<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 December 31, 1999
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)
<TABLE>
<S> <C>
Pennsylvania 25-1772349
- -------------------------------------------------------------- ----------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification Number)
</TABLE>
225 Ross Street
Pittsburgh, Pennsylvania 15219
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
(412) 227-1945
-------------------------------------
(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 February 14,
2000, there were issued and outstanding 1,739,348 shares of the Registrant's
Common Stock, par value $.01 per share.
<PAGE> 2
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 December 31, 1999
(unaudited) and September 30, 1999 3
Consolidated Statements of Income (unaudited) for the three
months ended December 31, 1999 and 1998. 4
Consolidated Statement of Changes in Stockholders' Equity
(unaudited) for the three months ended December 31, 1999. 5
Consolidated Statements of Cash Flows (unaudited) for the
three months ended December 31, 1999 and 1998. 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security-Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES
</TABLE>
<PAGE> 3
PITTSBURGH HOME FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
(Unaudited)
-------------------------------------
<S> <C> <C>
ASSETS
Cash $ 2,089,956 $ 1,589,834
Interest-bearing deposits 2,406,601 3,729,265
------------- -------------
4,496,557 5,319,099
Investment securities available for sale (cost of $107,057,972 and $113,557,150) 101,434,635 109,745,150
Loans receivable, net of allowance of $2,060,394 and $1,956,744 301,955,583 278,085,048
Accrued interest receivable 2,583,770 2,635,063
Premises and equipment, net 5,002,673 4,586,498
Goodwill 228,350 236,602
Federal Home Loan Bank stock - at cost 10,303,400 9,715,900
Deferred income taxes 2,295,812 1,682,812
Foreclosed real estate 2,256,203 1,956,740
Prepaid income taxes 1,163,858 1,242,673
Other assets 459,421 536,279
------------- -------------
Total assets $ 432,180,262 $ 415,741,864
============= =============
LIABILITIES
Deposits $ 172,765,527 $ 169,462,592
Advances from Federal Home Loan Bank 196,066,730 184,066,730
Reverse repurchase agreements 25,000,000 25,000,000
Guaranteed preferred beneficial interests in subordinated debt 10,811,799 10,805,672
Advances by borrowers for taxes and insurance 3,655,155 1,975,086
Other liabilities 2,741,420 2,405,650
------------- -------------
Total liabilities 411,040,631 393,715,730
STOCKHOLDERS' 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 16,314,636 16,311,188
Treasury stock - at cost, 411,277 and 395,277 (5,967,131) (5,755,444)
Unearned shares of ESOP (1,294,231) (1,340,100)
Unearned shares of Recognition and Retention Plan (389,810) (442,970)
Accumulated other comprehensive (loss) (3,707,000) (2,516,000)
Retained earnings (substantially restricted) 16,161,346 15,747,639
------------- -------------
Total stockholders' equity 21,139,631 22,026,134
------------- -------------
Total liabilities and stockholders' equity $ 432,180,262 $ 415,741,864
============= =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
PITTSBURGH HOME FINANCIAL CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three months ended
December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Interest income:
Loans receivable $ 5,505,623 $ 4,217,326
Mortgage-backed securities 1,227,348 1,499,574
Investment securities
Taxable 694,203 875,096
Tax - exempt 105,177 102,946
Interest-bearing deposits 38,353 50,807
----------- -----------
Total interest income 7,570,704 6,745,749
Interest expense:
Deposits 1,856,258 1,806,441
Advances from Federal Home Loan Bank and other borrowings 3,175,111 2,682,006
Guaranteed preferred beneficial interest
in subordinated debt 252,226 254,619
----------- -----------
Total interest expense 5,283,595 4,743,066
----------- -----------
Net interest income 2,287,109 2,002,683
Provision for loan losses 150,000 150,000
----------- -----------
Net interest income after provision for loan losses 2,137,109 1,852,683
Noninterest income:
Service charges and other fees 254,386 180,840
Net (loss) on trading securities -- (167,231)
Net gain on available for sale securities 3,357 97,292
Other income 43,417 28,525
----------- -----------
Total noninterest income 301,160 139,426
Noninterest expenses:
Compensation and employee benefits 888,207 747,406
Premises and occupancy costs 197,221 149,026
Amortization of goodwill 8,254 8,254
Federal insurance premium 24,350 22,503
(Gain) loss on sale of foreclosed real estate (2,247) 14,662
Marketing 97,025 48,719
Data processing costs 77,550 74,026
Other expenses 322,825 205,446
----------- -----------
Total noninterest expense 1,613,185 1,270,042
Income before income taxes 825,084 722,067
Income taxes 252,000 224,000
----------- -----------
Net income $ 573,084 $ 498,067
=========== ===========
Diluted earnings per share $ 0.36 $ 0.30
=========== ===========
Dividends per share $ 0.09 $ 0.07
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
PITTSBURGH HOME FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE QUARTER ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Comprehensive Common Paid In Retained
Income Stock Capital Earnings
------ ----- ------- --------
<S> <C> <C> <C> <C>
Balance as of September 30, 1999 $ 21,821 $ 16,311,188 $ 15,747,639
Treasury stock purchased
ESOP shares released -- 3,448 --
Exercise of stock options -- -- --
RRP amortization -- -- --
Cash dividends declared -- -- (159,376)
Change in unrealized gain (loss) on investment
securities available for sale, net of taxes $(1,187,643) -- -- --
Less reclassification adjustment for gains
included in net income (3,357)
-----------
Other comprehensive income (loss) (1,191,000)
Net income for period $ 573,083 -- -- 573,083
-----------
Comprehensive Income (loss) $ (617,917)
===========
----------- ------------ -------------
Balance as of December 31, 1999 $ 21,821 $ 16,314,636 $ 16,161,346
=========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
Unearned shares of
Treasury Employee Stock Unearned shares of
Stock Ownership Plan RRP
----- -------------- ---
<S> <C> <C> <C>
Balance as of September 30, 1999 $(5,755,444) $(1,340,100) $(442,970)
Treasury stock purchased (211,687)
ESOP shares released -- 45,869 --
Exercise of stock options -- -- --
RRP amortization -- -- 53,160
Cash dividends declared -- -- --
Change in unrealized gain (loss) on investment
securities available for sale, net of taxes -- -- --
Less reclassification adjustment for gains
included in net income
Other comprehensive income (loss)
Net income for period -- -- --
Comprehensive Income (loss)
----------- ----------- ---------
Balance as of December 31, 1999 $(5,967,131) $(1,294,231) $(389,810)
=========== =========== =========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Total
other Stockholders'
comprehensive income Equity
-------------------- ------
<S> <C> <C>
Balance as of September 30, 1999 $(2,516,000) $22,026,134
Treasury stock purchased (211,687)
ESOP shares released -- 49,317
Exercise of stock options -- --
RRP amortization -- 53,160
Cash dividends declared -- (159,376)
Change in unrealized gain (loss) on investment
securities available for sale, net of taxes -- --
Less reclassification adjustment for gains
included in net income
Other comprehensive income (loss) (1,191,000) (1,191,000)
Net income for period -- 573,083
Comprehensive Income (loss)
----------- -----------
Balance as of December 31, 1999 $(3,707,000) $21,139,631
=========== ===========
</TABLE>
5
<PAGE> 6
PITTSBURGH HOME FINANCIAL CORP
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended December 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 573,084 $ 498,067
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and goodwill amortization 107,842 77,019
Amortization and accretion of premiums and discounts on
assets and deferred loan fees 643,739 (38,799)
Amortization of RRP and release of ESOP shares 102,477 108,004
Provision for loan losses 150,000 150,000
Sale of equity securities, trading -- 1,207,291
Deferred tax provision (benefit) (534,185) (370,000)
Other, net 2,150,117 1,737,982
------------ ------------
Net cash provided by operating activities 3,193,074 3,369,564
CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations (33,531,791) (26,033,784)
Loan principal repayments 11,196,266 12,102,145
Net REO activity (299,463)
Purchases of:
Available for sale securities (1,632,500) (17,231,374)
Proceeds from sales, maturities and principal repayments of:
Available for sale securities 5,222,766 9,764,838
Held to maturity securities 10,000,000
Purchase of land, premises and equipment (515,765) (535,847)
Other, net 613,000 (361,915)
------------ ------------
Net cash (used) provided by investing activities (18,947,487) (12,295,937)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in checking, passbook, and money market
deposit accounts 3,433,350 2,789,106
Net increase in certificates of deposit (130,415) 389,960
Increase in advances from the Federal Home Loan Bank 12,000,000 8,250,000
Cash dividends paid to shareholders (159,377) (128,835)
Purchase of treasury stock (211,687) (457,869)
------------ ------------
Net cash provided by financing activities 14,931,871 10,842,362
Net decrease in cash and cash equivalents (822,542) 1,915,989
Cash and cash equivalents at beginning of year 5,319,099 4,476,181
------------ ------------
Cash and cash equivalents at end of year $ 4,496,557 $ 6,392,170
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest (includes interest credited on deposits of
$1,942,434 and $1,863,324 in 1999 and 1998
respectively) $ 5,005,792 $ 4,801,406
============ ============
Income taxes paid $ 173,185 $ 354,500
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Foreclosed mortgage loans transferred to real estate owned 728,187 704,401
Unrealized gain on securities available for sale (1,804,000) (1,087,000)
Deferred income taxes 613,000 370,000
------------ ------------
Accumulated other comprehensive income $ (1,191,000) $ (717,000)
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE> 7
PITTSBURGH HOME FINANCIAL CORP.
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 consolidated financial statements include the accounts of Pittsburgh
Home Financial Corp. and its wholly owned subsidiaries, Pittsburgh Home
Savings Bank (the "Bank") and Pittsburgh Home Capital Trust I. All
significant intercompany balances and transactions have been eliminated
in consolidation.
As of January 1, 1998, the Company adopted Statement Number 130,
"Reporting Comprehensive Income." Statement 130 requires unrealized
gains or losses on the Company's available-for-sale securities, which
prior to adoption were reported separately in stockholders' equity to be
included in other comprehensive income (loss). During the three months
ended December 31, 1999, total comprehensive loss amounted to $617,917,
as compared to $218,933 for the three months ended December 31, 1998.
The results of operations for the three months ended December 31, 1999
are not necessarily indicative of the results to be expected for the
year ending September 30, 2000. 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, 1999.
Note 2 - Business
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 nine 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
The Company's trust subsidiary, Pittsburgh Home Capital Trust I (the
"Trust") was formed to issue $11.5 million of 8.56% Cumulative Trust
Preferred Securities. These securities represent undivided beneficial
interests in Pittsburgh Home Capital Trust I. The Trust purchased junior
subordinated deferrable interest debentures which were issued by the
Company.
Note 3 - Earnings per share
Earnings per share are based on the weighted average number of shares of
common stock. Basic earnings per share is calculated by dividing income
available to holders of common shares by the weighted average number of
common shares outstanding during the period. Options, warrants, and
other potentially diluted securities are excluded from the basic
calculation, but are included in diluted earnings per share.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended
December 31,
1999 1998
---- ----
<S> <C> <C>
Numerator for basic and diluted earnings
per share - net income $ 573,084 $ 498,067
Denominator:
Denominator for basic earnings per
share - weighted-average shares 1,594,846 1,644,572
Effect of dilutive securities:
Employee stock options 5,950 26,771
Unvested Management Recognition Plan stock 6,485 7,573
---------- ----------
Dilutive potential common shares 12,435 34,344
---------- ----------
Denominator for diluted earnings per
share - adjusted weighted-average
shares and assumed conversions 1,607,281 1,678,916
========== ==========
Basic earnings per share $ 0.36 $ 0.30
========== ==========
Diluted earnings per share $ 0.36 $ 0.30
========== ==========
</TABLE>
The Company accounts for its Employee Stock Ownership Plan (ESOP) in
accordance with SOP 93-6, "Employers Accounting for Employee Stock
Ownership Plans,"; shares controlled by the ESOP are not considered in
the weighted average shares outstanding until the shares are committed
for allocation to an employee's individual account. In accordance with
SOP 93-6, uncommitted shares held by the ESOP (138,023 and 154,190
shares at
8
<PAGE> 9
December 31, 1999 and 1998 respectively) are excluded from basic
average shares outstanding.
Note 4 - Recent Accounting and Regulatory Developments
Financial Accounting Standards Board Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging
activities. As amended by FAS 137 the standard is effective for fiscal
years beginning after June 15, 2000, and will be adopted by the Company
for the year ended September 30, 2001. The impact of adoption is not
expected to materially affect the Company's financial condition or
results of operations.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At December 31, 1999, the Company's total assets amounted to $432.2
million compared with $415.7 million at September 30, 1999, an increase of 4.0%.
Cash and interest-bearing deposits decreased $800,000, or 15.1%, to $4.5 million
at December 31, 1999, compared to $5.3 million at September 30, 1999.
Investments and mortgage-backed securities decreased $8.3 million, or 7.6%, from
$109.7 million at September 30, 1999 to $101.4 million at December 31, 1999.
During the three months ended December 31, 1999, the Company's loans receivable,
net of allowance, increased $23.9 million, or 8.6%, to $302.0 million at
December 31, 1999 compared to $278.1 million at September 30, 1999. The growth
is primarily attributable to increases in residential mortgage loans and to a
lesser extent, commercial real estate and home equity loans.
Total liabilities increased by $17.3 million, or 4.4%, to $411.0 million
at December 31, 1999 compared to $393.7 million at September 30, 1999. Deposits
increased by $3.3 million, or 1.9% to $172.8 million at December 31, 1999
compared to $169.5 million at September 30, 1999. Borrowed funds increased $12.0
million or 5.7% to $221.1 million at December 31, 1999 compared to $209.1
million at September 30, 1999, as the Company increased its FHLB advances to aid
liquidity and fund loans receivable. Guaranteed preferred beneficial interest in
subordinated debt totaled $10.8 million at December 31, 1999.
Total stockholders' equity decreased $887,000 or 4.03% to $21.1 million
at December 31, 1999 compared to $22.0 million at September 30, 1999. The
decrease was primarily attributable to a $1.2 million decrease in the
accumulated other comprehensive loss equity account.
10
<PAGE> 11
RESULTS OF OPERATIONS
GENERAL. The Company reported net income of $573,000 for the quarter
ended December 31, 1999 as compared to $498,000 for the same quarter in 1998.
The Company recognized pre-tax net gains on investment sales of $3,000 for the
quarter ended December 31, 1999 as compared to pre-tax net losses on trading
activities and investment sales of $70,000 for the quarter ended December 31,
1998. Excluding the results of any trading activities and investment sales, net
income for the quarter ended December 31, 1999 was $571,000 as compared to
$546,000 for the same quarter in 1998, an increase of $25,000 or 4.6%.
The Company recognized an increase in net interest income before
provision for loan losses of $284,000 or 14.2% for the quarter. Noninterest
income, excluding any trading activities and investment sales, also increased
for the quarter by $88,000 or 42.2%. These increases were offset by an increase
in noninterest expense of $343,000 or 27.0% for the quarter.
Diluted earnings per share was $.36 for the quarter ended December 31,
1999, compared to $.30 per share for the same quarter of 1998. The 1998
quarter's earnings per share amount includes $.03 per share of losses related to
the net losses on trading activities and investment sales. Consequently,
diluted earnings per share excluding trading activities and investment sales
were $.33 for the quarter ended December 31, 1998. There was no impact from the
trading activities and investment sales on diluted earnings per share for the
quarter ended December 31, 1999.
INTEREST INCOME. Interest income increased $825,000 or 12.2% for the
quarter ended December 31, 1999, compared to the same period in 1998. The
average balance on loans receivable increased by $70.0 million for the three
months ended December 31, 1999, which was partially offset by a 10 basis point
decline in the average yield earned thereon. The Company is continuing its
efforts to diversify its loans receivable portfolio from its previous emphasis
on one-to-four family residential lending to a more broad based, full service
commercial bank-like portfolio. It should be noted that the largest individual
dollar component of its loans receivable portfolio will continue to be its
residential lending, as this has been a Company strength, and the ongoing high
level of service and commitment will also continue in this area.
11
<PAGE> 12
Average Balances, Net Interest Income and Yields Earned and Rates Paid
For the three months ended December 31,
<TABLE>
<CAPTION>
1999
---------------------------------------------
Average Average
Balance Interest Yield/Rate
---------------------------------------------
<S> <C> <C> <C>
Interest-earning assets:
Investment securities $ 43,966 $800 7.28%
Mortgage-backed securities 73,642 1,227 6.66
Loans receivable:
First mortgage loans 262,568 4,987 7.60
Other loans 24,721 519 8.40
------------ -----------
Total loans receivable 287,289 5,506 7.67
Other interest-earning assets 3,626 38 4.19
------------ -----------
Total interest-earning assets 408,523 $7,571 7.41%
================
Non-interest earning assets 16,828
------------
Total assets $425,351
============
Interest-bearing liabilities:
Deposits $165,012 $1,857 4.50%
FHLB advances and other 214,684 3,175 5.92
Guaranteed preferred beneficial
interest in subordinated debt 11,500 252 8.77
Escrows -- -- --
------------ -----------
Total interest-bearing liabilities $391,196 $5,284 5.40%
================
Non-interest bearing liabilities 12,788
------------
Total liabilities 403,984
Stockholders' equity 21,367
------------
Total liabilities and stockholders' equity $425,351
============
Net interest-earning assets $17,327
============
Net interest income/interest rate spread $2,287 2.01%
============================
Net interest margin 2.24%
================
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------
Average Average
Balance Interest Yield/Rate
---------------------------------------------------
<S> <C> <C> <C>
Interest-earning assets:
Investment securities $ 55,633 $978 7.03%
Mortgage-backed securities 89,455 1,499 6.70
Loans receivable:
First mortgage loans 199,244 3,807 7.64
Other loans 18,019 411 9.12
-----------------------------------
Total loans receivable 217,263 4,218 7.77
Other interest-earning assets 5,317 51 3.84
-----------------------------------
Total interest-earning assets 367,668 $6,746 7.34%
===============
Non-interest earning assets 11,477
------------------
Total assets $379,145
==================
Interest-bearing liabilities:
Deposits $152,301 $1,806 4.74%
FHLB advances and other 182,324 2,673 5.86
Guaranteed preferred beneficial
interest in subordinated debt 11,500 255 8.87
Escrows 2,397 9 1.50
-----------------------------------
Total interest-bearing liabilities $348,522 $4,743 5.44%
===============
Non-interest bearing liabilities 6,172
------------------
Total liabilities 354,694
Stockholders' equity 24,451
------------------
Total liabilities and stockholders' equity $379,145
==================
Net interest-earning assets $19,146
==================
Net interest income/interest rate spread $2,003 1.90%
=============================
Net interest margin 2.18%
===============
</TABLE>
12
<PAGE> 13
The average balance of investment and mortgage-backed securities totaled $117.6
million with a weighted average yield of 6.89% for the three months ended
December 31, 1999 compared to $145.1 million with a weighted average yield of
6.83% for the same period in 1998. During the three months ended December 31,
1999, the Company has continued to change its asset mix by decreasing its
investment portfolio and reinvesting the proceeds in higher yielding, internally
generated loans receivable.
Loans receivable, net at December 31, 1999 and September 30, 1999 are summarized
below:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
----------------- ------------------
<S> <C> <C>
First mortgage loans:
Secured by 1-4 family residence $ 238,753,980 $ 219,675,811
1-4 family residential construction 16,662,407 17,896,602
1-4 family residential construction
-builder 18,291,577 20,827,475
Commercial construction 5,827,425 --
Non-residential 16,487,275 15,678,557
Less loans in process (18,384,659) (18,997,323)
Deferred loan costs 561,076 521,928
Unamortized premium on mortgage loans 26,050 --
------------- -------------
Total first mortgage loans 278,225,131 255,603,050
============= =============
Home equity loans and lines 20,010,581 18,556,225
Other loans 5,780,264 5,882,517
Less allowance for loan losses (2,060,393) (1,956,744)
------------- -------------
$ 301,955,583 $ 278,085,048
============= =============
</TABLE>
INTEREST EXPENSE. Interest expense increased $541,000 or 11.4% for the
three months ended December 31, 1999, compared to the same period in 1998. The
increase was due primarily to a $42.7 million increase in average
interest-bearing liabilities for the three months ended December 31, 1999 when
compared to the same period in 1998. Average deposits increased $12.7 million
for the three months ended December 31, 1999 when compared to the same period in
1998. Average borrowed funds increased $32.4 million for the three months ended
December 31, 1999 when compared to the same period in 1998. Interest expense
associated with the guaranteed preferred beneficial interest in subordinated
debt totaled $252,000 for the three months ended December 31, 1999 when compared
to $255,000 for the same period in 1998. On March 6, 1998, the Bank purchased a
$25.0 million notional value interest rate cap from the FHLB. This purchase was
in connection with the Bank's ongoing management of its interest rate risk
position. The cap is being used as an off-balance sheet hedge to the Bank's risk
associated with shorter term liabilities. The cost of the cap is being amortized
as a yield adjustment to interest expense over the
13
<PAGE> 14
five year term of the transaction. Interest expense associated with the
amortization of the rate cap totaled $12,500 for the three months ended December
31,1999.
PROVISION FOR LOAN LOSSES. It is management's policy to maintain an
allowance for estimated losses based on the perceived risk of loss in the loan
portfolio and the adequacy of the allowance. Management's periodic evaluation of
the adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay, the estimated value of the
underlying collateral and current economic conditions. The allowance for loan
losses is evaluated based on an assessment of the losses inherent in the loan
portfolio. Management classifies all delinquent assets as Special Mention,
Substandard, Doubtful or Loss. The evaluation of the adequacy of the allowance
incorporates an estimated range of required allowance based on the items noted
above. A reserve level is estimated by management for each category of
classified loans, with an estimated percentage applied to the delinquent loan
category balance. In addition, management notes that there is an inherent risk
of potential loan loss in the Company's overall, non-classified loan portfolio.
This inherent risk is addressed by applying an estimated low and high percentage
of potential loss to the remaining unclassified loan portfolio. Management
extends out the various line item balances and estimated percentages in order to
arrive at an estimated required loan loss allowance reserve. Activity for the
period under analysis is taken into account (charge offs, recoveries, provision)
in order to challenge the Company's overall process, as well as its previous
loss history. The estimated range of required reserve balance is then compared
to the current allowance for loan loss balance, and any required adjustments are
made accordingly.
Activity in the allowance for loan losses is summarized as follows for the three
months ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- ------------------
<S> <C> <C>
Balance at beginning of year $ 1,956,744 $ 1,737,973
Provision charged to income 150,000 150,000
Chargeoffs (47,594) (165,125)
Recoveries 1,244 1,471
----------- -----------
Balance at end of period $ 2,060,394 $ 1,724,319
=========== ===========
</TABLE>
14
<PAGE> 15
The Company designates all loans that are 90 or more days past due as
non-performing. Generally, when loans are classified as non-performing, unpaid
accrued interest is a reduction of interest income on loans receivable and is
only recognized when cash payments are received. Subsequent to September 30,
1999, the Company's non-performing assets decreased from $5.0 million at
September 30, 1999 to $4.7 million at December 31, 1999. This $300,000 or 6.0%
decrease was primarily attributable to a $600,000 or 22.6% decrease in
non-accruing loans which was offset by a $300,000 increase in real estate owned.
Subsequent to September 30, 1999, the Company sold three of its real estate
owned properties for a net gain of $2,000; and an additional three loans ranging
from $28,000 to $300,000 were transferred into real estate owned at December 31,
1999, and are listed for sale.
Assets classified as a Loss are considered uncollectible and of such
little value that continuance, as an asset is not warranted. A Loss
classification does not mean that an asset has no recovery or salvage value, but
that it is not practical or desirable to defer writing off all or a portion of
the asset, even though partial recovery may be affected in the future. All loans
classified as loss have been written off directly or through provision in
specific allowance reserve. The allowance is increased by provisions for loan
losses, which are charged against income. During each of the three months ended
December 31, 1999 and 1998, the Company recorded provisions for losses on loans
of $150,000.
Management does not attribute the increase to any specific weakness
within the Company or in the marketplace generally. Although management utilizes
its best judgment in providing for losses with respect to its non-performing
assets, there can be no assurance that the Company will be able to dispose of
such non-performing assets without establishing additional provisions for losses
on loans or further reductions in the carrying value of its real estate owned.
NONINTEREST INCOME. Noninterest income increased by $162,000 or 116.5%
for the three months ended December 31, 1999 compared to the same period in
1998. The increase for the three months is attributable to a $73,000 or 40.3%
increase in service charges and other fees and a $14,000 or 48.3% increase in
other income. The Company recognized pre-tax net gains on investment sales of
$3,000 for the three months ended December 31, 1999. This compares to pre-tax
net losses on trading activities and investment sales of $70,000 for the three
months ended December 31, 1998.
NONINTEREST EXPENSES. Noninterest expenses increased by $343,000 or
27.0% for the three months ended December 31, 1999, compared to the same period
in 1998. The increase was primarily attributable to an $141,000 increase in
salaries and employee benefits, an $118,000 increase in other expenses, a
$48,000 increase in premises and occupancy costs, and a $48,000 increase in
marketing costs for the three months ended December 31, 1999 when compared to
the same period in 1998. The increase in salaries and employee benefits is due
to normal salary increases and the hiring of new employees. The increase in
other expenses is due to increased operating costs. The increase in premises and
occupancy costs is due to the building of a new
15
<PAGE> 16
branch and the addition of administrative offices. The increase in marketing
costs is the result of an increase in advertising in addition to marketing of
the new branch office.
PROVISION FOR INCOME TAXES. The Bank incurred provisions for income
taxes of $252,000 for the three months ended December 31, 1999, compared with
$224,000 for the same period in 1998. The effective tax rates during the three
months ended December 31, 1999 and 1998 were 30.5% and 31.0%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, advances from the
FHLB, 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 utilized other borrowing
sources, primarily advances from the FHLB of Pittsburgh. At December 31, 1999,
the Company had $196.0 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 December 31, 1999, the total approved loan commitments
outstanding amounted to $18.9 million, and unused lines of credit amounted to
$5.1 million. Certificates of deposit scheduled to mature in one year or less at
December 31, 1999, totaled $79.5 million. Management believes that a significant
portion of maturing deposits will remain with the Bank.
16
<PAGE> 17
Under federal regulations, the Bank is required to maintain specific amounts of
capital. The following table sets forth certain information concerning the
Bank's regulatory capital.
<TABLE>
<CAPTION>
Tier I Tier I Total
Leverage Risk-Based Risk-Based
Capital Capital Capital
------- ------- -------
<S> <C> <C> <C>
Regulatory capital as a percentage 7.39% 14.75% 15.69%
Minimum capital required as a percentage 4.00 4.00 8.00
==== ===== =====
Excess regulatory capital as a percentage 3.39% 10.75% 7.69%
==== ===== =====
Well-capitalized requirement 5.00% 6.00% 10.00%
==== ===== =====
</TABLE>
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
In addition to historical information, forward-looking statements are
contained herein that are subject to risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements. Factors that could cause future results to vary from current
expectations, include, but are not limited to, the impact of economic conditions
(both generally and more specifically in the markets in which the Company
operates), the impact of competition for the Company's customers from other
providers of financial services, the impact of government legislation and
regulation (which changes from time to time and over which the Company has no
control), and other risks detailed in this Form 10-Q and in the Company's other
Securities and Exchange Commission ("SEC") filings. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements, to reflect
events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the SEC.
YEAR 2000
The Year 2000 (Y2K) issue is primarily a result of computer software
programs recognizing a two digit date field rather than the full four digits
which identify the appropriate year. Any computer program or hardware that is
date sensitive may recognize "00" as year 1900 as opposed to the intended year
2000. The Y2K problem started decades ago when early computers had very limited
memory and storage space.
The objective of managing the Year 2000 process is for the institution
to determine the scope of the problem and to focus its efforts and attention on
solving it. The Federal Financial
17
<PAGE> 18
Institution's Examination Council ("FFIEC") outlined the Year 2000 management
process as a five phase procedure [(1) Awareness (2) Assessment (3) Renovation
(4) Validation (5) Implementation] that each financial institution would have to
navigate in identifying and fixing its Year 2000 exposures. The Company has
developed a detailed timetable which identifies various milestones and deadlines
to aid in managing the Year 2000 process.
The Company outsources substantially all of its data processing
functions, and it is working very closely with its third party provider and
other vendors within the Bank's project plan to ensure that its operational and
financial systems will not be adversely affected by the Y2K problem.
The Awareness and Assessment phases of the Company's plan are completed
as related to the understanding and educating of the Board and appropriate
management personnel as to the issues related to the Y2K problem. The Company is
continuously upgrading its comprehensive project plan (year 2000 binder), and
has completed its inventory of equipment, hardware, and software; updated its
Disaster Recovery Plan ("DRP"); and reported the project status to its Board,
its regulators, and its customer base. The Awareness phase, including the
comprehensive inventory of all hardware and software systems (including systems
purchased from software vendors) was completed March 31, 1998. The Assessment of
all hardware and software systems was completed June 30, 1998.
The Renovation phase of the Bank's project plan centered around the
initial contact and response evaluation of year 2000 letters and worksheets
which were sent to vendors and suppliers; the focus was on entities which have
been classified as fatal or critical to the ongoing operations of the Company.
The Company has coordinated with its third party vendors and suppliers and has
successfully completed all of its Y2K testing.
The Validation and Implementation phases revolved around the resolution
of all vendor's and supplier's compliance status. All critical equipment or
services that were non-compliant were replaced. The testing of vendor provided
mission-critical systems, including the Company's third party service provider
was completed.
The Company has contacted its loan and deposit customers that may
present some exposure to Y2K compliance. Commercial loan customers that are not
Y2K compliant may present some risk of default. The Company's initial assessment
of its commercial loan and other customer accounts present an immaterial impact
on the Company's statement of operations. Continued monitoring and evaluation of
this risk is incorporated into the Company's Y2K project plan.
The Company's costs associated with Year 2000 include an additional
assessment from its third party provider, consultant fees associated with its
DRP and the ongoing Y2K project plan, various hard costs for the replacement of
non-compliant computer, telephone, and related equipment. Excluding the "soft"
costs of Company management and personnel time, the Company estimates that the
total Year 2000 project costs have not exceeded $200,000 (pre-tax).
18
<PAGE> 19
As of the filing date of this Form 10-Q, the Company's business
operation has not been materially impacted by Y2K matters. The Company's Y2K
contingency plan did not have to be implemented nor has the Company had to
address any major problems with its service provider or any of its third party
vendors.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are presented
at September 30, 1999 in Item 7A of the Company's Annual Report on Form 10-K,
filed with the SEC on December 29, 1999. Management believes there have been no
material changes in the Company's market risk since September 30, 1999.
19
<PAGE> 20
PITTSBURGH HOME FINANCIAL CORP.
PART II
Item 1. Legal Proceedings
Neither the Company 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
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amended and Restated Articles of Incorporation of
Pittsburgh Home Financial Corp. *
3.2 Bylaws of Pittsburgh Home Financial Corp. *
27 Financial Data Schedule
* 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.
20
<PAGE> 21
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: February 14, 2000 By: /s/J. Ardie Dillen
------------------
J. Ardie Dillen
Chairman, President and Chief Executive Officer
Date: February 14, 2000 By: /s/ Michael J. Kirk
-------------------
Michael J. Kirk
Executive Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001003936
<NAME> PITTSBURGH HOME FINANCIAL CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,089,956
<INT-BEARING-DEPOSITS> 2,406,601
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 101,434,635
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 304,615,977
<ALLOWANCE> 2,060,394
<TOTAL-ASSETS> 432,180,262
<DEPOSITS> 172,765,527
<SHORT-TERM> 61,000,000
<LIABILITIES-OTHER> 2,741,420
<LONG-TERM> 160,066,730
0
0
<COMMON> 21,821
<OTHER-SE> 21,117,810
<TOTAL-LIABILITIES-AND-EQUITY> 432,180,262
<INTEREST-LOAN> 5,505,623
<INTEREST-INVEST> 2,026,728
<INTEREST-OTHER> 38,353
<INTEREST-TOTAL> 7,570,704
<INTEREST-DEPOSIT> 1,856,258
<INTEREST-EXPENSE> 5,283,593
<INTEREST-INCOME-NET> 2,287,109
<LOAN-LOSSES> 150,000
<SECURITIES-GAINS> 3,357
<EXPENSE-OTHER> 1,613,185
<INCOME-PRETAX> 825,084
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,000
<EPS-BASIC> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 7.41
<LOANS-NON> 2,445,000
<LOANS-PAST> 2,445,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,956,744
<CHARGE-OFFS> 47,594
<RECOVERIES> 1,244
<ALLOWANCE-CLOSE> 2,060,394
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
