<PAGE>   1
                                                                    Exhibit 13


                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
At year end September 30,                                       1996                      1995                       1994
----------------------------------------------    ------------------       -------------------         ------------------
                                             (Dollar amounts in thousands, except per share data)
<S>                                                       <C>                        <C>                        <C>
Total assets                                                $195,330                  $157,570                   $130,646

Loans receivable, net                                        135,552                   102,938                     65,341

Deposits                                                     124,342                   115,497                    110,394

FHLB Advances                                                 36,500                    29,000                      8,500

Shareholders' equity                                          30,372                    10,610                      9,905

Book value per share                                           13.92                       N/A                        N/A


For the year ended September 30,
----------------------------------------------

Net interest income                                         $  5,441                  $  4,162                   $  3,839

Net income                                                       772                       705                        351
Net income (1)                                                 1,245

Earnings per share (beginning April 1, 1996)                    0.15                       N/A                        N/A
Earnings per share (beginning April 1, 1996)(1)                 0.38

Dividends per share                                             0.05                       N/A                        N/A


Selected Ratios
-----------------------------------------------

Return on average equity                                        3.80%                     6.83%                      3.60%
Return on average equity(1)                                     6.14%                      N/A                        N/A

Return on average assets                                        0.44%                     0.51%                      0.26%
Return on average assets(1)                                     0.71%                      N/A                        N/A

Interest rate spread                                            2.64%                     2.78%                      2.73%

Net interest margin                                             3.22%                     3.09%                      2.90%

Operating expenses as a percent of average assets               2.47%                     2.14%                      2.02%
Operating expenses as a percent of average assets(1)            2.05%                      N/A                        N/A

Efficiency ratio(2)                                            73.94%                    65.23%                     65.46%
Efficiency ratio(1)(2)                                         61.31%                      N/A                        N/A
 
Nonperforming assets to total assets                            1.22%                     1.47%                      1.66%

Allowance for loan losses to nonperforming assets              50.27%                    39.70%                     32.73%
</TABLE>

(1) - Excludes one time special Savings Association Insurance Fund ("SAIF")
      assessment of $739,000 or $473,000 after tax ($.23 per share) incurred in
      the September 1996 quarter to recapitalize the SAIF of the Federal Deposit
      Insurance Corporation ("FDIC").

(2) - The efficiency ratio represents noninterest expense as a percentage of
      the sum of net interest income and noninterest income.
<PAGE>   2

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The selected consolidated financial and other data of the Company set
forth below does not purport to be complete and should be read in conjunction
with, and is qualified in its entirety by, the more detailed information,
including the Consolidated Financial Statements and related Notes, appearing
elsewhere herein.

<TABLE>
<CAPTION>
                                                                        As of or For the
                                                                    Year Ended September 30,
                                       --------------------------------------------------------------------------------
                                            1996             1995             1994             1993             1992   
                                       ------------     ------------     ------------     ------------     ------------
                                                                     (Dollars in Thousands)
<S>                                       <C>                <C>              <C>              <C>              <C>
SELECTED FINANCIAL AND OTHER DATA:
Total assets                                $195,330         $157,570         $130,646         $135,403         $129,661
Investment securities                         22,481           18,758           21,999           32,576           18,853
Mortgage-backed securities                    23,825           27,458           25,858           26,764           22,366
Loans receivable, net                        135,552          102,938           65,341           67,432           75,431
Cash and cash equivalents                      7,562            3,545           13,347            4,653            8,874
Deposits                                     124,342          115,497          110,394          114,377          115,200
FHLB advances                                 36,500           29,000            8,500            9,500            4,000
Shareholders' equity                          30,372           10,610            9,905            9,554            8,618
Non-performing assets(1)                       2,377            2,320            2,172            1,822            1,840
Full-service offices at end of
  period                                           6                5                5                5                5

SELECTED OPERATING DATA:
Interest income                              $12,933          $ 9,998         $  8,756         $  9,233         $  9,948
Interest expense                               7,492            5,836            4,917            5,176            6,246
                                             -------          -------         --------         --------         --------
Net interest income                            5,441            4,162            3,839            4,057            3,702
Provision for losses on loans                    300              304              135              249               55
                                             -------          -------         --------         --------         --------
Net interest income after
  provision for losses on loans                5,141            3,858            3,704            3,808            3,647
Noninterest income (loss)                        369              333            (362)              555              364
Special SAIF assessment(2)                       739              N/A              N/A              N/A              N/A
Other noninterest expenses                     3,557            2,932            2,761            2,765            2,695
                                             -------          -------         --------         --------         --------
Income before income taxes                     1,214            1,259              581            1,598            1,316
Income taxes                                     442              554              230              673              484
                                             -------          -------         --------         --------         --------
Net income                                   $   772(2)       $   705         $    351         $    925         $    832
                                             =======          =======         ========         ========         ========

PER COMMON SHARE:
Net income                                   $   .15(2)           N/A              N/A              N/A              N/A
Cash dividends                                   .05              N/A              N/A              N/A              N/A

SELECTED OPERATING RATIOS(3):
Average yield earned on
  interest-earning assets                       7.66%            7.42%            6.63%            7.19%            8.24%
Average rate paid on interest-
  bearing liabilities                           5.02             4.64             3.90             4.21             5.39
Average interest rate spread(4)                 2.64             2.78             2.73             2.98             2.85
Net interest margin(4)                          3.22             3.09             2.90             3.16             3.07
Ratio of interest-earning assets
  to interest-bearing liabilities             113.19           107.12           104.82           104.47           104.27

Net interest income to
  operating expenses                            1.27             1.40             1.39             1.47             1.37
Operating expenses as a
  percent of average assets                     2.47(2)          2.14             2.02             2.08             2.16
Return on average assets                         .44(2)           .51              .26              .70              .67
Return on average equity                        3.80(2)          6.83             3.60            10.31            10.35
Ratio of average equity to
  average assets                               11.68             7.43             7.14             6.76             6.46

ASSET QUALITY RATIOS(3):
Non-performing loans as a percent
  of total loans                                1.55%            2.09%            3.05%            2.56%            2.32%
Non-performing assets as a percent
  of total assets                               1.22             1.47             1.66             1.35             1.42
Allowance for loan losses as a
  percent of total loans                         .78              .83             1.00              .85              .47
Allowance for loan losses as a
  percent of non-performing loans              50.27            39.70            32.73            32.82            20.09

CAPITAL RATIOS(5):
Tier 1 risk-based capital ratio                24.33%           14.87%           19.88%           19.07%             N/A
Total risk-based capital ratio                 25.58            16.12            21.13            20.27              N/A
Tier 1 leverage capital ratio                  11.55             6.73             7.58             7.06              N/A
</TABLE>


                                                   (Footnotes on following page)

                                       5


<PAGE>   3

------------------

(1)  Non-performing assets consist of non-performing loans and real estate
     owned ("REO"). Non-performing loans consist of non-accrual loans and
     accruing loans 90 days or more overdue, while REO consists of real estate
     acquired through foreclosure and real estate acquired by acceptance of a
     deed-in-lieu of foreclosure.

(2)  Per common share data have been stated only for a partial period because
     of the Company's conversion to stock form on April 1, 1996. Without giving
     effect to the one-time special Savings Association Insurance Fund ("SAIF")
     assessment of $739,000 or $473,000 after tax ($.23 per share) incurred in
     the September 1996 quarter to recapitalize the SAIF of the Federal Deposit
     Insurance Corporation ("FDIC"), net income and net income per share would
     have been $1.25 million and $.38, respectively, and operating expenses as
     a percent of average assets, return on average assets and return on
     average equity would have been 2.05%, .71% and 6.14%, respectively.

(3)  Asset Quality Ratios and Capital Ratios are end of period ratios. With the
     exception of end of period ratios, all ratios are based on average daily
     balances during the indicated periods.

(4)  Interest rate spread represents the difference between the weighted
     average yield on average interest-earning assets and the weighted average
     cost of average interest-bearing liabilities, and net interest margin
     represents net interest income as a percent of average interest-earning
     assets.

(5)  Prior to fiscal 1993, the Company operated the Savings Bank as a mutual
     savings and loan association. As such, the Savings Bank was subject to the
     capital ratios of the Office of Thrift Supervision and not those of the
     FDIC and was at all times in capital compliance therewith.

                                       6


<PAGE>   4

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

GENERAL

     Pittsburgh Home Financial Corp. (the "Company") is a Pennsylvania
corporation organized in September 1995 by Pittsburgh Home Savings Bank (the
"Savings Bank") for the purpose of acquiring all of the capital stock of the
Savings Bank issued in the conversion (the "Conversion") of the Savings Bank
from a Pennsylvania-chartered mutual savings bank to a Pennsylvania-chartered
stock savings bank. The Conversion was completed on April 1, 1996. The only
significant assets of the Company are the capital stock of the Savings Bank,
the Company's loan to an employee stock ownership plan, and the balance of the
net Conversion proceeds retained by the Company.

     The operating results of the Company depend primarily upon its net
interest income, which is determined by the difference between interest income
on interest-earning assets, which consist principally of loans, investment
securities and other investments, and interest expense on interest-bearing
liabilities, which consist principally of deposits and borrowings. The Savings
Bank's net income also is affected by its provision for loan losses, as well as
the level of its other operating income, including loan fees and service
charges and its other operating expenses, including salaries and employee
benefits, occupancy expense, federal deposit insurance premiums and
miscellaneous other expenses, and income taxes.

CHANGES IN FINANCIAL CONDITION

     The Company's assets increased by $37.6 million or 23.9% from $157.6
million at September 30, 1995 to $195.3 million at September 30, 1996. The
increase in total assets was primarily attributable to increased residential
mortgage and residential construction loan originations, as the Company
continued a more aggressive approach to originations in these loan categories.
The Company's loans receivable, net, increased by $32.7 million or 31.8% from
$102.9 million at September 30, 1995 to $135.6 million at September 30, 1996.
The increase is primarily attributable to residential mortgage originations,
which increased $30.3 million or 35.0%, as the Company expanded its
relationships with local mortgage brokers and offered more competitive mortgage
rates and to construction loan originations, which increased $1.8 million or
18.6%, as the Company also expanded its relationships with contractors.
Investment securities and mortgage-backed securities increased by $100,000 or
 .2% and cash and cash equivalents increased by $4.1 million or 117.1% between
September 30, 1995 and 1996, attributable to the proceeds from the stock
offering which were offset by the funding of the Company's increased level of
lending during fiscal 1996. The increase in loan originations were also funded
by a $7.5 million or 25.9% increase in advances from the Federal Home Loan Bank
of Pittsburgh ("FHLB") as well as from an $8.8 million or 7.6% increase in
deposits. The increase in advances from the FHLB were used primarily to fund
the origination of one-to-four family mortgage loans as well as to fund the

                                       7


<PAGE>   5



origination of construction loans. The increase in deposits during fiscal 1996
was primarily as a result of an increase in rates offered by the Company as
well as a general increase in market interest rates. Shareholders' equity
increased $19.8 million or 186.3% to $30.4 million at September 30, 1996, as a
result of the Company's net income for fiscal 1996 and the completion of the
stock offering.

                                       8


<PAGE>   6



     AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID.
The following table sets forth, for the periods and at the date indicated,
information regarding Company's average balance sheet. Information is based on
average daily balances during the periods presented.

<TABLE>
<CAPTION>
                                        At                                  Year Ended September 30,
                                   September 30,  ---------------------------------------------------------------------------------
                                       1996                       1996                                    1995                     
                                  --------------  -------------------------------------   -------------------------------------
                                     Average                                  Average                                 Average      
                                      Yield/        Average                   Yield/        Average                   Yield/       
                                     Rate(1)        Balance     Interest       Rate         Balance     Interest       Rate        
                                  --------------  -----------  -----------  -----------   -----------  -----------  -----------     
                                                                            (Dollars in Thousands)
<S>                                     <C>          <C>           <C>         <C>        <C>           <C>           <C>
Interest-earning assets:
  Investment securities                  6.07%       $ 18,868       1,124       5.96%      $ 21,236      $1,129         5.32%
  Mortgage-backed securities             6.76          25,597       1,703       6.65         28,956       1,808         6.24
  Loans receivable(1):
    First mortgage loans                 8.20         109,032       8,991       8.25         73,401       6,197         8.44
    Other loans                          9.13           6,745         609       9.03          6,683         614         9.19
                                                     --------      ------                  --------      ------
      Total loans receivable             8.22         115,777       9,600       8.29         80,084       6,811         8.50
                                                     --------      ------                  --------      ------
  Other interest-earning assets          5.80           8,695         506       5.82          4,444         250         5.63
                                                     --------      ------                  --------      ------
    Total interest-earning assets        7.95%        168,937      12,933       7.66%       134,720      $9,998         7.42%
                                         ====                      ======       ====                     ======         ====

Noninterest-earning assets                              4,810                                 4,278
                                                     --------                              --------
    Total assets                                     $173,747                              $138,998
                                                     ========                              ========

Interest-bearing liabilities:
  Deposits                               4.66%       $114,377       5,373       4.70%      $109,209      $4,806         4.40%
  FHLB advances                          6.40          30,092       2,012       6.69         14,129         981         6.94
  Escrows                                2.00           4,777         107       2.24          2,425          49         2.02
                                         ----        --------       -----                  --------      ------         ----
    Total interest-bearing               5.04%        149,246       7,492       5.02%       125,763      $5,836         4.64%
      liabilities                        ====                       =====                                ======         ====

Noninterest-bearing liabilities                         4,216                                 2,907
                                                     --------                              --------
    Total liabilities                                 153,462                               128,670
Shareholders' equity                                   20,285                                10,328
                                                     --------                              --------
    Total liabilities and retained
      earnings                                       $173,747                              $138,998
                                                     ========                              ========
Net interest-earning assets                          $ 19,691                              $  8,957
                                                     ========                              ========
Net interest income/interest
  rate spread                            2.91%                      $5,441      2.64%                    $4,162         2.78%
                                         ====                       ======      ====                     ======         ====
Net interest margin(2)                                                          3.22%                                   3.09%
                                                                                ====                                    ====
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                                                113.19%                                 107.12%
                                                                              ======                                  ======      

</TABLE>


<TABLE>
<CAPTION>
                                                                    Year Ended September 30,
                                                          -------------------------------------------
                                                                              1994
                                                          -------------------------------------------
                                                                                            Average
                                                            Average                          Yield/
                                                            Balance        Interest           Rate
                                                          -----------    -----------     ------------
<S>                                                          <C>              <C>             <C>
Interest-earning assets:
  Investment securities                                      $ 34,944         $1,648             4.72%
  Mortgage-backed securities                                   28,226          1,522             5.39
  Loans receivable(1):
    First mortgage loans                                       59,779          4,987             8.34
    Other loans                                                 5,107            430             8.42
                                                             --------         ------
      Total loans receivable                                   64,886          5,417             8.35
                                                             --------         ------
  Other interest-earning assets                                 4,104            169             4.12
                                                             --------         ------
    Total interest-earning assets                             132,160         $8,756             6.63%
                                                                              ======             ====

Noninterest-earning assets                                      4,289
                                                             --------
    Total assets                                             $136,449
                                                             ========

Interest-bearing liabilities:
  Deposits                                                   $111,751         $4,093             3.66%
  FHLB advances                                                12,020            776             6.46
  Escrows                                                       2,314             48             2.07
                                                             --------         ------             ----
    Total interest-bearing                                    126,085         $4,917             3.90%
      liabilities                                                             ======             ====

Noninterest-bearing liabilities                                   624
                                                             --------
    Total liabilities                                         126,709
Shareholders' equity                                            9,740
                                                             --------
    Total liabilities and retained
      earnings                                               $136,449
                                                             ========

Net interest-earning assets                                  $  6,075
                                                             ========
Net interest income/interest
  rate spread                                                                 $3,839             2.73%
                                                                              ======             ====
Net interest margin(2)                                                                           2.90%
                                                                                                 ====
Ratio of average interest-
  earning assets to average
  interest-bearing liabilities                                                                 104.82%
                                                                                               ======
</TABLE>

(1) Includes non-accrual loans.

(2) Net interest income divided by interest-earning assets.

                                       9


<PAGE>   7



     RATE/VOLUME ANALYSIS. The following table describes the extent to which
changes in interest rates and changes in volume of interest-related assets and
liabilities have affected the Company's interest income and expense during the
periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (change in volume multiplied by prior year rate), (ii)
changes in rate (change in rate multiplied by prior year volume), and (iii)
total change in rate and volume.

<TABLE>
<CAPTION>  
                                                                        Year Ended September 30,
                                            ----------------------------------------------------------------------
                                                                      1996 vs. 1995                                             
                                            ----------------------------------------------------------------------            
                                                                Increase                                           
                                                            (Decrease) Due to                                      
                                            -----------------------------------------------                              
                                                                                                 Total Increase   
                                                 Rate            Volume        Rate/Volume         (Decrease)      
                                            ------------     ------------     -------------     ----------------   
<S>                                            <C>              <C>            <C>                  <C>       
Interest-earnings assets:

  Investment securities                         $ 136           $  (126)         $ (15)               $   (5)    
  Mortgage-backed securities                      119              (210)           (14)                 (105)    
  Loans receivable, net                          (154)            3,013            (70)                2,789    
  Other interest-earning assets                     9               239              8                   256    
                                                -----            ------          -----                ------    
    Total interest-earning assets                 110             2,916            (91)                2,935    
                                                -----            ------          -----                ------    

Interest-bearing liabilities

  Deposits                                        324               228             15                   567    
  FHLB advances                                   (36)            1,108            (41)                1,031    
  Escrows                                           5                48              5                    58    
                                                -----            ------          -----                ------    
    Total interest-bearing liabilities            293             1,384            (21)                1,656    
                                                -----            ------          -----                ------ 
Increase (decrease) in net interest income      $(183)           $1,532          $ (70)               $1,279    
                                                =====            ======          =====                ======    
</TABLE>

<TABLE>
<CAPTION>
                                                              Year Ended September 30,
                                          ----------------------------------------------------------------
                                                                    1995 vs. 1994                
                                          ----------------------------------------------------------------
                                                             Increase
                                                         (Decrease) Due to
                                          ----------------------------------------------
                                                                                             Total Increase
                                              Rate            Volume         Rate/Volume       (Decrease) 
                                          -----------     ------------      ------------     --------------
<S>                                           <C>             <C>                <C>              <C>
Interest-earnings assets:

  Investment securities                        $ 210           $ (646)            $ (83)           $ (519)
  Mortgage-backed securities                     240               39                 7               286
  Loans receivable, net                           99            1,269                26             1,394
  Other interest-earning assets                   62               14                 5                81
                                               -----           ------             -----            ------
    Total interest-earning assets                611              676               (45)            1,242
                                               -----           ------             -----            ------

Interest-bearing liabilities

  Deposits                                       825              (93)              (19)              713
  FHLB advances                                   59              136                10               205
  Escrows                                         --                1                --                 1
                                                ----           ------             -----            ------
    Total interest-bearing liabilities           884               44                (9)              919
                                               -----           ------             -----            ------
Increase (decrease) in net interest income     $(273)          $  632             $ (36)           $  323
                                               =====           ======             =====            ======
</TABLE>


                                       10


<PAGE>   8



RESULTS OF OPERATIONS

     NET INCOME. The Company reported net income of $772,000, $705,000 and
$351,000 for the fiscal years ended September 30, 1996, 1995 and 1994,
respectively. Without the one-time special assessment described below, the
Company's net income during fiscal 1996 would have been $1.25 million. For
fiscal 1996, the $67,000 or 9.5% increase in net income from fiscal 1995 was
attributable to a $1.3 million or 30.7% increase in net interest income, a
$36,000 or 10.9%, increase in noninterest income and a reduction in the
provision for income taxes of $112,000 or 20.2%. These increases in income
during fiscal 1996 were offset by an increase of $1.4 million or 46.5% in
noninterest expense, from $2.9 million in fiscal 1995 to $4.3 million in fiscal
1996. A one-time $739,000 pre-tax charge for the amount of the Federal Deposit
Insurance Corporation ("FDIC") special assessment to recapitalize the Savings
Association Insurance Fund ("SAIF") is the primary component of the increase in
noninterest expense. Excluding the special assessment, which affected all
banking institutions with SAIF insured deposits, the Company's noninterest
expense for the year ended September 30, 1996 increased $625,000 or 21.3% from
the year ended September 30, 1995. This increase in noninterest expense is
attributable to opening and operating a denovo supermarket branch office, an
increase in professional fees related to operating the Company as a public
reporting entity, additional hiring of personnel, implementation of a 401k and
employee stock ownership plan, and the implementation of a local area computer
network at the Company's headquarters.

     For fiscal 1996, the Company's net interest margin increased to 3.22% from
3.09% in fiscal 1995 and the Company's interest rate spread decreased 14 basis
points to 2.64% from 2.78% for fiscal 1995. The yield earned on the Company's
interest-earning assets increased 24 basis points to 7.66% from 7.42%, while
the Company's average cost of interest-bearing liabilities increased 38 basis
points to 5.02% in 1996 from 4.64% in 1995. The increase in the Company's yield
earned was attributable to having a greater portion of its interest-earning
assets in higher yielding first mortgage loans. The increase in the average
cost of liabilities reflects more aggressive pricing on the Company's
certificate of deposit accounts, coupled with increased borrowings from the
FHLB. The improvement in the Company's net interest margin is also attributable
to the overall increase in interest-earning assets purchased with the proceeds
from the stock offering.

     For fiscal 1995, the Company's net interest margin increased to 3.09% from
2.90% in fiscal 1994 and the Company's interest rate spread increased 5 basis
points to 2.78% from 2.73% for fiscal 1994 from 6.63% to 7.42%. The yield
earned on the Company's interest-earning assets increased 79 basis points,
which offset a 74 basis point increase in the Company's average cost of
interest-bearing liabilities, from 3.90% to 4.64%. The increase in the
Company's yield earned was attributable to having a greater portion of its
interest-earning assets in higher yielding first mortgage loans. The increase
in the average cost of liabilities reflects the impact of seven Federal Reserve
Board rate increases during 1994 and the first quarter of 1995 and the
corresponding increase in rates offered by the Savings Bank on deposit products
to respond to rates offered by other financial institutions in its market

                                       11


<PAGE>   9



area. The increase in rates paid on deposits and other interest-bearing
liabilities at the end of fiscal 1995 rose more rapidly than the rates earned
on interest-earning assets. As a result, the Company's interest rate spread
declined to 2.64% at September 30, 1995.

     NET INTEREST INCOME. Net interest income before the provision for losses
on loans increased $1.3 million or 30.7% during fiscal 1996 compared to the
prior fiscal year, due to a $34.2 million or 25.4% increase in the average
balance of interest-earning assets, primarily attributable to a 44.6% increase
in average loans receivable. The increase in interest-earning assets over
interest-bearing liabilities was primarily attributable to the proceeds from
the Company's stock offering. Another contributing factor was an increase in
the average yield earned on interest-earning assets to 7.66% in 1996 from 7.42%
in 1995. The increases in both average balances and yield on earnings assets
more than offset an increase of $23.5 million in average interest-bearing
liabilities, from $125.8 million with a related cost of 4.64% in 1995 to $149.2
million with a related cost of 5.02% in 1996. In fiscal 1995, net interest
income before provision for losses on loans increased $323,000 or 8.4% compared
to the prior fiscal year, due to a $2.6 million or 1.9% increase in the average
balance of interest-earning assets, primarily attributable to a 23.4% increase
in average loans receivable, which more than offset a $919,000 or 18.7%
increase in total interest expense, due to a 74 basis point increase in the
average rate paid on interest-bearing liabilities.

     During fiscal 1996, total interest income increased by $2.9 million or
29.4% compared to fiscal 1995, primarily due to a $2.8 million or 41.0%
increase in interest earned on loans receivable, a $33,000 or 2.8% increase in
interest earned on investments, and a $217,000 or 114.7% increase in interest
earned on interest-bearing deposits, which more than offset a $105,000 or 5.8%
decrease in interest earned on mortgage-backed securities. The increase in
interest on loans receivable was due to an increase in the average balance of
loans receivable outstanding increasing 44.6% to $115.8 million during fiscal
1996 as compared to $80.0 million during fiscal 1995. This increase in the
average outstanding balance more than offset a decrease in the yield on loans
receivable of 21 basis points to 8.3% during 1996 from 8.5% during 1995. The
decrease of 21 basis points can be attributed to an increase in originations in
the Company's adjustable rate mortgage (ARM) and balloon mortgage products. At
September 30, 1995, total ARM and balloon mortgages totaled $67.4 million; at
September 30, 1996, these mortgages products totaled $106.2 million, a $38.8 or
57.5% increase. ARM and balloon mortgages are priced lower than the
conventional 30 year fixed rate mortgage product due to their repricing
features. The Company continues to expand its construction loan program by
slowly increasing the number of home builders that are approved to deal with
the Company. The core group of builders that have a relationship with the
Company continued to finance new home projects; this group has been expanded in
part through the use of a Small Business Association (SBA) program that enables
newer and less established builders an opportunity to develop a relationship
with the Company. The Company's exposure to these entities is limited due to
the fact that these loans are substantially insured against default by the SBA.
The Company continued to utilize local mortgage brokers in the acquisition of
new loan customers in addition to its emphasis on internally generated product.
The increase in interest earned on interest-bearing deposits

                                       12


<PAGE>   10



relates primarily to the investment in a liquid cash fund that invests in
overnight repurchase agreements. The decrease in interest earned on
mortgage-backed securities relates to less emphasis placed by the Company on
purchasing mortgage related investments due to the improved ability of the
Company to generate mortgage originations.

     During fiscal 1996, interest expense increased $1.7 million or 28.4% over
the prior comparable year, due to a $567,000 or 11.8% increase in interest
expense on deposits as well as a $1.1 million or 105.7% increase in interest on
FHLB advances and other borrowings. The increase in interest expense on
deposits was primarily attributable to an increase in average deposits of $5.2
million or 4.7% from 1995 to 1996. A contributing factor was a 30 basis point
increase in the average cost of savings from 4.40% in 1995 to 4.70% in 1996.
The increase in interest paid on FHLB advances was due to an increase in the
average balance of $16.0 million or 113.0%, which was partially offset by a
decrease in the related borrowing cost of 25 basis points from 6.94% in 1995 to
6.69% in 1996. The increased borrowings were used to fund the increased loan
demand.

     Net interest income before provision for losses on loans increased
$323,000 or 8.4% during fiscal 1995 compared to the prior fiscal year, due to a
$2.6 million or 1.9% increase in the average balance of interest-earning
assets, primarily attributable to a 23.4% increase in average loans receivable,
which more than offset a $919,000 or 18.7% increase in total interest expense,
due to a 74 basis point increase in the average rate paid on interest-bearing
liabilities.

     During fiscal 1995, total interest income increased by $1.2 million or
14.2% compared to fiscal 1994, primarily due to a $1.4 million or 25.7%
increase in interest earned on loans receivable, which more than offset a
$152,000 or 4.6% decrease in interest earned on investment securities,
mortgage-backed securities and interest-bearing deposits held by the Savings
Bank. The increase in interest on loans receivable was due to the combined
effect of both a $15.2 million or 23.4% increase in the average balance of
loans receivable and a 15 basis point increase in average yield earned. The
increase in the average yield resulted primarily from the origination of higher
yielding residential loans and a general increase in market interest rates
during fiscal 1995. The increase in the average balance of loans was due to a
general increase in originations of primarily residential mortgage loans and,
to a lesser extent, residential construction loans, during fiscal 1995, as the
Savings Bank began to utilize a wider network of local mortgage brokers and
building contractors. The decrease in interest earned on investment securities,
mortgage-backed securities and interest-bearing deposits held by the Savings
Bank was primarily due to a decrease of $13.7 million or 39.2% in the average
balance of investment securities, the proceeds of which were used to fund loan
originations.

     During fiscal 1995, interest expense increased $919,000 or 18.7% over the
prior comparable year, due to a $713,000 or 17.4% increase in interest expense
on deposits as well as a $206,000 or 25% increase in interest on FHLB advances
and other interest expenses. The increase in interest expense on deposits was
primarily attributable to a 74

                                       13


<PAGE>   11



basis point increase in the average rate paid thereon. This increase was due to
an increase in rates offered by the Savings Bank in response to a general
increase in market interest rates as well as to respond to rates offered by
other financial institutions in its market area. The increase in interest rates
also contributed to a shift in customer deposits from passbook and money market
accounts into certificates of deposits bearing higher rates. The increase in
interest paid on FHLB advances was due to an increase in average balance of
$2.1 million or 17.5% as well as a 48 basis point increase in the average
interest rate paid thereon. The increased borrowings were used to fund the
increased loan demand, while the increase in the rate paid thereon reflects the
increase in market interest rates during fiscal 1995.

     PROVISION FOR LOSSES ON LOANS. The Company establishes provisions for
losses on loans, which are charged to operations, in order to maintain the
allowance for loan losses at a level which is deemed to be appropriate based
upon an assessment of prior loss experience, the volume and type of lending
presently being conducted by the Company, industry standards, past due loans,
economic conditions in the Company's market area generally and other factors
related to the collectibility of the Company's loan portfolio. For the fiscal
years ended September 30, 1996, 1995 and 1994, provisions for losses on loans
amounted to $300,000, $304,000 and $135,000, respectively. The increased
provisions for fiscal 1996 and 1995 over fiscal 1994 reflects the increase in
the level of loans originated during the years as well as the percentage
increase in construction loans which have greater inherent credit risk than
residential mortgage loans. At September 30, 1996, the Company's allowance for
loan losses amounted to 50.3% of total non-performing loans and 0.8% of total
loans outstanding.

     Although management utilizes its best judgment in providing for possible
loan losses, there can be no assurance that the Company will not have to
increase its provisions for losses on loans in the future as a result of future
increases in non-performing loans or for other reasons, which could adversely
affect the Company's results of operations. In addition, various regulatory
agencies, as an integral part of their examinations process, periodically
review the Company's provision for losses on loans and the carrying value of
its other non-performing assets based on their judgments about information
available to them at the time of their examination. The Company was last
examined by the FDIC as of December 31, 1995. The Company was not required to
increase its provision for losses on loans or adjust the carrying value of its
other non-performing assets as a result of such examination.

     NONINTEREST INCOME. Total noninterest income increased $36,000 or 10.9%
during fiscal 1996 over the prior fiscal year. The increase was primarily
attributable to income from services charges and other fees related to the
larger number of Company customers.

     Total noninterest income increased $695,000 or 192.0% during fiscal 1995
over the prior fiscal year. The increase was primarily attributable to there
being no losses on the sale of securities during fiscal 1995 compared to a loss
during fiscal 1994 of $740,000, which

                                       14


<PAGE>   12

improvement was partially offset by a decrease of $40,000 or 11.3% in income
from services charges and other fees as well as a decrease of $6,000 or 25% in
other income.

     NONINTEREST EXPENSE. Total noninterest expense increased $1.4 million or
46.5% during fiscal 1996 compared to the prior fiscal year. As noted
previously, the SAIF special assessment of $739,000 accounted for 54.2% of this
increase in 1996. The other reasons for the increase were an increase in
compensation and employee benefits of $396,000 or 26.0%, which is attributable
to the hiring a controller and a consumer loan manager in addition to new
personnel to staff the branch office opened in October, 1995, along with the
implementation of a 401k and employee stock ownership plan. Premises, occupancy
and equipment costs increased $85,000 or 22.8% due primarily to operating the
new branch facility coupled with additional depreciation expense related to
building and equipment improvements. Other expenses increased $107,000 or 22.3%
primarily as the result of additional costs related to operating the Company as
a public reporting entity. Professional fees increased $74,000 or 56.7%, and
printing related costs increased $14,000 or 28.5%. The Company also underwent a
data processing conversion during 1996 resulting in additional fees of $18,000
or 18.6%.

     Total noninterest expenses increased by $171,000 or 6.2% during fiscal
1995 compared to the prior fiscal year. The primary reasons for the increase
were a $92,000 or 23.6% increase in other expenses, due in part to the
Company's payment of MAC(C) ATM operation charges and other related ATM
expenses as well as increased expenses related to a new checking account
program, a $32,000 or 2.2% increase in compensation and employee benefits and a
$38,000 or 32.8% increase in advertising expense. The increase in compensation
and employee benefits was due to ordinary annual increases in such expenses.
The increase in advertising expense reflects the Company's increased efforts to
promote its products and services to help maintain its market share. The
increases were partially offset by a decrease of $5,000 or 1.9% decrease in
federal deposit insurance premiums due to a lower deposit base for assessment
purposes.

     PROVISION FOR INCOME TAXES. The Company incurred a provision for income
taxes of $442,000, $554,000 and $230,000 for the fiscal years ended September
30, 1996, 1995 and 1994, respectively. The effective tax rate during each of
the foregoing respective fiscal years was 36.4%, 44.0% and 39.6%.

ASSET AND LIABILITY MANAGEMENT

     The ability to maximize net interest income is largely dependent upon the
achievement of a positive interest rate spread that can be sustained during
fluctuations in prevailing interest rates. Interest rate sensitivity is a
measure of the difference between amounts of interest-earning assets and
interest-bearing liabilities which either reprice or mature within a given
period of time. The difference, or the interest rate repricing "gap," provides
an indication of the extent to which an institution's interest rate spread will
be affected by changes in interest rates. A gap is considered positive when the
amount of interest-rate

                                       15


<PAGE>   13



sensitive assets exceeds the amount of interest-rate sensitive liabilities, and
is considered negative when the amount of interest-rate sensitive liabilities
exceeds the amount of interest-rate sensitive assets during a given time
period.  Generally, during a period of rising interest rates, a negative gap
within shorter maturities would adversely affect net interest income, while a
positive gap within shorter maturities would result in an increase in net
interest income, and during a period of falling interest rates, a negative gap
within shorter maturities would result in an increase in net interest income
while a positive gap within shorter maturities would have the opposite effect.
As of September 30, 1996, the amount of the Company's interest-earning assets
which were estimated to mature or reprice within one year exceeded the
Company's interest-bearing liabilities with the same characteristics by $6.3
million or 3.2% of the Company's total assets.

     The Company's actions with respect to interest rate risk and its
asset/liability gap management are taken under the guidance of the
Asset/Liability Management Committee of the Board of Directors. This Committee
meets quarterly to, among other things, set interest rate risk targets and
review the Company's current composition of assets and liabilities in light of
the prevailing interest rate environment. The Committee assesses its interest
rate risk strategy quarterly, which is reviewed by the full Board of Directors.

     The Company has historically emphasized the origination of long-term
fixed-rate residential real estate loans for retention in its portfolio. At
September 30, 1996, $58.7 million or 42.9% of the Company's total loan
portfolio consisted of fixed-rate residential mortgage loans. However, as of
such date, the Company also held in its loan portfolio $11.5 million of
construction loans which reprice annually and $36.3 million of long-term
residential mortgage loans which have interest rate adjustment features at
seven years and 15 years.  Although the Company anticipates that a majority of
its loan portfolio will continue to consist of fixed-rate loans, the Company
has recently attempted to mitigate the interest rate risk of holding a
significant portion of fixed-rate loans in its portfolio through the
origination of ARMs and short-term construction and consumer loans. At
September 30, 1996, $22.4 million or 11.5% of the Company's total assets
consisted of investment securities, 61.5% of which have terms to maturity of
less than five years. In addition, the Company has invested in adjustable rate
mortgage-backed securities. At September 30, 1996, $19.0 million or 80.4% of
the Company's mortgage-backed securities portfolio was comprised of ARMs. As of
December 31, 1995, the Company reclassified its entire investment securities
and mortgage-backed securities portfolios as available for sale which will
permit the Company to sell such securities if deemed appropriate in response
to, among other things, changes in interest rates.

     Management presently monitors and evaluates the potential impact of
interest rate changes upon the market value of the Company's portfolio equity
(MVPE) and the level of net interest income on a quarterly basis. MVPE is the
difference between incoming and outgoing discounted cash flows from assets,
liabilities, and off-balance sheet contracts. The Company utilizes an outside
banking consultant for assistance in modeling its interest rate risk position.

                                       16


<PAGE>   14



     The following table presents the Company's MVPE as of September 30, 1996:

<TABLE>
<CAPTION>
                                               Market Value of Portfolio Equity
----------------------------------------------------------------------------------------------------------------------------
                                                          Estimated
       Change in                                          MVPE as a
    Interest Rates             Estimated                 Percentage                    Amount
    (basis points)               MVPE                     of Assets                  of Change                 Percent
-------------------      -------------------     -------------------------      ------------------      --------------------
                                                   (Dollars in Thousands)
         <S>                   <C>                          <C>                     <C>                        <C>
         +400                  24,154.2                      12.3%                  (10,244.5)                 (29.8)%
         +300                  27,116.0                      13.9                    (7,282.7)                 (21.2)
         +200                  29,807.4                      15.2                    (4,591.3)                 (13.3)
         +100                  32,421.7                      16.6                    (1,977.0)                  (5.7)
          --                   34,398.7                      17.6                        --                      --
         -100                  35,499.0                      18.1                     1,100.3                    3.2
         -200                  35,552.5                      18.2                     1,153.8                    3.4
         -300                  35,662.8                      18.2                     1,264.1                    3.7
         -400                  36,283.1                      18.5                     1,884.4                    5.5
</TABLE>


     As noted on the above table, significant increases in interest rates may
adversely affect the Company's net interest income and/or MVPE because of the
excess of interest-bearing liabilities over interest-earning assets within
shorter periods and because the Company's adjustable-rate, interest-earning
assets generally are not as responsive to changes in interest rates as its
interest-bearing liabilities due to terms which generally permit only annual
adjustments to the interest rate and which generally limit the amount which
interest rates thereon can adjust at such time and over the life of the related
asset. In addition, the proportion of adjustable-rate loans and assets in the
Company's loan and investment portfolio could decrease in future periods if
market rates of interest remain at or decrease below current levels.

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

                                       17


<PAGE>   15



of its total liabilities, the Company also utilizes other borrowing sources,
primarily advances from the FHLB.

     Liquidity management is both a daily and long-term function. Excess
liquidity is generally invested in short-term investments such as cash and cash
equivalents, and U.S. Government agency securities. On a longer-term basis, the
Company invests in various loans, mortgage-backed securities, and investment
securities. The Company uses its sources of funds primarily to meet its ongoing
commitments to pay maturing savings certificates and savings withdrawals, fund
loan commitments and maintain an investment securities portfolio. At September
30, 1996, the total approved loan commitments outstanding (excluding
undisbursed portions of loans in process) amounted to $9.2 million. At the same
date, the unadvanced portion of loans in process approximated $7.7 million.
Certificates of deposit scheduled to mature in one year or less at September
30, 1996 totalled $8.4 million. Management of the Company believes that the
Company has adequate resources, including principal prepayments and repayments
of loans and maturing investments, to fund all of its commitments to the extent
required.  Based upon its historical run-off experience, management believes
that a significant portion of maturing deposits will remain with the Company.

     As of September 30, 1996, the Company had regulatory capital which was in
excess of applicable limits.

RECAPITALIZATION OF SAIF

     The deposits of the Savings Bank are currently insured by the SAIF. Both
the SAIF and the Bank Insurance Fund ("BIF"), the federal deposit insurance
fund that covers commercial bank deposits, are required by law to attain and
thereafter maintain a reserve ratio of 1.25% of insured deposits. The BIF fund
met its target reserve level in September 1995, but the SAIF was not expected
to meet its target reserve level until at least 2002. Consequently, in late
1995, the FDIC approved a final rule regarding deposit insurance premiums
which, effective with respect to the semiannual premium assessment beginning
January 1, 1996, reduced deposit insurance premiums for BIF member institutions
to zero basis points (subject to an annual minimum of $2,000) for institutions
in the lowest risk category. Deposit insurance premiums for SAIF members were
maintained at their existing levels (23 basis points for institutions in the
lowest risk category).

     On September 30, 1996, President Clinton signed into law legislation which
will eliminate the premium differential between SAIF-insured institutions and
BIF-insured institutions by recapitalizing the SAIF's reserves to the required
ratio. The legislation provides that all SAIF member institutions pay a
one-time special assessment to recapitalize the SAIF, which in the aggregate
will be sufficient to bring the reserve ratio in the SAIF to 1.25% of insured
deposits.  The legislation also provides for the merger of the BIF and the
SAIF, with such merger being conditioned upon the prior elimination of the
thrift charter.

                                       18


<PAGE>   16


     Effective October 8, 1996, FDIC regulations imposed a one-time special
assessment of 65.7 basis points on SAIF-assessable deposits as of March 31,
1995, which was collected on November 27, 1996. The Company's one-time special
assessment amounted to $739,000 pre-tax. The payment of such special assessment
had the effect of immediately reducing the Company's capital by $473,000 after
tax. Nevertheless, management does not believe that this one-time special
assessment will have a material adverse effect on the Company's consolidated
financial condition or cause non-compliance with the Savings Bank's regulatory
capital requirements.

     On October 16, 1996, the FDIC proposed to lower assessment rates for SAIF
members to reduce the disparity in the assessment rates paid by BIF and SAIF
members. Beginning October 1, 1996, effective SAIF rates would range from zero
basis points to 27 basis points. From 1997 through 1999, SAIF members will pay
6.4 basis points to fund the Financing Corporation while BIF member
institutions will pay approximately 1.3 basis points. The Company's deposit
insurance premiums, which have amounted to 23 basis points will be reduced to
6.4 basis points. Based upon the $126.5 million of assessable deposits at
September 30, 1996, the Company would expect to pay approximately $52,000 less
in insurance premiums per quarter during 1997, or $.03 per share.

IMPACT OF INFLATION AND CHANGING PRICES

     The Consolidated Financial Statements of the Company and related notes
presented herein have been prepared in accordance with generally accepted
accounting principles which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes
in the relative purchasing power of money over time due to inflation.

     Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services, since such prices are affected by inflation to a
larger extent than interest rates. In the current interest rate environment,
liquidity and the maturity structure of the Company's assets and liabilities
are critical to the maintenance of acceptable performance levels.

                                       19


<PAGE>   17

ERNST & YOUNG LLP                             One Oxford Centre
                                              Pittsburgh, Pennsylvania 15219
                                              Phone: 412-644-7800

                         REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Pittsburgh Home Financial Corp.

We have audited the accompanying consolidated statements of financial condition 
of Pittsburgh Home Financial Corp. and its subsidiary as of September 30, 1996 
and 1995, and the related consolidated statements of income, changes in 
shareholders' equity, and cash flows for each of the three years in the period 
ended September 30, 1996. These financial statements are the responsibility of 
Pittsburgh Home Financial Corp.'s management. Our responsibility is to express 
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of 
material misstatement. An audit includes examining, on a test basis, evidence 
supporting the amounts and disclosures in the financial statements. An audit 
also includes assessing the accounting principles used and significant 
estimates made by management, as well as evaluating the overall financial 
statement presentation. We believe that our audits provide a reasonable basis 
for our opinion.

In our opinion, the accompanying financial statements referred to above present 
fairly, in all material respects, the consolidated financial condition of 
Pittsburgh Home Financial Corp. and its subsidiary at September 30, 1996 and 
1995, and the consolidated results of their operations and their cash flows for 
each of the three years in the period ended September 30, 1996, in conformity 
with generally accepted accounting principles.

                                                     /s/ ERNST & YOUNG LLP
 

November 8, 1996

                                     - 20 -
<PAGE>   18


                        Pittsburgh Home Financial Corp.

                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30
                                                                                1996                  1995
                                                                        --------------------------------------------
<S>                                                                       <C>                   <C>
ASSETS
Cash                                                                          $    915,326          $  1,417,548
Interest-bearing deposits                                                        6,646,384             2,127,055
                                                                        --------------------------------------------
                                                                                 7,561,710             3,544,603

Investment securities available for sale (cost of $46,381,706)                  46,305,705                    --
Investment securities held to maturity (fair value of $46,280,873)                      --            46,215,620
Loans receivable, net of allowance of $1,128,279 in 1996 and $920,685
   in 1995                                                                     135,551,534           102,937,733
Accrued interest receivable                                                      1,243,462             1,071,033
Premises and equipment, net                                                      1,900,149             1,919,162
Federal Home Loan Bank stock--at cost                                            1,875,000             1,450,000
Deferred income taxes                                                              523,632               178,763
Foreclosed real estate                                                             133,256                    --
Other assets                                                                       235,317               252,757
                                                                        --------------------------------------------
Total assets                                                                  $195,329,765          $157,569,671
                                                                        ============================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits                                                                      $124,341,573          $115,497,198
Advances from Federal Home Loan Bank                                            36,500,000            29,000,000
Advances by borrowers for taxes and insurance                                    1,847,815             1,687,301
Accrued income taxes payable                                                       496,029                18,555
Other liabilities                                                                1,772,332               756,781
                                                                        --------------------------------------------
Total liabilities                                                              164,957,749           146,959,835

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                    --
Additional paid-in capital                                                      20,958,806                    --
Unearned shares of ESOP                                                         (1,831,720)                   --
Net unrealized loss on securities available for sale, net of tax                   (50,000)                   --
Retained earnings (substantially restricted)                                    11,273,109            10,609,836
                                                                        --------------------------------------------
Total shareholders' equity                                                      30,372,016            10,609,836
                                                                        --------------------------------------------
Total liabilities and shareholders' equity                                    $195,329,765          $157,569,671
                                                                        ============================================
</TABLE>


See notes to consolidated financial statements.

                                  -21-

<PAGE>   19

                        Pittsburgh Home Financial Corp.

                       Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                      YEAR ENDED SEPTEMBER 30
                                                              1996             1995              1994
                                                        ----------------------------------------------------
<S>                                                         <C>              <C>               <C>
Interest income:
   Loans receivable                                          $ 9,600,096      $6,810,497        $5,417,439
   Investment securities:
     Taxable                                                   2,742,092       2,997,988         3,225,930
     Tax-exempt                                                  183,968              --                --
   Interest-bearing deposits                                     406,650         189,362           112,770
                                                        ----------------------------------------------------
Total interest income                                         12,932,806       9,997,847         8,756,139

Interest expense:
   Deposits                                                    5,372,817       4,806,047         4,092,591
   Advances from Federal Home Loan Bank and other

                                                               2,118,983       1,030,213           824,027
                                                        ----------------------------------------------------
Total interest expense                                         7,491,800       5,836,260         4,916,618
                                                        ----------------------------------------------------
Net interest income                                            5,441,006       4,161,587         3,839,521

Provision for loan losses                                        300,000         304,000           135,331
                                                        ----------------------------------------------------
Net interest income after provision for loan losses            5,141,006       3,857,587         3,704,190

Noninterest income (loss):
   Service charges and other fees                                340,625         314,404           354,062
   Loss on sale of securities                                         --              --          (739,969)
   Other income                                                   28,246          18,161            23,726
                                                        ----------------------------------------------------
Total noninterest income (loss)                                  368,871         332,565          (362,181)

Noninterest expense:
   Compensation and employee benefits                          1,915,520       1,519,970         1,487,793
   Premises and occupancy costs                                  458,379         373,409           371,522
   Federal insurance premium                                     288,551         257,384           262,482
   SAIF assessment                                               738,961              --                --
   Marketing                                                     154,636         154,068           116,124
   Data processing costs                                         149,703         144,490           132,851
   Other expenses                                                589,808         482,331           390,169
                                                        ----------------------------------------------------
Total noninterest expense                                      4,295,558       2,931,652         2,760,941
                                                        ----------------------------------------------------
Income before income taxes                                     1,214,319       1,258,500           581,068
Income taxes                                                     441,941         554,000           230,000
                                                        ----------------------------------------------------
Net income                                                   $   772,378     $   704,500       $   351,068
                                                        ====================================================
Earnings per share (beginning April 1, 1996)                 $       .15             N/A               N/A

</TABLE>

See notes to consolidated financial statements.

                                  -22-

<PAGE>   20

                        Pittsburgh Home Financial Corp.

           Consolidated Statements of Changes in Shareholders' Equity

                 Years ended September 30, 1996, 1995, and 1994

<TABLE>
<CAPTION>
                                                                               NET
                                                                           UNREALIZED
                                                                             LOSS ON
                                           ADDITIONAL        UNEARNED       SECURITIES                        TOTAL
                             COMMON         PAID-IN           SHARES        AVAILABLE       RETAINED      SHAREHOLDERS'
                             STOCK          CAPITAL          OF ESOP        FOR SALE        EARNINGS         EQUITY
                          -----------------------------------------------------------------------------------------------
<S>                         <C>           <C>             <C>                <C>         <C>               <C>
September 30, 1993           $    --       $        --     $        --        $     --    $ 9,554,268       $ 9,554,268
  Net income                      --                --              --              --        351,068           351,068
                          -----------------------------------------------------------------------------------------------
September 30, 1994                --                --              --              --      9,905,336         9,905,336
  Net income                      --                --              --              --        704,500           704,500
                          -----------------------------------------------------------------------------------------------
September 30, 1995                --                --              --              --     10,609,836        10,609,836
  Issuance of stock
     April 1, 1996            21,821        20,959,429              --              --             --        20,981,250
  Stock acquired by ESOP          --                --      (1,928,082)             --             --        (1,928,082)
  ESOP shares released            --              (623)         96,362              --             --            95,739
  Change in unrealized
     loss on investment
     securities
     available for
     sale, net of taxes           --                --              --         (50,000)            --           (50,000)
  Net income                      --                --              --              --        772,378           772,378
  Cash dividends
     declared on common
     stock of $.05 per
     share                        --                --              --              --       (109,105)         (109,105)
                          -----------------------------------------------------------------------------------------------
September 30, 1996           $21,821       $20,958,806     $(1,831,720)       $(50,000)   $11,273,109       $30,372,016
                          ===============================================================================================
</TABLE>


See notes to consolidated financial statements.

                                  -23-

<PAGE>   21

                        Pittsburgh Home Financial Corp.

                     Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED SEPTEMBER 30
                                                                              1996             1995            1994
                                                                         -------------------------------------------------
<S>                                                                      <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                $    772,378     $    704,500     $    351,068
Adjustments to reconcile net income to net cash 
   provided by operating activities:
     Depreciation                                                              172,083          132,279          133,239
     Loss on sale of securities and other assets, net                               --               --          739,969
     Amortization and accretion of premiums and discounts on assets and
       deferred loan fees                                                      149,762         (135,716)         142,711
     Provision for loan losses                                                 300,000          304,000          135,331
     Release of ESOP shares                                                     95,739               --               --
     Deferred tax benefit                                                     (310,868)         (52,763)         (42,863)
     Other, net                                                              1,498,550          534,771         (289,520)
                                                                         -------------------------------------------------
Net cash provided by operating activities                                    2,677,644        1,487,071        1,169,935

CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations                                                          (65,962,930)     (58,691,649)     (20,865,776)
Loan principal repayments                                                   31,099,129       17,995,368       17,221,061
Proceeds from sale of FHA/VA loans at cost                                   1,935,500        3,009,250        5,592,350
Purchases of:
   Available-for-sale securities                                           (18,656,078)      (5,152,989)     (12,413,795)
   Held-to-maturity securities                                                      --       (6,306,741)      (8,312,996)
Proceeds from maturities and principal repayments of:
   Available-for-sale securities                                            17,955,731        7,814,500        6,572,100
   Held-to-maturity securities                                                      --        4,622,964        5,833,297
Proceeds from sale of securities                                                    --               --       19,003,747
Purchases of premises and equipment                                           (153,070)        (183,670)        (149,142)
Other, net                                                                    (167,257)              --           26,337
                                                                         -------------------------------------------------
Net cash (used) provided by investing activities                           (33,948,975)     (36,892,967)      12,507,183

CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in checking, passbook, and money market
   deposit accounts                                                         (2,223,204)     (12,771,943)      (3,177,855)
Net increase (decrease) in certificates of deposit                          11,067,579       17,874,967         (804,690)
Increase (decrease) in advances from the Federal Home Loan Bank              7,500,000       20,500,000       (1,000,000)
Proceeds from issuance of stock, net of shares acquired by ESOP             19,053,168               --               --
Cash dividends paid to shareholders                                           (109,105)              --               --
                                                                         -------------------------------------------------
Net cash provided (used) by financing activities                            35,288,438       25,603,024       (4,982,545)
                                                                         -------------------------------------------------

Net increase (decrease) in cash and cash equivalents                         4,017,107       (9,802,872)       8,694,573
Cash and cash equivalents at beginning of year                               3,544,603       13,347,475        4,652,902
                                                                         -------------------------------------------------
Cash and cash equivalents at end of year                                  $  7,561,710     $  3,544,603     $ 13,347,475
                                                                         =================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
   Interest (includes interest credited on deposits of $5,006,336,
     $3,552,250, and $3,128,249 in 1996, 1995, and 1994, respectively)    $  7,300,703     $  5,702,391     $  4,900,987
   Income taxes                                                                393,016          405,000          581,000

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Foreclosed mortgage loans transferred to real estate owned                $    133,256     $    124,821     $     51,226
</TABLE>

See notes to consolidated financial statements.

                                  -24-

<PAGE>   22

                        Pittsburgh Home Financial Corp.

                   Notes to Consolidated Financial Statements

                               September 30, 1996

1. BASIS OF PRESENTATION AND ORGANIZATION

The consolidated financial statements include the accounts of Pittsburgh Home
Financial Corp. (the Company) and its wholly owned subsidiary, Pittsburgh Home
Savings Bank (the Bank). All significant intercompany balances and transactions
have been eliminated in consolidation.

The Bank is a state-chartered stock savings bank headquartered in Pittsburgh,
Pennsylvania, and conducts business from six offices in Allegheny and Butler
counties. The Bank is primarily engaged in attracting retail deposits from the
general public and using such deposits to originate loans. The Company and Bank
are subject to the regulations of certain federal and state agencies and
periodic examinations by certain regulatory authorities.

In September 1995, the Bank formed Pittsburgh Home Financial Corp., to acquire
100% of the capital stock of the Bank upon its conversion from the mutual to
stock form of ownership. The Bank's conversion and the Company's common stock
offering were completed on April 1, 1996, with the sale of 2,182,125 shares of
$.01 par value common stock at $10 per share. The Company received proceeds of
$20,981,250 (net of $840,000 of organization and stock offering costs). In
conjunction with the conversion and offering, the Company established an
Employee Stock Ownership Plan (ESOP) (see Note 9) which acquired 8% of the
shares issued, or 174,570 shares for $1,928,082.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expense during the reported period. Actual
results could differ from those estimates.

CASH AND NONINTEREST-EARNING DEPOSITS

The Bank is required by the Federal Reserve Bank to maintain cash and reserve
balances. The reserve calculation is 0% of the first $4.3 million of checking
deposits, 3% of the next $47.7 million of checking deposits and 10% of total
checking deposits over $52.0 million. These required reserves, net of allowable
credits, amounted to $268,000 at September 30, 1996.

                                  -25-

<PAGE>   23


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT SECURITIES AVAILABLE FOR SALE

Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
shareholders' equity until realized. Gains and losses on the sale of
available-for-sale securities are determined using the specific-identification
method. Declines in the fair value of individual available-for-sale securities
below their cost that are other than temporary will result in write-downs of
the individual securities to their fair value. Any related write-downs will be
included in earnings as realized losses. No securities have been classified as
trading.

INVESTMENT SECURITIES HELD TO MATURITY

Securities for which the Company has the positive intent and ability to hold to
maturity are reported at cost, adjusted for premiums and discounts that are
recognized in interest income using the interest method over the period to
maturity. Declines in the fair value of individual held-to-maturity securities
below their amortized cost that are other than temporary will result in
write-downs of the individual securities to their fair value. Any related
write-downs will be included in earnings as realized losses.

LOANS

Loans are reported at their outstanding principal adjusted for any chargeoffs,
the allowance for loan losses, and any deferred fees or costs on originated
loans. Loan origination and commitment fees and certain direct origination
costs have been deferred and recognized as an adjustment of the yield of the
related loan, adjusted for anticipated loan prepayments.

The accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become due or when
the loan becomes more than 90 days past due. An allowance for the loss of
accrued but uncollected interest is established at the time the interest
accrual is discontinued.  Interest ultimately collected is credited to income
in the period of recovery.

Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards (FAS) No. 114, "Accounting by Creditors for Impairment of
a Loan," as amended by FAS No. 118, "Accounting by Creditors for Impairment of
a Loan-Income Recognition and Disclosure." These statements require impaired
loans to be identified and measured based on the present value of the expected
future cash flows discounted at the loan's effective interest rate, or at the
loan's

                                  -26-

<PAGE>   24


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS (CONTINUED)

observable market price or at the fair value of the collateral if the loan is
collateral dependent. If the recorded investment in the loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses.

Impaired loans consist of nonhomogenous loans in which management has
determined based on the evaluation of current information and events, that it
is probable that the Bank will not be able to collect all of the amounts due on
these loans in accordance with the contractual terms of the loan agreements.
For purposes of the statements, nonaccrual, substandard and doubtful commercial
and other real estate loans are evaluated for impairment under the provisions
of FAS No. 114 and FAS No. 118. The adoption of these statements did not have a
material impact on the overall allowance for loan losses and did not affect the
Company's chargeoff or income recognition policies.

The allowance for loan losses is increased by charges to income and decreased
by charge-offs (net of recoveries). Management's periodic evaluation of the
adequacy of the allowance is based on the Bank'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 any underlying
collateral, and current economic conditions.

FORECLOSED REAL ESTATE

Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are recorded at the lower of the carrying amount of the loan or
fair value of the property less cost to sell. After foreclosure, valuations are
periodically performed by management and a valuation allowance is established
for any declines in the fair value less cost to sell below the property's
carrying amount. Revenues and expenses and changes in the valuation allowance
are included in the statement of income. Gains and losses upon disposition are
reflected in earnings as realized.

PREMISES AND EQUIPMENT

Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated on the straight-line method with asset lives ranging
from three to thirty years. Maintenance and repairs are charged to expense as
incurred.

                                  -27-

<PAGE>   25


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STATEMENTS OF CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash,
certificates of deposit and interest-bearing deposits.

EARNINGS PER SHARE

The Company completed its initial stock offering on April 1, 1996, and
accordingly, earnings per share for 1996 is computed on net income and common
stock outstanding from that date. Earnings per share is calculated by dividing
net income since April 1, 1996 of $310,768 by the number of weighted average
common shares outstanding. As discussed in Note 9, the Company accounts for the
174,570 shares acquired by its ESOP in accordance with Statement of Position
93-6; 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. The weighted number of common and common
equivalent shares outstanding for the period April 1 through September 30, 1996
was 2,011,919.

EFFECT OF NEW ACCOUNTING STANDARDS

In October 1995, the Financial Accounting Standards Board (FASB) issued FAS No.
123, "Accounting for Stock-Based Compensation." FAS No. 123 defines a fair
value-based method of accounting for stock-based employee compensation plans.
Under the fair value-based method, compensation cost is measured at the grant
date based upon the value of the award and is recognized over the service
period. The standard encourages all entities to adopt this method of accounting
for all employee stock compensation plans. However, it also allows an entity to
continue to measure compensation costs for its plans as prescribed in
Accounting Principles Board Opinion (Opinion) No. 25, "Accounting for Stock
Issued to Employees." If an entity elects to continue to use the accounting in
Opinion No. 25, pro forma disclosures of net income and earnings per share
must be made as if the fair value method of accounting, as defined by FAS No.
123 had been applied. FAS No. 123 is effective for the Company's fiscal year
ending September 30, 1997. On October 15, 1996, the Company's shareholders
approved the adoption of a stock option plan (see Note 9). The Company is
presently evaluating the impact of the new pronouncement and has not yet
determined whether it will adopt the statement for expense recognition
purposes.

                                  -28-

<PAGE>   26


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EFFECT OF NEW ACCOUNTING STANDARDS (CONTINUED)

In June 1996, the FASB issued FAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." Under the
FASB's "financial components" approach, both the transferor and transferee
would recognize the asset and liabilities (or components thereof) that it
controls in a physical sense and "derecognize" the assets and liabilities that
were surrendered or extinguished in the transfer. Prior rules emphasize the
economic risks or rewards of ownership of the assets. This statement is
effective for transactions occurring after December 31, 1996. The Company does
not anticipate any material impact on statements of income and financial
condition from the adoption of this statement.

3. INVESTMENT SECURITIES

In May 1993, FASB issued FAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," and, as permitted by the Statement, the Company
elected to adopt the provisions of FAS No. 115 at September 30, 1994. In
accordance with the standard, prior period financial statements have not been
restated to reflect the change in accounting principle. All investment
securities were classified as held to maturity at September 30, 1995.

On November 15, 1995, FASB issued a Special Report, "A Guide to Implementation
of Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities" (Guide). The Guide provided a one-time opportunity for companies to
reassess the classification of securities under FAS No. 115 beginning November
15, 1995, with any resulting reclassification being made without calling into
question the propriety of a company's stated intent in prior or subsequent
periods. The Company elected to take advantage of this opportunity and, as a
result, reclassified its entire held-to-maturity investment portfolio to
available-for-sale as of October 1, 1995. This reclassification was made
primarily in order to allow the Company maximum flexibility to respond to
changes in market conditions, manage interest rate risk, and to provide
liquidity. The amortized cost and net unrealized gain on the securities
transferred were $46,215,620 and $65,253, respectively, at the time of
transfer.


                                  -29-

<PAGE>   27

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)

3. INVESTMENT SECURITIES (CONTINUED)

Securities classified by type at September 30, 1996 and 1995, respectively,
are summarized below by scheduled maturity.  Mortgage-backed securities are
based on the payment patterns of the underlying collateral, and, therefore,
there are no stated maturity reflected below for these securities.

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30, 1996
                                                ---------------------------------------------------------------------------
                                                   AMORTIZED      UNREALIZED     UNREALIZED        MARKET        AMORTIZED
                                                     COST            GAIN           LOSS           VALUE           COST
                                                ---------------------------------------------------------------------------
<S>                                             <C>               <C>            <C>             <C>          <C>
U.S. Government and agency obligations due:
    Within 12 months                             $ 4,522,607       $  1,948       $  6,883        $ 4,517,672  $ 5,993,873
    Beyond 12 months but within 5 years            8,658,939         17,484         69,367          8,607,056    8,367,065
    Beyond 5 years but within 10 years             3,663,422         11,093         55,906          3,618,609    2,696,008
    Beyond 10 years                                5,058,622         18,630         47,079          5,030,173           --

Corporate obligations due:
    Within 12 months                                      --             --             --                 --    1,203,117
    Beyond 12 months but within 5 years              498,901          9,067             --            507,968      497,960
    Beyond 5 years but within 10 years                    --             --             --                 --           --
    Beyond 10 years                                       --             --             --                 --           --
                                                ---------------------------------------------------------------------------
                                                  22,402,491         58,222        179,235         22,281,478   18,758,023
Mortgage-backed securities:
   Government National Mortgage
     Association                                  11,881,295         47,727             --         11,929,022   12,917,823
   Federal National Mortgage Association           4,787,002             --          5,899          4,781,103    5,748,353
   Federal Home Loan Mortgage Corporation          7,131,555             --         16,828          7,114,727    8,791,421
                                                ---------------------------------------------------------------------------
                                                  23,799,852         47,727         22,727         23,824,852   27,457,597

Equity securities                                    179,363         20,012             --            199,375           --
                                                ---------------------------------------------------------------------------
Total investment securities                      $46,381,706       $125,961       $201,962        $46,305,705  $46,215,620
                                                ===========================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30, 1995
                                             ------------------------------------------------
                                                 UNREALIZED     UNREALIZED        MARKET
                                                    GAIN           LOSS           VALUE
                                             ------------------------------------------------
<S>                                              <C>            <C>           <C>
U.S. Government and agency obligations due:
    Within 12 months                              $  3,050       $ 35,175      $ 5,961,748
    Beyond 12 months but within 5 years             34,657        100,281        8,301,441
    Beyond 5 years but within 10 years              31,064          7,614        2,719,458
    Beyond 10 years                                     --             --               --

Corporate obligations due:
   Within 12 months                                    329          7,570        1,195,876
   Beyond 12 months but within 5 years              19,541             --          517,501
   Beyond 5 years but within 10 years                   --             --               --
   Beyond 10 years                                      --             --               --
                                             ------------------------------------------------
                                                    88,641        150,640       18,696,024
Mortgage-backed securities:
   Government National Mortgage
     Association                                   151,652         38,594       13,030,881
   Federal National Mortgage Association            78,300         61,160        5,765,493
   Federal Home Loan Mortgage                       60,883         63,829        8,788,475
     Corporation
                                             ------------------------------------------------
                                                   290,835        163,583       27,584,849

Equity securities                                       --             --               --
                                             ------------------------------------------------
Total investment securities                       $379,476       $314,223      $46,280,873
                                             ================================================
</TABLE>

U.S. Government obligations carried at approximately $1,000,000 at September 
30, 1996 were pledged to secure deposits and for other purposes required or 
permitted by law.

                                  -30-

<PAGE>   28

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)

3. INVESTMENT SECURITIES (CONTINUED)

There were no sales of securities in 1996 or 1995. Proceeds from sales of
investment securities were $15,892,802 for the year ended September 30, 1994.
Gross losses of $560,442 were realized on those sales. Additionally, proceeds
from sales of mortgage-backed securities were $3,110,945 for the year ended
September 30, 1994. Gross losses of $179,527 were realized on those sales.

4. LOANS RECEIVABLE, NET

Loans receivable, net at September 30, 1996 and 1995, are summarized below:


<TABLE>
                                                   1996                1995
                                           -----------------------------------------
<S>                                             <C>                 <C>
First mortgage loans:
   Secured by 1-4 family residence               $114,310,658         $ 85,108,528
   Construction                                    19,265,055           16,586,300
   Other                                            2,592,566            1,527,201
                                           -----------------------------------------
                                                  136,168,279          103,222,029
Less:
   Loans in process                                 7,745,464            6,926,107
   Deferred loan fees (costs)                         (14,502)              21,859
                                           -----------------------------------------
Total first mortgage loans                        128,437,317           96,274,063

Home equity loans and lines                         5,311,682            4,312,142
Other loans                                         2,930,814            3,272,213
Less allowance for loan losses                      1,128,279              920,685
                                           -----------------------------------------
                                                 $135,551,534         $102,937,733
                                           =========================================
</TABLE>

Activity in the allowance for loan losses is summarized as follows for the
years ended September 30:
<TABLE>
<CAPTION>
                                                 1996              1995             1994
                                           -----------------------------------------------------
<S>                                           <C>                 <C>              <C>
Balance at beginning of year                   $  920,685          $711,212         $598,157
Provision charged to income                       300,000           304,000          135,331
Chargeoffs                                       (113,347)         (103,837)         (29,363)
Recoveries                                         20,941             9,310            7,087
                                           -----------------------------------------------------
Balance at end of year                         $1,128,279          $920,685         $711,212
                                           =====================================================
</TABLE>

                                  -31-

<PAGE>   29


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


4. LOANS RECEIVABLE, NET (CONTINUED)

Real estate loans in arrears three months or more or in process of
foreclosure at September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
                    NUMBER                            % OF REAL
                   OF LOANS           AMOUNT         ESTATE LOANS
               ------------------------------------------------------
<S>                   <C>            <C>                <C>
1996                  65             $1,796,003         1.49%
1995                  66              1,897,266         2.12
</TABLE>

The Bank had outstanding loan origination commitments of $9,203,459 and
$9,138,261, including $1,863,967 and $1,964,701 available on lines of credit,
at September 30, 1996 and 1995, respectively. Included in loans receivable are
$283,350 and $318,100 of FHA and VA loans at September 30, 1996 and 1995,
respectively, which the Company has committed to sell at par.

The Bank utilizes established loan underwriting procedures which generally
require the taking of collateral to secure loans and does not believe it has a
significant concentration of credit risk to any one borrower but does estimate
that essentially all of its loans are located within and around Allegheny and
Butler counties in Pennsylvania.

5. PREMISES AND EQUIPMENT

Premises and equipment and the related accumulated depreciation at
September 30, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
                                       1996             1995
                                 -----------------------------------
<S>                                 <C>              <C>
Land                                 $   517,573      $   517,573
Buildings and improvements             1,611,803        1,545,712
Furniture and equipment                1,118,586          858,746
Construction in progress                      --          172,861
                                 -----------------------------------
                                       3,247,962        3,094,892

Less accumulated depreciation         (1,347,813)      (1,175,730)
                                 -----------------------------------
                                      $1,900,149       $1,919,162
                                 ===================================
</TABLE>


                                  -32-

<PAGE>   30


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


5. PREMISES AND EQUIPMENT (CONTINUED)

The Company leases office space under noncancelable operating leases. Future
minimum lease commitments under these operating lease agreements are as
follows:

<TABLE>
<CAPTION>
  YEAR ENDING SEPTEMBER 30
-------------------------------
<S>                                    <C>
1997                                        $  64,286
1998                                           66,300
1999                                           68,415
2000                                           70,636
2001                                           72,968
2002 and thereafter                           217,050
                                       ------------------
Total minimum payments                       $559,655
                                       ==================
</TABLE>

Total rental  expense for these leases  charged to earnings was $62,367,
$36,540,  and $37,500 for the years ended September 30, 1996, 1995, and 1994,
respectively.

6. DEPOSITS

Deposits at September 30, 1996 and 1995 are summarized as follows:

<TABLE>
<CAPTION>
                                                          1996                                1995
                                           ------------------------------------------------------------------------
        BALANCES BY INTEREST RATE                 AMOUNT            PERCENT           AMOUNT            PERCENT
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                 <C>             <C>                  <C>      
Savings accounts:
   Regular checking                              $  2,807,808         2.3%           $  2,062,464          1.8%
   Interest checking                                6,795,122         5.5               5,469,045          4.7
   Regular passbook                                11,690,296         9.4              13,488,604         11.7
   Bonus/tiered passbook                           14,350,721        11.5              16,518,147         14.3
   Variable money market                            3,345,539         2.7               3,674,430          3.2
                                           ------------------------------------------------------------------------
                                                   38,989,486        31.4              41,212,690         35.7
Certificate accounts:
   0%--3.49%                                             2,246          --                      --           --
   3.50%--4.49%                                         68,500         0.1                 217,051           .2
   4.50%--5.49%                                     38,658,993        31.1              23,814,532         20.6
   5.50%--6.49%                                     36,978,137        29.7              41,149,042         35.6
   6.50%--7.49%                                      9,434,554         7.6               8,921,599          7.7
   7.50%--8.99%                                        209,657         0.1                 182,284           .2
                                           ------------------------------------------------------------------------
                                                    85,352,087        68.6              74,284,508         64.3
                                           ------------------------------------------------------------------------
                                                  $124,341,573       100.0%           $115,497,198        100.0%
                                           ========================================================================
</TABLE>

                                  -33-

<PAGE>   31

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


6. DEPOSITS (CONTINUED)

Individual retirement accounts totaled $11,698,433 and $11,394,488 at 
September 30, 1996 and 1995, respectively.

Accrued interest payable on deposits included in other liabilities was
$275,153 and $143,981 at September 30, 1996 and 1995, respectively.

The contractual maturity of certificate accounts are as follows:

<TABLE>
<CAPTION>
                                             SEPTEMBER 30
                                      1996                  1995
                              --------------------------------------------
<S>                                <C>                   <C>
Less than one year                  $53,021,739           $43,805,710
One to two years                     17,425,218             7,623,733
Two to three years                    3,954,565            11,754,054
Three to four years                   3,457,260             1,488,097
Thereafter                            7,493,305             9,612,914
                              --------------------------------------------
                                    $85,352,087           $74,284,508
                              ============================================
</TABLE>

Certificate accounts of $100,000 or more at September 30, 1996 and 1995
were $8,381,679 and $5,391,838, respectively.

The weighted average interest rates for all deposits at September 30,
1996 and 1995 was 4.67% and 4.73%, respectively.

The following schedule sets forth interest expense by fiscal year by type of
deposit:

<TABLE>
<CAPTION>
                                                    1996              1995             1994
                                            -----------------------------------------------------
<S>                                             <C>               <C>              <C>
Checking and money market accounts               $  192,839        $  220,105       $  300,268
Passbook accounts                                   791,561           976,135        1,269,722
Certificates                                      4,388,417         3,609,807        2,522,601
                                            -----------------------------------------------------
                                                 $5,372,817        $4,806,047       $4,092,591
                                            =====================================================
</TABLE>


                                  -34-


<PAGE>   32

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


7. ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB)

The Bank is a member of the Federal Home Loan Bank System. As a member, the
Bank has the ability to borrow "advances" which are collateralized by certain
mortgages and securities. The Bank is also required to maintain an investment
in the capital stock of the Federal Home Loan Bank of Pittsburgh in an amount
not less than 1% of its outstanding residential loans or 5% of its outstanding
advances (whichever is greater), if any, payable to the Federal Home Loan Bank
of Pittsburgh as calculated at December 31 of each year.

Advances from the FHLB consist of the following:

<TABLE>
<CAPTION>
                                SEPTEMBER 30, 1996                   SEPTEMBER 30, 1995
                         -------------------------------------------------------------------------
                            WEIGHTED                              WEIGHTED
                            AVERAGE                               AVERAGE
                              RATE             AMOUNT               RATE              AMOUNT
                         -------------------------------------------------------------------------
<S>                           <C>         <C>                      <C>         <C>
Less than 12 months           5.50%            $ 8,000,000         6.36%            $11,000,000
One to two years              6.27%              1,750,000         6.55%              1,750,000
Two to three years            6.46%              7,700,000         7.12%              1,950,000
Three to four years           7.09%              2,800,000         7.09%              2,800,000
Thereafter                    6.71%             16,250,000         6.79%             11,500,000
                                          ------------------                   -------------------
                              6.40%            $36,500,000         6.66%            $29,000,000
                                          ==================                   ===================
</TABLE>

Advances from the Federal Home Loan Bank of Pittsburgh are secured by the
Bank's stock in the Federal Home Loan Bank of Pittsburgh, qualifying
residential mortgage loans, U.S. Government securities, U.S. agency securities,
and mortgage-backed securities issued or guaranteed by GNMA, FHLMC, and FNMA to
the extent that the defined statutory value must be at least equal to the
advances outstanding. The maximum remaining borrowing capacity at September 30,
1996 is approximately $84,500,000. The advances are subject to restrictions or
penalties in the event of prepayment.

                                  -35-

<PAGE>   33

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


8. INCOME TAXES

Income tax expense in the consolidated statements of income for the years ended
September 30, 1996, 1995, and 1994 includes the following components:

<TABLE>
<CAPTION>
                              1996              1995             1994
                        -----------------------------------------------------
<S>                          <C>               <C>             <C>
Federal:
   Current                    $697,035          $561,305         $270,163
   Deferred                   (310,868)          (52,763)         (42,863)
State:
   Current                      55,774            45,458            2,700
                        -----------------------------------------------------
                              $441,941          $554,000         $230,000
                        =====================================================
</TABLE>

A reconciliation from the expected federal statutory income tax provision to
the effective tax provision expressed as a percentage of pretax income is as
follows:

<TABLE>
<CAPTION>
                                                               PERCENTAGE OF PRETAX INCOME
                                                     ---------------------------------------------
                                                                 YEAR ENDED SEPTEMBER 30
                                                            1996            1995          1994
                                                     ---------------------------------------------
<S>                                                        <C>             <C>           <C>
Expected federal tax rate                                   34.0%           34.0%          34.0%
State income taxes, net of federal income tax effect         3.0             3.6             .3
Tax-exempt interest income                                  (4.1)             --             --
Other, net                                                   3.5             6.4            5.3
                                                     ---------------------------------------------
Actual effective tax rate                                   36.4%           44.0%          39.6%
                                                     =============================================
</TABLE>


                                  -36-


<PAGE>   34

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


8. INCOME TAXES (CONTINUED)

Deferred federal income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for income tax purposes. Significant
components of deferred federal income tax assets and liabilities as of September
30, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                                                1996                1995
                                                          ---------------------------------------
<S>                                                            <C>                 <C>
Deferred federal income tax assets:
   Allowance for loan losses                                    $415,032            $313,033
   Accrued insurance fund assessment                             251,246                   -
   Unrealized loss on securities                                  26,000                   -
   Other                                                          (1,686)              7,431
                                                          ---------------------------------------
Total deferred federal income tax assets                         690,592             320,464

Deferred federal income tax liabilities:
   Tax-based bad debt reserve in excess of base year             166,960             109,006
   Other                                                               -              32,695
                                                          ---------------------------------------
Total deferred federal income tax liabilities                    166,960             141,701
                                                          ---------------------------------------
Net deferred federal income tax assets                          $523,632            $178,763
                                                          =======================================
</TABLE>

Retained earnings at September 30, 1996 include financial statement tax bad
debt reserves of $3,385,000. The Small Business Job Protection Act of 1996
passed on August 20, 1996 eliminated the special bad debt deduction previously
granted solely to thrifts. This results in the recapture of past taxes for
permanent deductions arising from the "applicable excess reserve," which is the
total amount of the Bank's reserve over its base year reserve as of September
30, 1987. The recapture tax is to be paid in six equal annual installments
beginning after September 30, 1996. However, deferral of these payments will be
permitted for up to two years, contingent upon the Bank satisfying a specified
mortgage origination test for 1996 and/or 1997. At September 30, 1996, the Bank
had $493,000 in excess of the base year reserves, and subject to prevailing
corporate tax rates, the Bank will owe $167,000 in federal taxes, which is
reflected as a deferred tax liability. No provision is required to be made for
the $2,892,000 of base year reserves.

The Bank is subject to the Pennsylvania Mutual Thrift Institutions Tax which is
calculated at 11.5% of earnings based on generally accepted accounting
principles with certain adjustments.

                                  -37-

<PAGE>   35
                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


9. EMPLOYEE COMPENSATION PLANS

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

The Company has an Employee Stock Ownership Plan for the benefit of employees
who meet eligibility requirements which include having completed one year of
service with the Bank and having attained age 21. The ESOP Trust purchased
174,570 shares of common stock in connection with the Company's initial public
offering with the proceeds from a loan from the Company. The Company makes cash
contributions to the ESOP on an annual basis sufficient to enable the ESOP to
make required loan payments to the Company.

The ESOP note bears a fixed rate of interest equal to 8.5%, with equal payments
of interest and principal payable quarterly over ten years. The loan is secured
by the shares of stock purchased.

The Company accounts for its ESOP in accordance with Statement of Position
93-6.  As the debt is repaid, shares are released from collateral and allocated
to qualified employees based on the proportion of debt service paid in the
year.  Accordingly, the shares pledged as collateral are reported as deferred
ESOP shares in the statement of financial position. As shares are released from
collateral, the Company reports compensation expense equal to the current
market price of the shares, and the shares become outstanding for earnings per
share computations. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings; dividends on unallocated ESOP shares are
recorded as a reduction of debt.

Deferred compensation expense for the ESOP was $95,739 for the year ended
September 30, 1996. The following summarizes the status of the ESOP shares at
September 30, 1996:

<TABLE>
         <S>                                   <C>
         Allocated shares                                     -
         Shares released for allocation                   8,728
         Shares distributed                                   -
         Unreleased shares                              165,842
                                               -------------------
         Total ESOP shares                              174,570
                                               ===================
         Fair value of unreleased shares
           at September 30, 1996                     $1,969,373
                                               ===================
</TABLE>


                                  -38-


<PAGE>   36

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


9. EMPLOYEE COMPENSATION PLANS (CONTINUED)

STOCK OPTION PLAN

At a special meeting of the shareholders held on October 15, 1996, the
Company's shareholders adopted a Stock Option Plan which is designed to provide
directors, officers, and key employees with a proprietary interest in the
Company as an incentive to contribute to its success. A total of 218,212 shares
of common stock has been reserved for issuance pursuant to the plan, which
represents 10% of the common stock issued in connection with the Company's
public offering. All options granted to participants under the plan shall
become vested and exercisable at the rate of 20% per year on each annual
anniversary date.

RECOGNITION AND RETENTION PLAN AND TRUST

The shareholders of the Company approved at the same meeting a Recognition and
Retention Plan and Trust, the objective of which is to retain qualified
personnel in key positions of the Company. Directors, officers, and key
employees will be eligible to receive benefits under the Plan. The Trust will
acquire common stock equal to 87,285 shares, or 4% of the shares issued in
conjunction with the Company's public offering necessary to establish the plan.
Shares awarded under the Recognition and Retention Plan shall become vested and
exercisable at the rate of 20% per year on each annual anniversary date.

THRIFT PLAN

Effective October 1, 1996, the Bank provided eligible employees participation
in a 401(k) contributory defined contribution plan. The Bank matches 50% of an
employee's contribution up to 6% of an employee's compensation.

PENSION PLAN

The Bank participates in the Financial Institutions Retirement Fund (the Plan),
a multiemployer pension plan administrator. The Plan provides defined pension
benefits to substantially all of the Bank's employees. The Bank charged
$60,000, $60,000, and $62,000 to pension expense for the years ended September
30, 1996, 1995, and 1994, respectively.

                                  -39-

<PAGE>   37


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)

10. SHAREHOLDERS' EQUITY

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>
                                                                       September 30, 1996
                                                   ------------------------------------------------------------
                                                       Tier I                Tier I                 Total
                                                      Leverage             Risk-Based            Risk-Based
                                                       Capital               Capital               Capital
                                                   ------------------------------------------------------------
                                                                             (000s)
<S>                                                    <C>                 <C>                      <C>         
Equity capital (1)                                      $ 21,817            $21,817                  $21,817
Plus general valuation allowances (2)                         --                 --                    1,123
                                                   ------------------------------------------------------------
Total regulatory capital                                  21,817             21,817                   22,940
Minimum required capital                                   7,553              3,586                    7,173
                                                   ------------------------------------------------------------
Excess regulatory capital                               $ 14,264            $18,231                  $15,767
                                                   ============================================================
Adjusted total assets                                   $188,832            $89,671                  $89,671
                                                   ============================================================

Regulatory capital as a percentage                         11.55%             24.33%                   25.58%
Minimum capital required as a percentage                    4.00               4.00                     8.00
                                                   ------------------------------------------------------------
Excess regulatory capital as a percentage                   7.55%             20.33%                   17.58%
                                                   ============================================================
Well capitalized requirement                                5.00%              6.00%                   10.00%
                                                   ============================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                       September 30, 1995
                                                   -------------------------------------------------------------
                                                     Tier I Leverage            Tier I               Total
                                                         Capital          Risk-Based Capital      Risk-Based
                                                                                                    Capital
                                                   -------------------------------------------------------------
                                                                               (000s)
<S>                                                   <C>                    <C>                  <C>
Equity capital (1)                                       $10,610              $10,610              $10,610
Plus general valuation allowances (2)                         --                   --                  892
                                                   -------------------------------------------------------------
Total regulatory capital                                  10,610               10,610               11,502
Minimum required capital                                   6,303                2,854                5,708
                                                   -------------------------------------------------------------
Excess regulatory capital                               $  4,307             $  7,756             $  5,794
                                                   =============================================================
Adjusted total assets                                   $157,150              $71,347              $71,347
                                                   =============================================================

Regulatory capital as a percentage                        6.73%              14.87%                16.12%
Minimum capital required as a percentage                  4.00                4.00                  8.00
                                                   -------------------------------------------------------------
Excess regulatory capital as a percentage                 2.73%              10.87%                 8.12%
                                                   =============================================================

 Well capitalized requirement                             5.00%               6.00%                10.00%
                                                   =============================================================
</TABLE>
(1) Represents equity capital of the Bank as reported to the Pennsylvania
    Department of Banking and the Federal Deposit Insurance Corporation.

(2) Limited to 1.25% of risk adjusted total assets.


                                  -40-

<PAGE>   38
                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


 10. SHAREHOLDERS' EQUITY (CONTINUED)

The Bank is also subject to more stringent Pennsylvania Department of Banking
capital guidelines. Although not adopted in regulation form, the Department
utilizes capital standards requiring a minimum of 6% leverage capital and 10%
risk-based capital.

In connection with the Bank's stock conversion, the Bank segregated and
restricted $11,167,000 of retained earnings, the amount of its regulatory
capital at that date, in a liquidation account for the benefit of eligible
savings account holders who continue to maintain their accounts at the Bank
after conversion.  In the event of a complete liquidation of the Bank
subsequent to conversion, each eligible account holder will be entitled to
receive a distribution from the liquidation account in the amount
proportionate to the current adjusted balances of all qualifying deposits
then held before any liquidation distribution may be made with respect
to the stockholders. Except for the repurchase of stock and payment of
dividends, the existence of the liquidation account will not restrict the
use or application of such capital.

Subsequent to the conversion, neither the Bank nor the Company may declare or
pay cash dividends on any of their shares of common stock if the effect would
be to reduce shareholders' equity below applicable regulatory capital
requirements or if such declaration and payment would otherwise violate
regulatory requirements.

11. LOANS TO RELATED PARTIES

The Bank has granted loans to certain directors and officers of the Bank and to
their affiliates. Such loans are made in the ordinary course of business at the
Bank's normal credit terms and do not represent more than normal risk of
collection. These loans aggregated approximately $51,880 and $277,563 at
September 30, 1996 and 1995, respectively. There were $30,402 new loans granted
and repayments approximated $256,084 in fiscal 1996.

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of FAS No. 107, "Disclosures about Fair Value of Financial
Instruments," requires that the Company disclose estimated fair values for its
financial instruments. The market value of investments and mortgage-backed
securities, as presented in Note 3, are based primarily upon quoted market
prices. For substantially all other financial instruments, the fair values are
management's estimates of the values at which the instruments could be
exchanged in a transaction between willing parties. In accordance with FAS No.
107, fair values are based on estimates using present value and other valuation
techniques in instances where quoted prices are not available. These techniques
are significantly affected by the assumptions used, including discount rates
and estimates of future cash flows. As such, the derived fair value estimates
cannot be substantiated by comparison to independent markets, and further, may
not be realizable in an immediate settlement of the instruments. FAS No. 107
also excludes certain items from its


                                  -41-

<PAGE>   39

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


12.    FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent, and should not be construed to represent, the
underlying value of the Company.

Fair value estimates, methods, and assumptions are set forth below for the
Company's financial instruments:

   Cash and interest-bearing deposits in financial institutions: The carrying
   amounts reported in the balance sheet for cash and interest-bearing deposits
   approximate those assets' fair value.

   Investment securities, including mortgage-backed securities and equity
   securities: Fair values are based on quoted market prices, where available.
   If quoted market prices are not available, fair values are based on quoted
   prices of comparable instruments (see Note 3).

   Loans receivable: For variable rate loans that reprice frequently and with
   no significant change in credit risk, fair values are based on carrying
   values.  The fair values for all other loans are estimated using discounted
   cash flow analysis, using comparable interest rates offered for loans with
   similar terms to borrowers of similar credit quality.

   Deposit liabilities: The fair values disclosed for interest checking, money
   market, and savings deposits are, by definition, equal to the amount payable
   on demand at the reporting date (i.e., their carrying amounts). Fair values
   for certificates of deposit are estimated using a discounted cash flow
   analysis, applying a comparable Federal Home Loan Bank advance rate to the
   aggregated weighted average maturity on time deposits.

   Borrowings: Fair values for the Company's variable rate FHLB advances and
   other borrowings are deemed to equal carrying value. Fair values for fixed
   rate borrowings are estimated using a discounted cash flow analysis similar
   to that used in valuing fixed rate deposit liabilities.

   Off-balance sheet instruments: Fair values for the Company's commitments to
   extend credit are based on their carrying value, taking into account the
   remaining terms and conditions of the agreements.


                                  -42-

<PAGE>   40

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)


12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                          SEPTEMBER 30, 1996
                                                ---------------------------------------
                                                      CARRYING             FAIR
                                                        VALUE              VALUE
                                                ------------------- -------------------
<S>                                                <C>                 <C>
ASSETS
Cash and interest-bearing deposits                 $    7,561,710      $    7,561,710
Investment securities available for sale               46,305,705          46,305,705
Loans receivable, net                                 135,551,534         137,780,005
Federal Home Loan Bank stock                            1,875,000           1,875,000

LIABILITIES
Deposits                                              124,341,573         124,429,486
Advances from Federal Home Loan Bank                   36,500,000          36,209,000
Advance payments by borrowers                           1,847,815           1,847,815
</TABLE>

13. SUBSEQUENT EVENT

BRANCH ACQUISITION

During July 1996, Pittsburgh Home Savings Bank entered into a definitive
agreement to purchase a branch office of another financial institution with
total deposits of $10.5 million. The transaction was consummated in December
1996.


                                  -43-

<PAGE>   41

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)

14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly consolidated statements of income are as follows (dollar amounts in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                     Three Months Ended
                         -------------------------------------------------------------  Year Ended
                            December        March           June         September      September
                              1995           1996           1996            1996           1996
                         ----------------------------------------------------------------------------
<S>                        <C>             <C>           <C>             <C>            <C>
Total interest income       $2,986          $3,090         $3,255         $3,602         $12,933
Total interest expense       1,886           1,863          1,781          1,962           7,492
                         ----------------------------------------------------------------------------
Net interest income          1,100           1,227          1,474          1,640           5,441
Provision for loan
 losses                         60              60             90             90             300
                         ----------------------------------------------------------------------------
Net interest income
  after provision
  for loan losses            1,040           1,167          1,384          1,550           5,141

Total noninterest income        93              87             90             98             368
Total noninterest
 expense                       779             869            908          1,739           4,295
                         ----------------------------------------------------------------------------
Income (loss) before
 income taxes                  354             385            566            (91)          1,214
Income taxes                   134             143            197            (32)            442
                         ----------------------------------------------------------------------------
Net income (loss)           $  220          $  242         $  369         $  (59)        $   772
                         ============================================================================
Net income (loss) per
   share                       N/A             N/A         $  .18         $ (.03)        $   .15
                         ============================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                       Three Months Ended
                          --------------------------------------------------------------  Year Ended
                             December         March           June         September      September
                               1994            1995           1995           1995            1995
                         ------------------------------------------------------------------------------
<S>                         <C>              <C>            <C>            <C>             <C>
Total interest income        $2,196           $2,383         $2,605         $2,814          $9,998
Total interest expense        1,201            1,328          1,583          1,724           5,836
                         ------------------------------------------------------------------------------
Net interest income             995            1,055          1,022          1,090           4,162
Provision for loan
 losses                          24               24             29            227             304
                         ------------------------------------------------------------------------------

Net interest income
  after provision for
  loan losses                   971            1,031            993            863           3,858

Total noninterest income         78               81             81             93             333

Total noninterest
 expense                        729              743            706            754           2,932
                         ------------------------------------------------------------------------------
Income (loss) before
 income taxes                    20              369            368            202           1,259
Income taxes                    115              141            138            160             554
                         ------------------------------------------------------------------------------
Net income (loss)            $  205           $  228         $  230         $   42          $  705
                         ==============================================================================
Net income (loss) per
   share                        N/A              N/A            N/A            N/A             N/A
                         ==============================================================================
</TABLE>


                                  -44-

<PAGE>   42

                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)

15. CONSOLIDATED FINANCIAL INFORMATION OF PITTSBURGH HOME FINANCIAL CORP.
    (PARENT ONLY)

Pittsburgh Home Financial Corp. was organized in September 1995 and began
operations on April 1, 1996. The Company's balance sheet as of September 30,
1996 and related statements of income and cash flows from inception to
September 30, 1996 are as follows:

BALANCE SHEET

<TABLE>
<S>                                                               <C>
ASSETS
Cash and cash equivalents                                              $ 5,400,097
Investment securities available for sale                                 3,190,632
Investment in Pittsburgh Home Savings Bank                              21,752,396
Other assets                                                                40,566
                                                                  -------------------
Total assets                                                           $30,383,691
                                                                  ===================

LIABILITIES AND SHAREHOLDERS' EQUITY
Total liabilities                                                      $    11,675
Total shareholders' equity                                              30,372,016
                                                                  -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                             $30,383,691
                                                                  ===================

STATEMENT OF INCOME
Interest income                                                        $   237,131
Noninterest expense                                                        151,814
                                                                  -------------------
Income before income taxes and equity in earnings of subsidiary             85,317
Income tax expense                                                          29,875
                                                                  -------------------
Income before equity in earnings of subsidiary                              55,442
Equity in earnings of Pittsburgh Home Savings Bank                         255,326
                                                                  ===================
Net income                                                             $   310,768

</TABLE>

                                  -45-

<PAGE>   43


                        Pittsburgh Home Financial Corp.

             Notes to Consolidated Financial Statements (continued)



15. CONSOLIDATED FINANCIAL INFORMATION OF PITTSBURGH HOME FINANCIAL CORP.
     (PARENT ONLY) (CONTINUED)

<TABLE>
<S>                                                                                               <C>
STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES
Net income                                                                                           $    310,768

ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED IN OPERATIONS
Equity in earnings of Pittsburgh Home Savings Bank                                                       (255,326)
Release of ESOP shares                                                                                     95,739
Change in other assets and liabilities                                                                    (28,891)
                                                                                                  -------------------
Net cash provided by operating activities                                                                 122,290

INVESTING ACTIVITIES
Investment in Pittsburgh Home Savings Bank                                                            (10,425,624)
Investment purchases                                                                                   (3,240,632)
                                                                                                  -------------------
Net cash used by investing activities                                                                 (13,666,256)

FINANCING ACTIVITIES
Proceeds from sale of common stock                                                                     19,053,168
Cash dividend on common stock                                                                            (109,105)
                                                                                                  -------------------
Net cash provided by financing activities                                                              18,944,063
                                                                                                  -------------------
Ending cash and cash equivalents                                                                     $  5,400,097
                                                                                                  -------------------

</TABLE>