<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 0-27522
PITTSBURGH HOME FINANCIAL CORP.
-------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1772349
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
438 Wood Street
Pittsburgh, Pennsylvania 15222
------------------------ -----
(Address of principal executive office) (Zip Code)
(412) 281-0780
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: As of August 11,
1997, there were issued and outstanding 1,969,369 shares of the Registrant's
Common Stock, par value $.01 per share.
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PITTSBURGH HOME FINANCIAL CORP.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition as of
June 30, 1997 (unaudited) and September 30, 1996 3
Consolidated Statements of Income for the nine months
ended June 30, 1997 (unaudited) and 1996 (unaudited). 4
Consolidated Statements of Changes in Shareholders' Equity
for the nine months ended June 30, 1997 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1997 (unaudited) and 1996 (unaudited). 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security-Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES
</TABLE>
<PAGE> 3
PITTSBURGH HOME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
(Unaudited)
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 1,685,270 $ 915,326
Interest-bearing deposits 2,586,882 6,646,384
------------- -----------
4,272,152 7,561,710
Investments and mortgage-backed securities; available for sale 59,138,453 46,305,705
Equity securities, trading 1,186,750 -
Investments and mortgage-backed securities; held to maturity
(fair value of $9,812,064) 10,020,844 -
Loans receivable, net of allowance of $1,318,489 and
$1,128,279 171,714,197 135,551,534
Accrued interest receivable 1,744,548 1,243,462
Premises and equipment, net 2,603,256 1,900,149
Goodwill 310,886 -
Federal Home Loan Bank stock - at cost 4,360,000 1,875,000
Deferred income taxes 176,000 523,632
Foreclosed real estate 516,065 133,256
Other assets 221,403 235,317
------------- ------------
Total assets $ 256,264,554 $195,329,765
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits $ 138,770,110 $124,341,573
Advances from Federal Home Loan Bank 84,200,000 36,500,000
Advances by borrowers for taxes and insurance 3,466,538 1,847,815
Accrued income taxes payable 195,389 496,029
Other liabilities 1,646,240 1,772,332
------------- ------------
Total liabilities 228,278,277 164,957,749
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued - -
Common stock, $.01 par value, 10,000,000 shares authorized,
2,182,125 shares issued and outstanding 21,821 21,821
Additional paid-in capital 20,993,066 20,958,806
Treasury stock - at cost, 212,756 shares (2,948,004) -
Unearned shares of ESOP (1,702,776) (1,831,720)
Unearned shares of Recognition and Retention Plan (921,410) -
Net unrealized gain (loss) on securities available for sale 332,000 (50,000)
Retained earnings (substantially restricted) 12,211,580 11,273,109
------------- ------------
Total shareholders' equity 27,986,277 30,372,016
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 256,264,554 $195,329,765
============= ============
</TABLE>
3
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PITTSBURGH HOME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
(Unaudited) (Unaudited)
------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $3,398,959 $2,389,944 $9,493,500 $6,924,588
Mortgage-backed securities 632,328 422,156 1,531,693 1,286,486
Investment securities
Taxable 475,675 318,046 1,361,287 708,836
Tax exempt 76,264 46,736 238,551 113,958
Interest-bearing deposits 96,196 78,001 276,254 297,529
---------- ---------- ---------- ----------
Total interest income 4,679,422 3,254,883 12,901,285 9,331,397
Interest expense:
Deposits 1,631,438 1,269,206 4,743,005 3,939,763
Interest on advances and other borrowings 1,198,035 511,554 2,881,141 1,589,671
---------- ---------- ---------- ----------
Total interest expense 2,829,473 1,780,760 7,624,146 5,529,434
---------- ---------- ---------- ----------
Net interest income before provision for loan losses 1,849,949 1,474,123 5,277,139 3,801,963
Provision for loan losses 105,000 90,000 255,000 210,000
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 1,744,949 1,384,123 5,022,139 3,591,963
Noninterest income:
Service charges and other fees 3,655 19,654 20,866 70,663
Other income 87,777 70,846 269,134 199,784
Gain on trading account securities 150,958 - 150,958 -
Gain on sale of investments 857 - 857 -
Loss on sale of REO (16,142) - (16,142) -
---------- ---------- ---------- ----------
Total noninterest income 227,105 90,500 425,673 270,447
Noninterest expenses:
Compensation and employee benefits 641,238 499,739 1,840,954 1,388,863
Premises and occupancy costs 126,662 112,694 406,361 361,073
Amortization of goodwill 8,254 - 19,259 -
Federal insurance premium 21,998 66,810 42,233 200,324
Marketing 52,815 30,342 133,129 113,453
Data processing costs 71,817 40,487 197,202 121,334
Other expenses 175,715 158,206 620,564 372,009
---------- ---------- ---------- ----------
Total noninterest expense 1,098,499 908,278 3,259,702 2,557,056
Income before income taxes 873,555 566,345 2,188,110 1,305,354
Income taxes 326,300 197,175 775,300 474,575
---------- ---------- ---------- ----------
Net income $ 547,255 $ 369,170 $1,412,810 $ 830,779
========== ========== ========== ==========
Earnings per share $ 0.30 $ 0.18 $ 0.75 N/A
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
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PITTSBURGH HOME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Net
unrealized
Unearned gain (loss)
Additional shares of Unearned on securities Total
Common Paid In Retained Treasury Employee Stock shares of available for Shareholders'
Stock Capital Earnings Stock Ownership Plan RRP sale Equity
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
September 30, 1996 $ 21,821 $20,958,806 $11,273,109 $ - $(1,831,720) $ - $(50,000) $30,372,016
Acquisition of
Treasury stock - - - (2,948,004) - - - (2,948,004)
Stock acquired for
the Recognition
and Retention Plan - - - - - (1,063,170) - (1,063,170)
Amortization of Employee
Stock Ownership Plan - - - - 128,944 - - 128,944
Amortization of the
Recognition and
Retention Plan - - - - - 141,760 - 141,760
Commitment for release
of ESOP shares - 34,260 - - - - - 34,260
Change in unrealized
loss on securities
available for sale - - - - - 382,000 382,000
Net income for period - - 1,412,810 - - - - 1,412,810
Cash dividends declared - - (474,339) - - - - (474,339)
---------------------------------------------------------------------------------------------------------
Balance as of June 30,
1997 (Unaudited) $ 21,821 $20,993,066 $12,211,580 $(2,948,004) $(1,702,776) $(921,410) $332,000 $27,986,277
=========================================================================================================
</TABLE>
See accompanying notes to unaudited financial statements.
5
<PAGE> 6
PITTSBURGH HOME FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended June 30,
1997 1996
---------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,412,811 $ 830,779
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 148,523 115,678
Amortization and accretion of premiums and discounts on
assets and deferred loan fees 482,510 (15,969)
Provision for loan losses 255,000 210,000
Deferred tax benefit 347,632 (104,237)
Amortization of ESOP plan 128,944 -
Amortization of Recognition and Retention Plan 141,760 -
Purchases of:
Equity securities, trading (2,203,523) -
Sale of:
Equity securities, trading 1,017,073 -
Commitment for release of ESOP shares 34,260 -
Other, net (913,904) 81,339
----------- ------------
Net cash provided by operating activities 851,086 1,117,590
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (63,796,412) (46,749,137)
Loan and Mortgage-backed securities principal repayments 30,519,476 28,164,601
Proceeds from loan sales 617,700 1,675,300
Purchases of:
Investment securities and mortgage-backed securities, available for sale (27,150,565) (20,029,098)
Investment securities and mortgage-backed securities, held to maturity (10,000,000) -
Sales and maturities of:
Investment securities and mortgage-backed securities, available for sale 7,952,735 10,071,429
Purchases of premises and equipment (988,594) (273,219)
Disposal of premises and equipment - 2,025
Other, net (556,731) 65,669
----------- ------------
Net cash (used) provided by investing activities (63,402,391) (27,072,430)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in checking, passbook, and money market
deposit accounts 2,690,305 (1,205,252)
Net increase (decrease) in certificates of deposit 11,738,232 589,174
Increase in advances by borrowers for taxes and insurance 1,618,723 1,858,828
Increase in advances from the Federal Home Loan Bank 47,700,000 5,000,000
Cash dividends paid to shareholders (474,339) -
Purchase of Recognition and Retention Plan shares (1,063,170) -
Purchase of treasury stock (2,948,004) -
Proceeds from issuance of stock - 19,085,645
----------- ------------
Net cash provided by financing activities 59,261,747 25,328,395
Net decrease in cash and cash equivalents (3,289,558) (626,445)
Cash and cash equivalents at beginning of year 7,561,710 3,544,603
----------- ------------
Cash and cash equivalents at end of year $ 4,272,152 $ 2,918,158
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (includes interest credited on deposits of $4,743,005 and $3,795,198
in 1997 and 1996 respectively) $ 7,659,896 $ 4,339,265
=========== ============
Income taxes paid $ 514,500 $ 211,266
=========== ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Foreclosed mortgage loans transferred to real estate owned 382,809 -
Unrealized gain on securities available for sale 579,500 182,000
Deferred income taxes (197,500) (62,000)
----------- ------------
Net unrealized gain on investment and mortgage-backed securities $ 382,000 $ 120,000
=========== ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
PITTSBURGH HOME FINANCIAL CORP. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of
Pittsburgh Home Financial Corp. (the "Company") have been prepared in
accordance with instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
However, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The results of operations for the three and nine months ended June 30,
1997 are not necessarily indicative of the results to be expected for
the year ending September 30, 1997. The unaudited consolidated
financial statements and notes thereto should be read in conjunction
with the audited financial statements and notes thereto for the year
ended September 30, 1996.
Financial Accounting Standards Board Statement Number 128, "Accounting
for Earnings per Share," is effective for fiscal years beginning after
December 15, 1997 and provides specific computation, presentation and
disclosure requirements for earnings per share. The statement's
objective is to simplify the computation of earnings per share and to
make the United States standard for computing earnings per share more
compatible with the standards of other countries and with that of the
International Accounting Standards Committee. Early adoption of FAS 128
is not permitted; however, reported Earnings Per Share would not be
materially different if FAS 128 would have been in effect.
Note 2 - Business
--------
The Company's subsidiary, Pittsburgh Home Savings Bank (the "Bank"), is
a state chartered stock savings bank primarily engaged in attracting
retail deposits from the general public and using such deposits to
originate loans (primarily single-family residential loans.) The Bank
conducts business from seven offices in Allegheny and Butler counties
of western Pennsylvania and primarily lends in this geographic area.
The Bank is subject to competition from other financial institutions
and other companies which provide financial services. The Bank is
subject to the regulations of certain federal and state agencies and
undergoes periodic examinations by those regulatory authorities.
7
<PAGE> 8
Note 3 - Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of
Pittsburgh Home Financial Corp. and its wholly owned subsidiary,
Pittsburgh Home Savings Bank. All significant intercompany balances and
transactions have been eliminated in consolidation.
Note 4 - Conversion
----------
The Company is a Pennsylvania corporation which is the holding company
for the Bank. The Company was organized by the Bank for the purpose of
acquiring all of the capital stock of the Bank in connection with its
conversion from a mutual stock organization to the stock holding
company form which was completed on April 1, 1996 (the "Conversion").
In the Conversion, 2,182,125 shares of common stock were sold at a
subscription price of $10.00 per share, resulting in net proceeds of
approximately $21.0 million. In exchange for 50% of the net conversion
proceeds ($10.5 million), the Company acquired 100% of the stock of the
Bank and retained the remaining $10.5 million at the holding company
level.
Note 5 - Earnings per share
------------------
Earnings for the three and nine months ended June 30, 1997 were $.30
and $.75 per share. Earnings per share for the three months ended June
30, 1996 were $.18, information is not applicable for any periods prior
to April 1, 1996, which was the date the Company completed the
Conversion. Earnings per share were computed by dividing net income
for the three and nine months ended June 30, 1997 by the average number
of common shares outstanding. Shares outstanding for June 30, 1997 do
not include ESOP shares that have not been committed to be released in
accordance with Statement of Position (SOP) 93-6, "Employers'
Accounting for Employee Stock Ownership Plans." Reported earnings per
share are based on 1,815,707 and 1,889,995 common shares for the three
and nine months ended June 30, 1997.
Note 6 - Employee Stock Ownership Plan (ESOP)
------------------------------------
In connection with the Conversion, the Company established an ESOP for
the benefit of eligible employees. The ESOP Trust borrowed $1.9 million
from the Company and purchased 174,570 shares, equal to 8% of the total
number of shares issued in the Conversion. The Company accounts for its
ESOP in accordance with SOP 93-6, "Employers Accounting for Employee
Stock Ownership Plans," which requires the Company to recognize
compensation expense equal to the fair value of the ESOP shares during
the periods in which they become committed to be released. To the
extent that the fair value of ESOP shares differs from the cost of such
shares, this differential will be
8
<PAGE> 9
charged or credited to equity. Management expects the recorded amount
of expense to fluctuate as continuing adjustments are made to reflect
changes in the fair value of the ESOP shares. Employers with internally
leveraged ESOPs, such as the Company, will not report the loan
receivable from the ESOP as an asset and will not report the ESOP debt
from the employer as a liability.
Note 7 - Stock Option Plan
-----------------
On October 15, 1996, the Stock Option Plan was approved by the
Company's stockholders. A total of 218,212 shares of common stock may
be issued pursuant to the Stock Option Plan and 176,511 shares were
awarded during the nine months ended June 30, 1997. These options are
subject to vesting provisions as well as other provisions of the Stock
Option Plan. No options have been exercised through June 30, 1997.
Note 8 - Recognition and Retention Plan and Trust (RRP)
----------------------------------------------
On October 15, 1996, the RRP was approved by the Company's
stockholders. A total of 87,285 shares of common stock are available
for awards pursuant to the RRP and 79,490 shares were awarded during
the nine months ended June 30, 1997. Awards will vest in equal
installments over a five year period, with the first installment
vesting on the first anniversary date of the grant and each additional
installment vesting on the four subsequent anniversaries of such date,
subject to various requirements as more fully described in the plan
documents. Compensation cost related to RRP shares earned during the
nine months ended June 30, 1997 was $141,760.
The Company purchased on the open market 100,935 shares of common stock
during the nine months ended June 30, 1997 to fully fund the RRP. The
cost of unearned RRP shares is recorded as a reduction of shareholders'
equity.
Note 9 - Recent Accounting and Regulatory Developments
---------------------------------------------
The Financial Accounting Standards Board released Statement of
Financial Accounting Standard Number 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") in October 1995. Effective for fiscal years
beginning after December 15, 1995, SFAS 123 outlines preferable
accounting treatment and reporting guidelines for employee stock option
plans. The Company plans to continue to measure compensation cost using
the method of accounting prescribed by Accounting Principles Board
("APB") Opinion Number 25.
The Financial Accounting Standards Board released Statement of
Financial Accounting Standard Number 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 123") in June 1996. SFAS 125 is effective for
9
<PAGE> 10
transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996 and is to be applied
prospectively. SFAS 125 establishes standards for resolving issues
related to the circumstances under which the transfer of financial
assets should be considered as sales of all or part of the assets or
as secured borrowings and about when a liability should be considered
extinguished. The Company does not anticipate any material impact on
statements of income and financial condition from the adoption of this
statement.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At June 30, 1997, the Company's total assets amounted to $256.3 million
compared with $195.3 million at September 30, 1996, an increase of 31.2%. Cash
and interest-bearing deposits decreased $3.3 million, or 43.4%, to $4.3 million
at June 30, 1997, compared to $7.6 million at September 30, 1996. The decrease
reflects the payment of dividends and the purchase of treasury stock and RRP
shares. Investments and mortgage-backed securities (held to maturity, trading
and available for sale) increased by $24.0 million or 51.8%, from $46.3 million
at September 30, 1996 to $70.3 million at June 30, 1997. The Company
implemented a trading account strategy investing $1.2 million securities for
the quarter ended June 30, 1997. The Company purchased $39.4 million in
investments and mortgage-backed securities during the period, which was
partially offset by repayments, sales and maturities. Loans receivable, net of
allowance, increased $36.1 million or 26.7%, to $171.7 million at June 30, 1997
compared to $135.6 million at September 30, 1996. The growth is primarily
attributable to increases in residential mortgage loans. During the period
ended June 30, 1997, the Company had an increase of $383,000 in foreclosed real
estate when compared to $133,000 at September 30, 1996.
Total liabilities increased by $63.3 million or 38.4% to $228.3 million
at June 30, 1997 compared to $165.0 million at September 30, 1996. Deposits
increased by $14.5 million or 11.7% to $138.8 million at June 30, 1997 compared
to $124.3 million at September 30, 1996. During the period, the Bank acquired a
branch ("Branch Acquisition") from another financial institution located in
Pittsburgh and assumed all the deposits and acquired all equipment and real
estate associated with the branch. Borrowed funds increased $47.7 million or
130.7% to $84.2 million compared to $36.5 million at September 30, 1996, as the
Company increased its Federal Home Loan Bank ("FHLB") advances to increase
liquidity and used those funds to reinvest in assets at higher yields.
Total shareholders' equity decreased $2.4 million or 7.9% to $28.0
million at June 30, 1997 compared to $30.4 million at September 30, 1996. The
decrease was the result of the Company's repurchase of its common stock and the
funding of the RRP, which was partially offset by net income during the period.
11
<PAGE> 12
RESULTS OF OPERATIONS
GENERAL. The Bank reported net income of $547,000 or $.30 per share and
$1,413,000 or $.75 per share during the three and nine months ended June 30,
1997, respectively, compared to $369,000 and $831,000 during the three and nine
months ended June 30, 1996. The increases in net income were primarily due to
an increase in net interest income before the provision for losses on loans of
$376,000, or 25.5% and $1.5 million, or 38.8%, for the three and nine months
ended June 30, 1997, respectively, compared to the same periods in 1996. The
Company implemented and managed a trading account strategy during the quarter
ended June 30, 1997, which recognized a $151,000 net gain. The trading activity
gains had an after tax impact of approximately $.05 per share for the period.
The increases were partially offset by an increase for both periods in
provision for loan losses of $15,000 or 16.7%, and $45,000 or 21.4%, an
increase in noninterest expense of $191,000, or 21.0% and $703,000, or 27.5%,
and an increase in income taxes of $129,000 or 65.5% and $300,000 or 63.2% for
the same three and nine month periods.
INTEREST INCOME. Interest income increased $1.4 million or 43.7% and
$3.6 million or 38.7% during the three and nine months ended June 30, 1997,
respectively, compared to the same periods in fiscal 1996. The increases were
primarily due to an increase in investment and loan origination activity. The
average balance of investment and mortgage-backed securities totaled $65.7
million and $60.3 million, with weighted average yields of 7.21% and 6.93%, for
the three and nine months ended June 30, 1997 respectively, an increase of
26.3% and 31.9%, respectively, from $52.0 million and $45.7 million with
weighted average yields of 6.05% and 6.14% for the same periods ended June 30,
1996. The increase in investments is primarily attributable to the Company's
continued efforts to grow its balance sheet and leverage its capital position.
The investment and mortgage-backed securities purchased have been funded
primarily with advances from the FHLB. The average balance of loans receivable
totaled $165.8 million and $153.9 million, with weighted average yields of
8.20% and 8.22%, for the three and nine months ended June 30, 1997
respectively, an increase of 40.9% and 38.0%, respectively, from $117.7 million
and $111.5 million with weighted average yields of 8.12% and 8.28% for the same
periods ended June 30, 1996.
INTEREST EXPENSE. Interest expense increased $1.0 million or 55.6% and
$2.1 million or 38.2% during the three and nine months ended June 30, 1997,
respectively, compared to the same periods in fiscal 1996. Such increases were
primarily due to an increase in the average cost of interest-bearing
liabilities, from 4.95% and 4.99% for the three and nine months ended June 30,
1996, respectively, to 5.28% and 5.20% for the same periods ended June 30,
1997. Average deposits increased $24.1 million or 21.7% and $18.7 million or
16.6% for the three and nine months ended June 30, 1997 when compared to the
same period in 1996. Average borrowed funds increased $46.4 million and $31.8
million for the three and nine months ended June 30, 1997 when compared to the
same periods in 1996. Such increases were due to the Branch Acquisition, as
well as, increased borrowings from the FHLB of Pittsburgh.
12
<PAGE> 13
PROVISION FOR LOAN LOSSES. During the three and nine months ended June
30, 1997, the Bank recorded provisions for losses on loans of $105,000 and
$255,000, respectively, compared to $90,000 and $210,000 for the comparable
periods in fiscal 1996. Total non-performing assets increased by $1.7 million
or 72.3% for the period ending June 30, 1997. The increase in total
non-performing assets is primarily attributable to a $672,000 or 192.6%
increase in non-accruing residential construction loans due to six construction
loans, and an $827,000 or 57.2% increase in non-accruing single family
residential loans (of which a portion of these loans are insured by the FHA or
guaranteed by the VA) and is attributable to the increase in loan originations.
The six non-performing construction loans are completed and are currently
listed for sale with Realtors and are located in primary market areas.
Management believes that these residential construction homes will be sold,
however, they cannot speculate as to when they will be sold nor at what level.
Real estate owned increased from $133,000 to $516,000 for the period ended June
30, 1997, due to the foreclosure of three single family residential loans,
three multi-family residential loans, and one residential construction loan.
Such increases were offset by an $155,000 or 35.2% decrease in non-performing
commercial leases and an $8,000 or 100.0% decrease in non-performing consumer
loans. The Company recorded such provisions to adjust the Company's allowance
for loan losses to a level deemed appropriate based upon an assessment of the
volume and type of lending presently being conducted by the Company, industry
standards and economic conditions in the Company's market area. The increases
in the fiscal 1997 periods reflect the increased amount of lending by the
Company.
NONINTEREST INCOME. Noninterest income increased $136,000 or 149.5% and
$156,000 or 57.8% for the three and nine months ended June 30, 1997 compared to
the three and nine months ended June 30, 1996, which was offset by a $16,000
loss on the sale of real estate owned property. The Company invested up to $1.2
million during the quarter ended June 30, 1997, pursuant to its trading account
strategy and recognized an $151,000 net gain. The investments purchased were
primarily equity securities of institutions similar to the Company itself. The
Company diversifies the purchases among numerous entities, and over the past
quarter, no individual purchase was more than $250,000.
NONINTEREST EXPENSES. Noninterest expenses increased by $191,000 or
21.0% and $703,000 or 27.5% for the three and nine months ended June 30, 1997,
respectively, compared to the same periods during fiscal 1996. Such increases
were primarily attributable to an $141,000 and $452,000 increase in salaries
and employee benefits, an $18,000 and $249,000 increase in other operating
expenses (consisting primarily of office supplies, legal and professional
fees), and a $32,000 and $76,000 increase in data processing costs for the
three and nine months ended June 30, 1997, respectively, when compared to the
same periods during fiscal 1996. The increase in salaries and employee benefits
is due to normal salary increases, the hiring of several new employees, and the
addition of the RRP. The increase in other operating expenses is to a large
degree reflective of increased costs associated with being a public company.
13
<PAGE> 14
PROVISION FOR INCOME TAXES. The Bank incurred provisions for income
taxes of $326,000 and $197,000 during the three and nine months ended June 30,
1997, respectively, compared with $775,000 and $475,000 for the comparable
periods in fiscal 1996. The effective tax rates during the three and nine
months ended June 30, 1997 were 37.3% and 34.8%, respectively, compared to
35.4% and 36.4% for the comparable 1996 periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, repayments, prepayments
and maturities of outstanding loans, maturities of investment securities and
other short-term investments, and funds provided from operations. While
scheduled loan repayments and maturing investment securities and short-term
investments are relatively predictable sources of funds, deposit flows and loan
prepayments are greatly influenced by the movement of interest rates in
general, economic conditions and competition. The Company manages the pricing
of its deposits to maintain a deposit balance deemed appropriate and desirable.
In addition, the Company invests in short-term investment securities and
interest-earning assets which provide liquidity to meet lending requirements.
Although the Company's deposits have historically represented the majority of
its total liabilities, the Company also utilizes other borrowing sources,
primarily FHLB advances from the FHLB of Pittsburgh. At June 30, 1997, the Bank
had $84.2 million of outstanding advances from the FHLB of Pittsburgh.
Liquidity management is both a daily and long-term function of business
management. The Bank uses its sources of funds primarily to meet its ongoing
commitments, to pay maturing savings certificates and savings withdrawals, to
fund loan commitments and to maintain a portfolio of mortgage-backed and
investment securities. At June 30, 1997, the total approved loan commitments
outstanding amounted to $9.3 million, and unused lines of credit amounted to
$147,000. Certificates of deposit scheduled to mature in one year or less at
June 30, 1997, totaled $59.8 million. Management believes that a significant
portion of maturing deposits will remain with the Bank.
As of June 30, 1997, the Bank's regulatory capital was well in excess
of all applicable regulatory requirements. At June 30, 1997 the Savings Bank's
Tier 1 risk-based, total risk-based and Tier 1 leverage capital ratios amounted
to 19.64%, 20.77% and 9.06%, respectively, compared to regulatory requirements
of 4.0%, 8.0% and 4.0%, respectively.
14
<PAGE> 15
PITTSBURGH HOME FINANCIAL CORP.
PART II
Item 1. Legal Proceedings
-----------------
Neither the Corporation nor the Bank is involved in any pending legal
proceedings other than non-material legal proceedings occurring 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
--------------------------------
a) Exhibits:
3.1 Amended and Restated Articles of Incorporation of Pittsburgh
Home Financial Corp.(1)
3.2 Bylaws of Pittsburgh Home Financial Corp.(1)
27 Financial Data Schedule
(1) Incorporated by reference from the Registration Statement
on Form S-1 (Registration No. 33-99658) filed by the
Registrant with the SEC on November 21, 1995, as amended.
b) No Form 8-K reports were filed during the quarter.
15
<PAGE> 16
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.
PITTSBURGH HOME FINANCIAL CORP.
Date: August 13, 1997 By: /s/ J. Ardie Dillen
-----------------------------
J. Ardie Dillen
Chairman, President and
Chief Executive Officer
Date: August 13, 1997 By: /s/ Michael J. Kirk
-----------------------------
Michael J. Kirk
Senior Vice President and Chief
Financial Officer
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