPTEMBER 30,

      ($ in 000s, except per share amounts)              1996         1995         1996         1995
                                                          ----         ----         ----         ----
      <C>                                                <C>          <C>          <C>          <C>
       Before One-Time Special Assessment
               Net Income                                 $523         $292        $1,428        $933
               Earnings Per Share                         $.47         $.25        $1.27         $.79

       After One-Time Special Assessment
               Net Income                                ($151)        $292         $754         $933
               Earnings (Loss) Per Share                 ($.13)        $.25         $.67         $.79

       Affect of One-Time Special Assessment on
               Net Income                                ($674)                    ($674)
               Earnings Per Share                        ($.60)                    ($.60)

</TABLE>

   Results of Operations
   ---------------------

        The operating results of the Savings Bank depend primarily on its
   net interest income, which is the difference between interest income
   on interest-earning assets, primarily loans and securities available
   for sale and securities to be held for maturity, and interest expense
   on interest-bearing liabilities, primarily deposits and borrowings. 
   The Bank's net income also is affected by the establishment of
   provisions for loan losses and the level of its other income,
   including fees on loans sold, deposit service charges, the result of
   real estate activities, gains or losses from the sale of assets, as
   well as its other expenses and income tax provisions.

        Net loss for the quarter ended September 30, 1996 equaled
   $151,000, compared to net income of $292,000 for the quarter September
   30, 1995.  The primary cause for the difference was the special one-
   time FDIC assessment of $1.049 million, as discussed above.  The table
   below shows the effect of the assessment, as well as other material
   changes between the quarters.  A discussion follows.

<PAGE>  12


<TABLE>
<CAPTION>
                                                                          For the Quarter
                                                                        Ended September 30,        Effect on
                                                                      1996               1995      Net Income
                                                                      ----               ----      ----------
<S>                                                                  <C>            <C>            <C>

       Interest income on mortgage loans                               $2,570         $2,729         $ (159)
       Interest income on other loans                                     706            425            281
       Interest expense on borrowed funds                                (728)          (843)           115
       Other changes in net interest income                                                             (33)
                                                                     --------       --------       --------

                                                                                                        204

       Provision for loan losses                                         (100)           (30)           (70)
       Special one-time FDIC assessment                                (1,049)             0         (1,049)
       Other changes in non-interest income and expense                                                 185
       Income taxes                                                       113           (174)           287
                                                                     --------       --------       --------
       Net Income                                                        (151)           292           (443)
                                                                     ========       ========       ========

</TABLE>
              The decrease in interest income on mortgage loans of $159,000 was
   due to a decrease in outstanding balances in mortgage loans of $7.0
   million from December 30, 1995 to September 30, 1996.  The decrease
   was due to the sale of long term, fixed rate mortgage loans to the
   secondary market.  In order to manage interest rate risk, it is the
   Savings Bank's policy to sell fixed rate mortgage loans with a term of
   15 years or greater.  

        Interest income on other loans increased $281,000, or 66%, for
   the quarter ended September 30, 1996, compared to a year earlier.  The
   Savings Bank has made a concerted effort to increase balances in
   commercial and consumer loans.  The emphasis on consumer loans has
   been home equity loans and home equity lines of credit.  The results
   of these efforts have been an increase in outstanding balances from
   $18.2 million at September 30, 1995, to $32 million at the end of the
   third quarter in 1996.  The increase in interest income is a direct
   result of the increase in volume.  

        The decrease in interest expense on borrowed funds of $115,000 is
   the result of repayment of advances to the Federal Home Loan Bank. 
   Outstanding borrowings equal $50.7 million at September 30, 1996,
   compared to  $56.9 million a year earlier.

        Provision for loan losses equaled $100,000 for the quarter ended
   September 30, 1996, compared to $30,000 for the same quarter in 1995. 
   As mentioned above, the bank has increased outstanding balances in
   commercial and consumer loans.  These types of loans do present a
   somewhat higher degree of risk than residential mortgage loans. 
   Therefore, the Savings Bank has increased the provision for loan
   losses to $1.1 million at September 30, 1996 from $770,000 a year
   earlier.  There have been no serious problems with the quality of the

<PAGE>  13




   loan portfolio.  Non-performing loans equal just 0.34% of total loans
   at September 30, 1996, up slightly from 0.20% at September 30, 1995. 
   The loan loss reserves equal 186.45% of non-performing assets at
   September 30, 1996.  

        The special one-time FDIC assessment has been discussed above. 
   The change for provision for income taxes relates directly to net
   income before taxes.

        Net income for nine months ended September 30, 1996 was $754,000,
   compared to $933,000 for the same period in 1995.  The per share
   numbers are $0.67 and $0.79, respectively.  The table below summarizes
   the activity for the two periods.    
<TABLE>
<CAPTION>
                                                                              For the Nine Months
                                                                              Ended September 30,         Effect on
                                                                              1996             1995      Net Income
                                                                              ----             ----      ----------

<S>                                                                        <C>            <C>             <C>

             Net interest income                                              5,544          4,860            684
             Provision for loan losses                                         (315)          (153)          (162)
             Non-interest income and gains on sales                             896            795            101
             Special one-time FDIC assessment                                (1,049)             0         (1,049)
             Other non-interest expense                                      (3,940)        (4,002)            62
             Income taxes                                                      (382)          (567)           185
                                                                           --------       --------       --------

                                                                                754            933           (179)
                                                                           ========       ========       ========
</TABLE>

              Again, the special one-time FDIC assessment is the primary reason
   for the decrease.  The other factors are the same as the discussion
   for the third quarter above.  The Savings Bank's emphasis on
   commercial and consumer lending contributed to the increase in net
   interest income.  The spread, or difference between the yield of
   interest earning assets and costs of interest paying liabilities, has
   improved from 2.04% on September 30, 1995 to 2.61% on September 30,
   1996.  Non-interest expense excluding the FDIC assessment is actually
   slightly less for the nine months ended September 30, 1996 than for
   the same period in 1995.  And, the effect of the FDIC assessment is
   $674,000 after taxes, or $0.60 per share.  


   Financial Condition
   -------------------

        Total assets have declined $10.3 million, or 3.97%, from $260.8
   million at December 31, 1995 to $250.5 million at September 30, 1996. 
   The factors causing the decrease are summarized in the table below,
   with discussion to follow.

<PAGE>  14

<TABLE>
<CAPTION>

                                                            At Sept. 30, 1996   At Dec. 31, 1995       $ Change
<S>                                                             <C>              <C>                 <C>

       Cash and cash equivalents                                 $   1,077          $   3,789        $   (2,712)
       Investment and mortgage-backed securities                    69,920             79,601            (9,681)
       Loans receivable and held for sale                          170,732            168,462             2,270
                                                                                                     ----------

                                                                                                        (10,123)
                                                                                                       --------

       Deposits                                                    161,802            156,782
       Borrowed funds                                               50,710             64,335             5,020
       Treasury stock                                               (8,434)            (6,833)          (13,625)
                                                                                                         (1,601)
                                                                                                     ----------
                                                                                                        (10,206)
                                                                                                       --------
</TABLE>
        The Savings Bank made the decision to rely more on retail
   deposits to fund operations, and less on borrowed funds.  A number of
   steps have been taken to accomplish this.  First, a money market index
   account was introduced in late 1995.  To date, that account has
   attracted an excess of $15 million.  There has been a campaign to
   increase the number of retail checking accounts, which was successful. 
   These efforts have resulted in the $5 million increase in deposits. 
   Borrowings at the Federal Home Loan Bank of Chicago have been re-paid
   when possible, funded primarily by maturities and sales of investments
   and mortgage-backed securities.  

        All these actions helped to improve the interest rate spread,
   mentioned above.  Lower cost deposits replaced higher cost borrowings. 
   Mutual funds with a relatively low yield were sold to pay off
   borrowings.  Though there was relatively small over all increase in
   the loan portfolio, the composition of that portfolio changed
   dramatically.  Higher yielding commercial and consumer loans increased
   to 18% of the loan portfolio at September 30, 1996 from less than 12%
   at the end of 1995.

   Capital Ratios
   --------------

        Federal regulations require the Savings Bank to meet certain
   tangible, core, and risk-based capital requirements.  Tangible capital
   consists of stockholders' equity minus certain intangible assets and
   an adjustment for unrealized gains or losses on available for sale
   securities.  Core capital consists of stockholders' equity and an
   adjustment for unrealized gains or losses on available for sale
   securities.  The risk-based capital requirements address risk related
   to both recorded assets and off-balance sheet commitments and
   obligations.

<PAGE>  15






        The following table summarizes the Savings Bank's capital ratios
   and the ratios required by regulations of the Office of Thrift
   Supervision at September 30, 1996:
<TABLE>
<CAPTION>
                                                          Tangible         Core        Risk-Based
                                                          Capital         Capital       Capital
                                                          -------         -------      ----------

<S>                                                        <C>            <C>           <C>
                  Bank Regulatory Percentage                  10.66%         10.66%        23.39%
                  Required Regulatory Percentage               1.50%          3.00%         8.00%
                  Excess Regulatory Percentage               -------       --------      --------
                                                               9.16%          7.66%        15.39%

                                                                     ($ in Thousands)
                  Bank Regulatory Capital                    $27,123        $27,123       $28,188
                  Required Regulatory Capital                  3,816          7,631         9,640
                  Excess Regulatory Capital                 --------       --------      --------
                                                             $23,207        $19,492       $18,548
</TABLE>

   Future Accounting Changes
   -------------------------

        The Financial Accounting Standards Board ("FASB") issued
   Statement of Financial Accounting Standards ("FAS") No. 125,
   "Accounting for Transfers and Servicing of Financial Assets and
   Extinguishments of Liabilities" in June 1996.  FAS No. 125 provides
   accounting and reporting standards for transfers and servicing of
   financial assets and extinguishments of liabilities.  The standards
   are based on consistent application of a financial-components approach
   that focuses on control.  Under the financial-components approach, an
   entity recognizes the financial and servicing assets it controls and
   the liabilities it has incurred after a transfer of financial assets. 
   In addition, the entity derecognizes financial assets when control has
   been surrendered and derecognizes liabilities when extinguished.  This
   statement is required to be adopted by the Corporation for transfers
   and servicing of financial assets and extinguishments of liabilities
   occurring after December 31, 1996.  The adoption of FAS No. 125 is not
   anticipated to have a significant impact on the Corporation's
   financial condition or results of operations once implemented.

<PAGE>  16




                    OSB Financial Corp. and Subsidiaries
                     -----------------------------------

                         Part II - Other Information

   ITEM 1, LEGAL PROCEEDINGS

   Neither OSB Financial Corp. nor the Savings Bank is a party to any
   material legal proceedings at this time.  From time to time the
   Savings Bank is involved in various claims and legal actions arising
   in the ordinary course of business.  


   ITEM 2, CHANGES IN SECURITIES

   Not applicable.


   ITEM 3, DEFAULTS UPON SENIOR SECURITIES

   Not applicable.


   ITEM 4, SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   Not applicable.


   ITEM 5, OTHER INFORMATION

   None


   ITEM 6, EXHIBITS AND REPORTS ON FORM 8-K

   None

<PAGE>  17




                                 SIGNATURES
                                 ----------


   Pursuant to the requirements of the Securities Exchange Act of 1934,
   the registrant has duly caused this report to be signed on its behalf
   by the undersigned thereunto duly authorized.


                                      OSB Financial Corp.


   Date:     November 1, 1996         By:  /s/ James J. Rothenback
             ------------------            ---------------------------
                                           James J. Rothenbach
                                           President and Chief Executive
                                           Officer
                                           (Duly Authorized Officer)


   Date:     November 1, 1996         By:  /s/ David A. Hayford
             ------------------            ----------------------------
                                           David A. Hayford
                                           Vice President - Finance
                                           (Principal Accounting Officer)