<PAGE>   1
                                                                      EXHIBIT 13


FINANCIAL HIGHLIGHTS
================================================================================

<TABLE>
<CAPTION>
At year end September 30,                                            1998                  1997                  1996
-----------------------------------------------------------------------------------------------------------------------
                                                                              (Dollar amounts in thousands,
                                                                                  except per share data)

<S>                                                               <C>                   <C>                   <C>     
Total assets                                                      $374,279              $273,174              $195,330

Loans receivable, net                                              211,981               181,339               135,552

Deposits                                                           153,983               138,731               124,342

FHLB Advances                                                      155,267               101,700                36,500

Reverse repurchase agreements                                       25,000                    --                    --

Stockholders' equity                                                24,799                28,814                30,372

Book value per share                                                 13.25                 14.63                 13.92


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

Net interest income                                                  7,901                 7,156                 5,441

Net income                                                           1,902                 1,983                   772
Net income (1)                                                       1,916                 1,781                 1,245

Basic earnings per share (beginning April 1, 1996)                    1.10                  1.11                  0.15
Basic earnings per share (beginning April 1, 1996) (1)                1.11                  1.00                  0.38

Diluted earnings per share                                            1.05                  1.08                  0.15
Diluted earnings per share (1)                                        1.06                  0.97                  0.15

Dividends per share                                                   0.31                  0.29                  0.05
Return of Capital Distribution                                        2.43                    --                    --

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

Return on average equity                                              7.33%                 6.95%                 3.80%
Return on average equity (1)                                          7.38%                 6.26%                 6.14%

Return on average assets                                              0.56%                 0.84%                 0.44%
Return on average assets (1)                                          0.57%                 0.75%                 0.71%

Interest rate spread                                                  2.10%                 2.49%                 2.64%

Net interest margin                                                   2.43%                 3.10%                 3.22%

Operating expenses as a percentage of average assets                  1.50%                 1.88%                 2.47%
Operating expenses as a percentage of average assets (1)                --                    --                  2.05%

Efficiency ratio (1)                                                 59.59%                58.93%                61.31%
</TABLE>

----------

  (1) - Ratio or calculation for 1998 excludes trading account losses and 
realized gains and losses on available for sale securities of $22,000 or $14,000
after tax ($.01 per share), and for 1997 excludes trading account gains of
$310,000 or $201,000 after tax ($.11). For 1996, ratio or calculation 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



<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 and For the
                                                                            Year Ended September 30,
                                                        ------------------------------------------------------------------
                                                        1998           1997           1996            1995           1994
--------------------------------------------------------------------------------------------------------------------------
                                                                             (Dollars in Thousands)
<S>                                                  <C>            <C>             <C>            <C>            <C>     
SELECTED FINANCIAL AND OTHER DATA:
Total assets                                         $374,279       $273,174        $195,330       $157,570       $130,646
Investment securities                                  57,109         37,145          22,481         18,758         21,999
Mortgage-backed securities                             84,515         38,216          23,825         27,458         25,858
Loans receivable, net                                 211,981        181,339         135,552        102,938         65,341
Cash and cash equivalents                               4,476          5,224           7,562          3,545         13,347
Deposits                                              153,983        138,731         124,342        115,497        110,394
FHLB advances                                         155,267        101,700          36,500         29,000          8,500
Reverse repurchase agreements                          25,000             --              --             --             --
Stockholders' equity                                   24,799         28,814          30,372         10,610          9,905
Non-performing assets (1)                               4,488          4,612           2,377          2,320          2,172
Full service offices at end of period                       8              7               6              5              5
--------------------------------------------------------------------------------------------------------------------------

SELECTED OPERATING DATA:
Interest income                                       $24,414        $17,964         $12,933         $9,998         $8,756
Interest expense                                       16,513         10,808           7,492          5,836          4,917
                                                     ---------------------------------------------------------------------
Net interest income                                     7,901          7,156           5,441          4,162          3,839
Provision for losses on loans                             610            360             300            304            135
                                                     ---------------------------------------------------------------------
Net interest income after provision for losses 
   on loans                                             7,291          6,796           5,141          3,858          3,704
Gain (loss) on trading securities                        (208)           310              --             --           (740)
Other noninterest  income                                 817            431             369            333            378
Other noninterest expenses                              5,114          4,476           3,557          2,932          2,761
Special SAIF assessment (2)                                --             --             739             --             --
                                                     ---------------------------------------------------------------------
Income before income taxes                              2,786          3,061           1,214          1,259            581
Income taxes                                              884          1,078             442            554            230
                                                     ---------------------------------------------------------------------
Net income                                             $1,902         $1,983            $772 (2)       $705           $351
                                                     =====================================================================
--------------------------------------------------------------------------------------------------------------------------

PER COMMON SHARE
Basic earnings per share                                $1.10          $1.11             .15 (2)
Basic earnings per share (5)                             1.11           1.00             .15 (2)
Diluted earnings per share                               1.05           1.08             .15 (2)
Diluted earnings per share (5)                           1.06            .97             .15 (2)
Dividends per share                                       .31            .29             .05 (2)
Return of capital distribution                           2.43
</TABLE>


6
<PAGE>   3

========================================================================= [LOGO]


<TABLE>
<S>                                                    <C>            <C>            <C>         <C>            <C> 
SELECTED OPERATING RATIOS:
Average yield earned on interest-earning assets          7.51%          7.78%          7.66%       7.42%          6.63%
Average rate paid on interest-bearing liabilities        5.41           5.29           5.02        4.64           3.90
Average interest rate spread (4)                         2.10           2.49           2.64        2.78           2.73
Net interest margin (4)                                  2.43           3.10           3.22        3.09           2.90
Ratio of interest-earning assets to
   interest-bearing liabilities                        106.45         113.05         113.19      107.12         104.82
Net interest income to operating expenses                1.55           1.60           1.27        1.40           1.39
Operating expenses as a percent of average assets        1.50           1.88           2.47 (2)    2.14           2.02
Return on average assets                                  .56            .84            .44 (2)     .51            .26
Return on average equity                                 7.33           6.95           3.80 (2)    6.83           3.60
Ratio of average equity to average assets                7.66          12.02          11.68        7.43           7.14
----------------------------------------------------------------------------------------------------------------------
ASSET QUALITY RATIOS (3):
Non-performing loans as a percent of total loans         1.42%          1.92%          1.55%       2.09%          3.05%
Non-performing assets as a percent of total assets       1.20           1.69           1.22        1.47           1.66
Allowance for loan losses as a percent of total loans     .77            .74            .78         .83           1.00
Allowance for loan losses as a percentage
  of non-performing loans                               54.08          38.30          50.27       39.70          32.73
----------------------------------------------------------------------------------------------------------------------
BANK CAPITAL RATIOS (3):
Tier 1 risk-based capital ratio                         18.37%         18.91%         24.33%      14.87%         19.88%
Total risk-based capital ratio                          19.40          20.04          25.58       16.12          21.13
Tier 1 leverage capital ratio                            8.29           8.80          11.55        6.73           7.58
</TABLE>


 (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 Bank 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) - Excludes impact of trading activities and sales of available for sale
securities.


                                                                               7
<PAGE>   4

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

GENERAL

         The Company is a Pennsylvania corporation organized in September 1995
by the Bank for the purpose of acquiring all of the capital stock of the Bank
issued in the conversion (the "Conversion") of the 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 Bank and assets
purchased with the balance of the net Conversion proceeds retained by the
Company. The business of the Company consists primarily of the business of the
Bank.

         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, borrowings and trust
preferred debt. The 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, miscellaneous other expenses, and income
taxes.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

         In addition to historical information, forward-looking statements are
contained herein that are subject to risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements. Factors that could cause future results to vary from current
expectations, include, but are not limited to, the impact of economic conditions
(both generally and more specifically in the markets in which the Company
operates), the impact of competition for the Company's customers from other
providers of financial services, the impact of government legislation and
regulation (which changes from time to time and over which the Company has no
control), and other risks detailed in this Annual Report and in the Company's
other Securities and Exchange Commission filings. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements, to reflect
events or circumstances that arise after the date hereof. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission, including the
Quarterly Reports on Form 10-Q to be filed by the Company in 1999 and any
Current Reports on Form 8-K filed by the Company.

CHANGES IN FINANCIAL CONDITION

         The Company's assets increased by $101.1 million or 37.0% from $273.2
million at September 30, 1997 to $374.3 million at September 30, 1998. During
fiscal 1997, the Company adopted a leveraged asset policy in order to utilize
its excess capital. The Company continued this approach for fiscal 1998, which
attributed to increases in mortgaged-backed, U.S. Government and agency
securities, and trading investment securities. The Company's investment in
trading securities increased $444,000 or 46.4% from $956,000 at September 30,
1997 to $1.4 million at September 30, 1998. Investment and mortgage-backed
securities increased an aggregate of $65.8 million or 88.4% from $74.4 million
at September 30, 1997 to $140.2 million at September 30, 1998. The Company
continued to invest in bank and thrift equities, as well as in mortgage-backed
securities and U.S. Government and agency securities at a positive spread over
advances from the Federal Home Loan Bank ("FHLB") of Pittsburgh and reverse
repurchase agreements. Subsequent to September 30, 1998, the Company
discontinued investing in equity securities. The Company's loans receivable,
net, increased $30.7 million or 16.9% from $181.3 million at September 30, 1997
to $212.0 million at September 30, 1998. The growth was primarily attributable
to increases in residential mortgage loans, construction loans, and
non-residential mortgages.

         Total liabilities increased by $105.1 million or 43.0% to $349.5
million at September 30, 1998 compared to $244.4 million at September 30, 1997.
The increase of $15.3 million or 11.0% in deposits is attributable to the Bank's
newest supermarket branch, and more aggressive deposit pricing throughout it's
branch network. The Company has continued to increase its FHLB advances and
other sources of borrowings to increase liquidity and used those funds to
reinvest in assets at higher yields. Advances from the FHLB increased by $53.6
million or 52.7% to $155.3 million at September 30, 1998 compared to $101.7
million at September 30, 1997. During the fiscal year ended September 30, 1998,
the Company also entered into reverse repurchase agreements amounting to $25.0
million. The Company's trust subsidiary, Pittsburgh Home Capital Trust I, sold
$11.5 million ($10.8 million net of offering costs) of 8.56% Cumulative Trust
Preferred Securities on January 30, 1998. The Trust used the proceeds from the
sale of the preferred securities to purchase junior subordinated deferrable
interest debentures which were issued by the Company.

         Total stockholders' equity decreased $4.0 million or 13.9% to $24.8
million at September 30, 1998 compared to $28.8 million at September 30, 1997.
The decrease is primarily attributable to a special return of capital
distribution totaling $4.8 million that the Company paid on December 19, 1997,
and a treasury stock purchase of $1.6 million during the year, which were
partially offset by an increase in comprehensive income of $2.5 million during
the period.



8
<PAGE>   5


==========================================================================[LOGO]

AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID.

The following table sets forth, for the periods and as of the date indicated,
information regarding the Company's average balance sheet. Information is based
on average daily balances during the periods presented.

<TABLE>
<CAPTION>
                                                                      Year ended September 30,
                                             ---------------------------------------------------------------------------------------
                             At September 30, 
                                   1998               1998                             1997                         1996
                                   ----      ----------------------------   ---------------------------  ---------------------------
                                   Average                        Average                       Average                      Average
                                   Yield/    Average               Yield/   Average             Yield/   Average              Yield/
                                  Rate (1)   Balance     Interest   Rate    Balance   Interest   Rate    Balance    Interest    Rate
                                             ---------------------------------------------------------------------------------------
                                                              (Dollars in Thousands)

<S>                               <C>        <C>         <C>        <C>    <C>         <C>        <C>    <C>        <C>        <C>  
INTEREST-EARNING ASSETS:
  Investment securities              7.56%   $ 58,848    $ 3,826   6.50%  $ 31,942    $ 1,991    6.23%  $ 18,868   $ 1,124   5.96%
  Mortgage-backed securities         6.46      54,200      3,702   6.83     31,449      2,194    6.98     25,597     1,703   6.65
  Loans receivable (1):                       
    First mortgage loans             7.98     184,110     14,930   8.11    150,099     12,351    8.23    109,032     8,991   8.25
    Other loans                      7.41      14,500      1,098   7.57      9,461        826    8.73      6,745       609   9.03
----------------------------------------------------------------------------------------------------------------------------------
  Total loans receivable             7.93     198,610     16,028   8.07    159,560     13,177    8.26    115,777     9,600   8.29
----------------------------------------------------------------------------------------------------------------------------------
  Other interest-earning assets      4.41      13,358        858   6.42      7,987        603    7.55      8,695       506   5.82
----------------------------------------------------------------------------------------------------------------------------------
Total interest-earning assets        7.43%    325,016    $24,414   7.51%   230,938    $17,965    7.78    168,937   $12,933   7.66%
==================================================================================================================================
                                           
  Noninterest-earning assets                   13,497                        6,348                         4,810
----------------------------------------------------------------------------------------------------------------------------------
Total assets                                 $338,513                     $237,286                      $173,747
==================================================================================================================================
                                           
INTEREST-BEARING LIABILITIES:              
  Deposits                           4.81%   $144,866    $ 6,946   4.79%  $132,280    $ 6,437    4.87%  $114,377   $ 5,373   4.70%
  FHLB advances and other            5.87     149,759      8,831   5.90     69,268      4,312    6.23     30,092     2,012   6.69
  Guaranteed preferred                     
    beneficial interests in                
    subordinated debt                8.80       7,667        675   8.80         --         --      --         --        --     --
  Escrows                            2.00       3,023         62   2.05      2,734         59    2.16      4,777       107   2.24
----------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities   5.47%    305,315    $16,514   5.41%   204,282    $10,808    5.29%   149,246   $ 7,492   5.02%
==================================================================================================================================
  Noninterest-bearing liabilities               7,253                        4,489                         4,216
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities                             312,568                      208,771                       153,462
  Stockholders' equity                         25,945                       28,515                        20,285
==================================================================================================================================
Total liabilities and                      
  stockholders' equity                       $338,513                     $237,286                      $173,747
==================================================================================================================================
Net interest-earning assets                  $ 19,701                     $ 26,656                      $ 19,691
==================================================================================================================================
Net interest income/interest               
  rate spread                        1.96%               $ 7,900   2.10%              $ 7,157    2.49%             $ 5,441   2.64%
==================================================================================================================================
Net interest margin (2)                                            2.43%                         3.10%                       3.22%
==================================================================================================================================
Ratio of average interest-                 
  earning assets to average                
  interest-bearing liabilities                                   106.45%                       113.05%                     113.19%
==================================================================================================================================
</TABLE>
                                           
                                          
(1) - Includes non-accrual loans.
(2) - Net interest income divided by interest-earning assets.

                                                                               9
<PAGE>   6


================================================================================

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>
                                                                        Ended September 30,
                                             1998 vs. 1997                                   1997 vs. 1996
                                       ----------------------------                    --------------------------
                                       Increase (Decrease) Due to                      Increase (Decrease) Due to
                                       ----------------------------                    --------------------------
                                                              Rate/  Total Increase                            Rate/  Total Increase
                                      Rate       Volume      Volume    (Decrease)    Rate         Volume      Volume    (Decrease)
                                      -----------------------------    ----------    -------------------------------    ----------
<S>                                  <C>         <C>         <C>     <C>             <C>         <C>           <C>    <C>    
Interest-earning assets:
Investment securities                $  86       $1,677      $  72       $1,835      $ 184       $  779       $ 127       $ 1,090
Mortgage-backed securities             (46)       1,587        (33)       1,508         83          389          19           491
Loans receivable, net                 (289)       3,239        (99)       2,851        (39)       3,631         (15)        3,577
Other interest-earning assets          (90)         405        (60)         255        (93)         (41)          8          (126)
                                     --------------------------------------------------------------------------------------------
  Total interest-earning assets       (339)       6,908       (120)       6,449        135        4,758         139         5,032
                                     --------------------------------------------------------------------------------------------

Interest-bearing liabilities
Deposits                               (95)         612         (8)         509        193          841          30         1,064
FHLB advances                         (227)       5,011       (265)       4,519       (139)       2,620        (181)        2,300
Guaranteed preferred
  beneficial interests                  --           --        675          675         --           --          --            --
  in subordinated debt
Escrows                                 (3)           6         --            3         (4)         (46)          2           (48)
                                     --------------------------------------------------------------------------------------------
  Total interest-bearing
   liabilities                        (325)       5,629        402        5,706         50        3,415        (149)        3,316
                                     --------------------------------------------------------------------------------------------
Increase (decrease)
  in net interest income             $ (14)      $1,279      $(522)      $  743      $  85       $1,343       $ 288       $ 1,716
                                     ============================================================================================
</TABLE>

RESULTS OF OPERATIONS

NET INCOME. The Company reported net income of $1.90 million, $1.98 million, and
$772,000 for the fiscal years ended September 30, 1998, 1997, and 1996,
respectively. Basic and diluted earnings per share were $1.10 and $1.05,
respectively, for the year ended September 30, 1998, compared to $1.11 and $1.08
for the same period ended September 30, 1997. The year ended September 30, 1998
earnings per share amounts include $.01 per share of losses related to the net
losses on sales of securities. This compares to $.11 per share of gains related
to sales of securities for the year ended September 30, 1997. Excluding the
results of the security sales, for the year ended September 30, 1998, net income
was $1.92 million as compared to $1.78 million for the year ended September 30,
1997.

         For fiscal 1998, the $81,000 or 4.1% decrease in net income was
primarily attributable to a decrease in noninterest income of $132,000 or 17.8%,
an increase in noninterest expense of $638,000 or 14.3%, and an increase in the
provision for loan losses of $250,000 or 69.4%, which was partially offset by an
increase in net interest income before provision for loan losses of $745,000 or
10.4% and a decrease in income tax expense of $194,000 or 18.0%. The Company
recognized pre-tax net losses on trading account and available for sale
securities of $22,000 for the fiscal year ended September 30, 1998 compared to a
pre-tax net gain of $310,000 for the fiscal year ended September 30, 1997.
Noninterest income (excluding trading activities and investment sales) increased
$200,000 or 46.4% during fiscal 1998.

         For fiscal 1997, the $1.21 million or 156.5% increase in net income
from fiscal 1996 was attributable to a $1.7 million or 31.5% increase in net
interest income and a $361,000 or 97.8% increase in noninterest income. These
increases in income during fiscal 1997 were partially offset by an increase of
$200,000 or 4.65% in noninterest expense, which increased from $4.3 million in
fiscal 1996 to $4.5 million in fiscal 1997. For fiscal 1996, the one-time
$739,000 pre-tax charge for the special assessment to recapitalize the SAIF is
the primary reason for the increase in noninterest expense.

         For fiscal 1998, the Company's net interest margin decreased to 2.43%
from 3.10% in fiscal 1997 and the Company's interest rate spread decreased by 39
basis points to 2.10% from 2.49% for fiscal 1997. The yield earned on the
Company's interest-earning assets decreased by 27 basis points to 7.51% from
7.78%, while the Company's average cost of interest-bearing liabilities
increased 12 basis points to 5.41% in 1998 from 5.29% in 1997. The decrease in
the Company's yield on interest-earning assets is due to the Company having a
greater portion of its interest-earning assets in loans receivable which
reflects lower interest rates sustained throughout the majority of fiscal 1998.
The increase in the average cost of liabilities reflects the guaranteed
preferred beneficial interests in subordinated debt, as well as, increased
borrowings.


10
<PAGE>   7


========================================================================= [LOGO]

         For fiscal 1997, the Company's net interest margin decreased to 3.10%
from 3.22% in fiscal 1996 and the Company's interest rate spread decreased 15
basis points to 2.49% from 2.64% for fiscal 1996. The yield earned on the
Company's interest-earning assets increased 12 basis points to 7.78% from 7.66%,
while the Company's average cost of interest-bearing liabilities increased 27
basis points to 5.29% in 1997 from 5.02% in 1996. 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 and higher
yielding investments. 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.

NET INTEREST INCOME. Net interest income before the provision for losses on
loans increased $745,000 or 10.4% compared to the prior fiscal year. The
increase was due to the increase in investment purchases and loan origination
activity. The average balance of interest-earning assets increased $94.1 million
or 40.7%. The increase is primarily attributable to a $49.7 million or 78.3%
increase in average investments and mortgage-backed securities and a $39.0
million or 24.4% increase in the average balance of loans receivable, when
compared to the same periods in 1997. The average balance of interest-bearing
liabilities increased $101.0 million or 49.4%. The increase is primarily
attributable to the guaranteed preferred beneficial interests in subordinated
debt with an average balance of $7.7 million and a weighted average yield of
8.80% for the year ended September 30, 1998.

         During fiscal 1998, total interest income increased $6.4 million or
35.9% compared to fiscal 1997, primarily due to a $2.9 million or 21.6% increase
in interest earned on loans, a $1.8 million or 92.2% increase in interest earned
on investments, a $1.5 million or 68.7% increase in interest earned on
mortgage-backed securities, and a $111,000 or 38.6% increase in interest earned
on interest-bearing deposits. The increase in interest on loans receivable was
due to an increase in the average balance of loans receivable outstanding which
increased $39.0 million or 24.4% during fiscal 1998. One-to-four family
residential loans increased by $18.0 million or 11.8% when compared to fiscal
1997. The Company continues to utilize local mortgage brokers in the acquisition
of new loan customers in addition to its emphasis on internally generated
product. In addition, 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.

         During fiscal 1998, interest expense increased $5.7 million or 52.8%
over the prior comparable year, due to a $4.5 million increase in interest on
FHLB advances and other borrowings. The increase in interest expense on advances
and other borrowings was primarily attributable to an increase in average
borrowings of $80.5 million or 116.2%, which was partially offset by a decrease
in the related borrowing cost of 33 basis points from 6.23% to 5.90%. The
increased borrowings were used to fund the purchase of mortgage-backed and
investment securities as part of the Company's leveraged asset strategy. The
Company had interest expense of $675,000 due to the guaranteed preferred
beneficial interests in subordinated debt. Interest expense on deposits
increased $509,000 or 7.9% over the prior comparable year, due to an increase in
average deposits of $12.6 million or 9.5% from 1997 to 1998.

         Net interest income before the provision for losses on loans increased
$1.7 million or 31.5% during fiscal 1997 compared to the prior fiscal year, due
to a $62.0 million or 36.7% increase in the average balance of interest-earning
assets, primarily attributable to a 42.6% increase in average investments and
mortgage-backed securities and a 37.8% increase in average loans receivable. The
increase in interest-earning assets over interest-bearing liabilities was also
attributable to an increase in the average yield earned on interest-earning
assets from 7.66% in 1996 to 7.78% in 1997. The increases in both average
balances and yield on earnings assets more than offset an increase of $55.0
million in average interest-bearing liabilities, from $149.2 million with a
related cost of 5.02% in 1996 to $204.3 million with a related cost of 5.29% in
1997.

         During fiscal 1997, total interest income increased by $5.0 million or
38.9% compared to fiscal 1996, primarily due to a $3.6 million or 37.3% increase
in interest earned on loans receivable, a $1.1 million or 88.5% increase in
interest earned on investments and a $491,000 or 28.8% increase in interest
earned on mortgage-backed securities, which was offset by an $118,000 or 29.1%
decrease in interest earned on interest-bearing deposits. The increase in
interest on loans receivable was due to an increase in the average balance of
loans receivable outstanding, which increased 37.8% or $43.8 million during
fiscal 1997.

         During fiscal 1997, interest expense increased $3.3 million or 44.0%
over the prior comparable year, due to a $1.0 million or 18.5% increase in
interest expense on deposits as well as a $2.3 million or 109.5% 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
$17.9 million or 15.7% from 1996 to 1997. A contributing factor was a 17 basis
point increase in the average cost of savings from 4.70% in 1996 to 4.87% in
1997. The increase in interest paid on FHLB advances was due to an increase in
the average balance of $39.2 million or 130.2%, which was partially offset by a
decrease in the related borrowing cost of 46 basis points from 6.69% in 1996 to
6.23% in 1997.


                                                                              11
<PAGE>   8


================================================================================

PROVISION FOR LOSSES ON LOANS. The Company establishes provisions for losses on
loans, which are charged against income. It is management's policy to maintain
an allowance for loan losses based on the perceived risk of loss in the loan
portfolio. Management's periodic evaluation of the adequacy of the allowance is
based upon the Company's past loan loss experience, known and inherent risks in
the portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of the underlying collateral and current economic
conditions.

         For the fiscal years ended September 1998, 1997, and 1996, provisions
for losses on loans amounted to $610,000, $360,000, and $300,000, respectively.
During fiscal 1998, the Company increased its provision for loan losses by
$250,000 or 69.4% compared to the same period during fiscal 1997. During fiscal
1997, management increased its provisions for loan losses by $60,000 or 20.0%.
The increase in the level of the Company's provision for loan losses is due to
the increased levels of loan originations as well as the increase in
nonperforming assets. At September 30, 1998, the Company's allowance for loan
losses amounted to 54.1% of total non-performing loans when compared to 38.3%
for the year ended September 30, 1997.

         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 examination 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.

NONINTEREST INCOME. Total noninterest income decreased $132,000 or 17.8% during
fiscal 1998 over the prior fiscal year. The Company recognized a pre-tax net
loss of $208,000 on trading securities primarily due to a decline in market
conditions, which was partially offset by a pre-tax net gain on available for
sale securities of $186,000. The pre-tax net loss on trading activities and
investment sales were offset by a $187,000 or 48.0% increase in service charges
and other fees, and a $13,500 or 32.1% increase in other income. In April 1997,
the Board authorized a trading account whereby up to $2.5 million could be
invested in trading account securities, with not more than $1.0 million in any
single issue, to be accounted for as trading securities in accordance with SFAS
No. 115. Under Board authorization, there is no limit on the types of securities
that the Company may invest in provided that the securities are approved under
the Company's investment policy, although to date the Company has limited its
investments to equity securities of financial institutions. At September 30,
1998, the Company had an aggregate of $1.4 million invested in nine securities.
Subsequent to September 30, 1998, the Company discontinued investing in equity
securities. Noninterest income (excluding trading activities and investment
sales) increased $200,000 or 46.4% from $431,000 for the year ended September
30, 1997 to $631,000 for the year ended September 30, 1998.

         Total noninterest income increased $361,000 or 97.8% during fiscal 1997
over the prior fiscal year. The primary reason for the gain was due to gains
associated with the Company's newly established trading account. Pursuant to its
trading account strategy, the Company recognized a $310,000 net gain. For the
fiscal year ended September 30, 1997, the Company did not recognize any gains or
losses on available for sale securities. The investments purchased were
primarily equity securities of financial institutions. Noninterest income
(excluding trading activities) increased $62,000 or 16.8% from $369,000 for the
year ended September 30, 1996 to $431,000 for the year ended September 30, 1997.

NONINTEREST EXPENSE. Total noninterest expense increased $638,000 or 14.3%
during fiscal 1998 when compared to the prior fiscal year. Compensation and
employee benefits increased $448,000 or 17.6%, which is attributable to the
opening of a new supermarket branch, a full year's personnel expense of its
Dormont branch, acquired in late 1996, the hiring of additional bank personnel,
along with the expenses related to the Recognition and Retention Plan and the
Employee Stock Ownership Plan. Premises and occupancy costs increased $89,000 or
19.1% and marketing expenses increased $50,000 or 27.9%. Both increases were due
primarily to the opening of a new supermarket branch.

         For the fiscal year ended 1997, noninterest expense increased $180,000
or 4.19% compared to the prior fiscal year. Compensation and employee benefits
increased $635,000 or 33.2% which is attributable to the hiring of a Senior Vice
President of the Bank, acquiring the branch of another financial institution,
the addition of two new board members at the Bank level, along with the
implementation of the Recognition and Retention Plan and a full year of expense
related to the Employee Stock Ownership Plan. Data processing expenses increased
$138,000 or 92.0% as the Company upgraded its data processing system. Other
expenses increased $297,000 or 50.4% of which $267,000 consisted of professional
fees related to operating the Company as a public reporting entity.

PROVISION FOR INCOME TAXES. The Company incurred a provision for income taxes of
$884,000, $1.1 million, and $442,000 for the fiscal years ended September 30,
1998, 1997, and 1996, respectively. The effective tax rate during each of the
foregoing respective fiscal years was 31.7%, 35.5%, and 36.4%. See Note 10 to
Consolidated Financial Statements for additional information relating to income
taxes.


12
<PAGE>   9

========================================================================= [LOGO]

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 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, 1998 and 1997, the amount of
the Company's interest-bearing liabilities which were estimated to mature or
reprice within one year exceeded the Company's interest-earning assets with the
same characteristics by $37.9 million or 10.1% and $19.4 million or 7.2%
respectively, 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 fixed-rate
residential real estate loans for retention in its portfolio. At September 30,
1998, $59.5 million or 26.4% 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 $29.9 million of construction loans which
reprice annually and $58.6 million of long-term residential mortgage loans which
have interest rate adjustment features at seven years and fifteen years.
Although the Company anticipates that a majority of its loan portfolio will
continue to consist of fixed-rate loans, the Company has 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, 1998, ARMs comprised $52.7 million or 23.3% of
the total loan portfolio and construction and consumer loans aggregated $45.4
million or 20.1% of the total loan portfolio. At September 30, 1998, $55.7
million or 14.9% of the Company's total assets consisted of investment
securities, 31.6% 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, 1998, $22.2 million or 26.3% of the Company's
mortgage-backed securities portfolio was comprised of ARMs. At September 30,
1998, the Company classified $131.6 million or 92.9% of its investment and
mortgage-backed securities portfolios as available for sale, which permits 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.

The following table presents the Company's MVPE as of September 30, 1998 and
September 30, 1997:

MARKET VALUE OF PORTFOLIO EQUITY

<TABLE>
<CAPTION>
    Change in                    Estimated MVPE
  Interest Rates  Estimated     as a Percentage       Amount of
  (basis points)     MVPE          of Assets            Change          Percent
--------------------------------------------------------------------------------
1998                             (Dollars in Thousands)
<S>    <C>         <C>                 <C>           <C>                <C>    
       +400         $2,675              0.7%          $(25,290)          (90.4)%
       +300          9,005              2.4            (18,960)          (68.8)
       +200         15,780              4.2            (12,185)          (43.6)
       +100         22,310              6.0             (5,655)          (20.2)
         --         27,965              7.5                 --              --
       -100         23,474              6.3             (4,491)          (16.1)
       -200         17,829              4.8            (10,136)          (36.2)
       -300         12,336              3.3            (15,629)          (55.9)
       -400          6,611              1.8            (21,354)          (76.4)
</TABLE>


                                                                              13
<PAGE>   10

================================================================================

MARKET VALUE OF PORTFOLIO EQUITY Continued...

<TABLE>
<CAPTION>
    Change in                    Estimated MVPE
  Interest Rates  Estimated     as a Percentage       Amount of
  (basis points)     MVPE          of Assets            Change          Percent
--------------------------------------------------------------------------------
1997                             (Dollars in Thousands)
<S>               <C>           <C>                  <C>                <C>    
       +400        $16,159             5.9%          $(18,010)          (52.7)%
       +300         21,175             7.7            (12,993)          (38.0)
       +200         25,838             9.5             (8,330)          (24.4)
       +100         30,499            11.2             (3,669)          (10.7)
         --         34,168            12.5                 --              --
       -100         36,262            13.3              2,094             6.1
       -200         37,201            13.6              3,033             8.9
       -300         38,258            14.0              4,090            12.0
       -400         40,340            14.8              6,172            18.1
</TABLE>


         As noted on the previous tables, significant increases or decreases 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 repricing 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 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 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, 1998, the total approved loan commitments outstanding (excluding undisbursed
portions of loans in process) amounted to $17.7 million. At the same date, the
unadvanced portion of loans in process approximated $12.2 million. Certificates
of deposit scheduled to mature in one year or less at September 30, 1998 totaled
$68.2 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, 1998, the Company had regulatory capital which was
in excess of applicable limits.

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.


14
<PAGE>   11

========================================================================= [LOGO]

YEAR 2000

         The Year 2000 (Y2K) issue is primarily a result of computer software
programs recognizing a two digit date field rather than the full four digits
which identify the appropriate year. Any computer program or hardware that is
date sensitive may recognize "00" as year 1900 as opposed to the intended year
2000. The Y2K problem started decades ago when early computers had very limited
memory and storage space.

         The objective of managing the Year 2000 process is for the institution
to determine the scope of the problem and to focus its efforts and attention on
solving it. The Federal Financial Institution's Examination Council ("FFIEC")
outlined the Year 2000 management process as a five phase procedure [(1)
Awareness (2) Assessment (3) Renovation (4) Validation (5) Implementation] that
each financial institution would have to navigate in identifying and fixing its
Year 2000 exposures. The Company has developed a detailed timetable which
identifies various milestones and deadlines to aid in managing the Year 2000
process.

         The Company outsources substantially all of its data processing
functions, and it is working very closely with its third party provider and
other vendors within the Bank's project plan to ensure that its operational and
financial systems will not be adversely affected by the Y2K problem.

         The Awareness and Assessment phases of the Company's plan are completed
and related to the understanding and educating of the Board and appropriate
management personnel as to the issues related to the Y2K problem. The Company is
continuously upgrading its comprehensive project plan (year 2000 binder), and
has completed its inventory of equipment, hardware, and software; updated its
Disaster Recovery Plan ("DRP"); and reported the project status to its Board,
its regulators, and its customer base. The Awareness phase, including the
comprehensive inventory of all hardware and software systems (including systems
purchased from software vendors) was completed March 31, 1998. The Assessment of
all hardware and software systems was completed June 30, 1998.

         The Renovation phase of the Bank's project plan centered around the
initial contact and response evaluation of year 2000 letters and worksheets
which were sent to vendors and suppliers; the focus was on entities which have
been classified as fatal or critical to the ongoing operations of the Company.
The Company is coordinating with its third party vendors and suppliers to
complete their Y2K testing.

         The Validation and Implementation phases revolve around the resolution
of all vendor's and supplier's compliance status. All critical equipment or
services that are non-compliant will be replaced by the appropriate milestone
date. The Company's testing and implementation of internal mission-critical
systems is ongoing and has an expected completion date of December 31, 1998. The
testing of vendor provided mission-critical systems, including the Company's
third party service provider is in process and ongoing with an expected
completion date of June 30, 1999. The Company and the third party service
provider successfully completed its first round of online testing in September
1998. The second test is currently scheduled for March 1999.

         The Company has contacted its loan and deposit customers that may
present some exposure to Y2K compliance. Commercial loan customers that are not
Y2K compliant may present some risk of default. The Company's initial assessment
of its commercial loan and other customer accounts present an immaterial impact
on the Company's statement of operations. Continued monitoring and evaluation of
this risk is incorporated into the Company's Y2K project plan.

         The Company's costs associated with Year 2000 include an additional
assessment from its third party provider, consultant fees associated with its
DRP and the ongoing Y2K project plan, various hard costs for the replacement of
non-compliant computer, telephone, and related equipment. Excluding the "soft"
costs of Company management and personnel time, the Company estimates that the
total Year 2000 project costs will not exceed $200,000 (pre-tax). As of
September 30,1998, the Company estimates that it has incurred less than $50,000
in connection with its Y2K project plan.

         In the event that the Company and its service providers face a "worst
case" year 2K scenario and its systems would not handle the date changeover, the
impact on the Company is at this point uncertain. Clearly, the Company's Y2K
contingency plan would be enacted, which would include off-line, manual postings
of all transactions, as well as addressing any required Company service provider
changes or outsourcing to Y2K compliant entities.

         The Company's plans to complete Y2K compliance are based on
management's and the Board's best estimates. There can be no guarantee that
these estimates will be achieved, and ending results could be significantly
different due to unforeseen circumstances.


                                                                              15
<PAGE>   12


================================================================================




(This page has been intentionally left blank.)







16


<PAGE>   13



REPORT OF INDEPENDENT AUDITORS

========================================================================= [LOGO]

[ERNST & YOUNG LLP LETTERHEAD]



Stockholders and Board of Directors
Pittsburgh Home Financial Corp.


We have audited the accompanying consolidated statements of financial condition
of Pittsburgh Home Financial Corp. and subsidiaries as of September 30, 1998 and
1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1998. 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 subsidiaries at September 30, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended September 30, 1998, in conformity with
generally accepted accounting principles.


                                   /s/ ERNST & YOUNG LLP



October 30, 1998



                                                                              17
<PAGE>   14



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

================================================================================

<TABLE>
<CAPTION>
                                                                                           SEPTEMBER 30
                                                                                  1998                      1997
                                                                      ------------------------------------------------
<S>                                                                        <C>                        <C>         
ASSETS
Cash                                                                         $1,959,659                 $1,844,534
Interest-bearing deposits                                                     2,516,522                  3,379,240
                                                                      ------------------------------------------------
                                                                              4,476,181                  5,223,774

Investment securities trading (cost of $1,727,163 in 1998
   and $904,875 in 1997)                                                      1,415,291                    955,587
Investment securities available for sale (cost of $128,405,910
   in 1998 and $63,483,368 in 1997)                                         130,208,910                 64,387,368
Investment securities held to maturity (fair value of $10,033,700
   in 1998 and $10,054,039 in 1997)                                          10,000,000                 10,017,166
Loans receivable, net of allowance of $1,737,973 in 1998
   and $1,419,196 in 1997                                                   211,980,925                181,338,949
Accrued interest receivable                                                   2,797,759                  2,026,718
Premises and equipment, net                                                   3,315,565                  2,699,396
Goodwill                                                                        269,618                    302,632
Federal Home Loan Bank stock--at cost                                         7,863,400                  5,110,000
Deferred income taxes                                                           221,718                     12,564
Foreclosed real estate                                                        1,273,928                    907,398
Other assets                                                                    455,429                    192,673
                                                                      ------------------------------------------------
Total assets                                                               $374,278,724               $273,174,225
                                                                      ================================================

LIABILITIES
Deposits                                                                   $153,982,999               $138,730,862
Advances from Federal Home Loan Bank                                        155,266,730                101,700,000
Reverse repurchase agreements                                                25,000,000                          -
Guaranteed preferred beneficial interests in subordinated debt               10,781,166                          -
Advances by borrowers for taxes and insurance                                 1,618,579                  1,649,312
Accrued income taxes payable                                                    543,130                    146,194
Other liabilities                                                             2,286,655                  2,133,472
                                                                      ------------------------------------------------
Total liabilities                                                           349,479,259                244,359,840

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 5,000,000 shares authorized,
   none issued                                                                        -                          -
Common stock $.01 par value, 10,000,000 shares authorized
   (2,182,125 shares issued in 1998 and 1997)                                    21,821                     21,821
Additional paid-in capital                                                   16,308,564                 21,017,411
Treasury stock--at cost, 310,424 in 1998 and 212,756 shares in 1997          (4,511,868)                (2,948,004)
Unearned shares of ESOP                                                      (1,514,220)               (1,669,498)
Unearned shares of Recognition and Retention Plan                              (655,610)                 (868,250)
Accumulated other comprehensive income                                        1,190,000                    597,000
Retained earnings (substantially restricted)                                 13,960,778                 12,663,905
                                                                      ------------------------------------------------
Total stockholders' equity                                                   24,799,465                 28,814,385
                                                                      ------------------------------------------------
Total liabilities and stockholders' equity                                 $374,278,724               $273,174,225
                                                                      ================================================
</TABLE>

See notes to consolidated financial statements.


18
<PAGE>   15



CONSOLIDATED STATEMENTS OF OPERATIONS

========================================================================= [LOGO]

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED SEPTEMBER 30
                                                                      1998                    1997                   1996
                                                               ----------------------------------------------------------
<S>                                                            <C>                     <C>                     <C>       
Interest income:
   Loans                                                       $16,028,442             $13,176,737            $ 9,600,096
   Investment securities:
      Taxable                                                    7,585,237               4,180,561              2,742,092
      Tax-exempt                                                   401,040                 318,919                183,968
   Interest-bearing deposits                                       399,666                 288,290                406,650
                                                               ----------------------------------------------------------
Total interest income                                           24,414,385              17,964,507             12,932,806

Interest expense:
   Deposits                                                      6,945,652               6,436,932              5,372,817
   Advances from Federal Home Loan Bank and other                8,893,371               4,371,324              2,118,983
   Guaranteed preferred beneficial interests in 
   subordinated debt                                               674,518                      --                     --
                                                               ----------------------------------------------------------
Total interest expense                                          16,513,541              10,808,256              7,491,800
                                                               ----------------------------------------------------------
Net interest income                                              7,900,844               7,156,251              5,441,006

Provision for loan losses                                          610,000                 360,000                300,000
                                                               ----------------------------------------------------------
Net interest income after provision for loan losses              7,290,844               6,796,251              5,141,006

Noninterest income (loss):
   Service charges and other fees                                  575,602                 388,892                340,625
   Net (loss) gain on trading securities                          (208,084)                310,071                     --
   Net gain on available for sale securities                       186,211                      --                     --
   Other income                                                     55,469                  41,966                 28,246
                                                               ----------------------------------------------------------
Total noninterest income                                           609,198                 740,929                368,871

Noninterest expense:
   Compensation and employee benefits                            2,999,230               2,550,712              1,915,520
   Premises and occupancy costs                                    555,102                 466,119                458,379
   Amortization of goodwill                                         33,014                  27,512                     --
   Federal insurance premium                                        89,513                  66,143                288,551
   SAIF assessment                                                      --                      --                738,961
   Loss on sale of foreclosed real estate                           30,258                  11,222                     --
   Marketing                                                       228,800                 178,943                154,636
   Data processing costs                                           243,483                 287,761                149,703
   Other expenses                                                  934,638                 887,172                589,808
                                                               ----------------------------------------------------------
Total noninterest expense                                        5,114,038               4,475,584              4,295,558
                                                               ----------------------------------------------------------
Income before income taxes                                       2,786,004               3,061,596              1,214,319
Income taxes                                                       884,486               1,078,300                441,941
                                                               ----------------------------------------------------------
Net income                                                      $1,901,518              $1,983,296               $772,378
                                                               ==========================================================

Beginning April 1, 1996
   Diluted earnings per share                                        $1.05                   $1.08                   $.15
   Dividends per share                                               $ .31                   $ .29                   $.05
   Return of capital distribution (see Note 9)                       $2.43                      --                     --
   Dilutive average shares outstanding                           1,813,475               1,842,011              2,011,919
</TABLE>


See notes to consolidated financial statements.


                                                                              19
<PAGE>   16



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

========================================================================= [LOGO]

<TABLE>
<CAPTION>
                                                                     Additional                        Unearned     
                                     Comprehensive      Common         Paid-in         Treasury         Shares      
                                         Income          Stock         Capital          Stock           of ESOP     
                                         ------     ---------------------------------------------------------------

<S>                                 <C>              <C>             <C>              <C>             <C>           
September 30, 1995                                  $     --     $         --     $        --     $        --   
   Issuance of stock
      April 1, 1996                                   21,821       20,959,429              --              --   
   Stock acquired by ESOP                                 --               --              --      (1,928,082)  
   ESOP shares released                                   --             (623)             --          96,362   
   Cash dividends declared
      on common stock of
      $.05 per share                                      --               --              --              --   
   Change in unrealized loss
      on investment securities
      available for sale, net of
      taxes                         $  (50,000)           --               --              --              --   
   Net Income                          772,378            --               --              --              --   
                                    ----------
   Comprehensive income             $  722,378
                                    ==========      ------------------------------------------------------------
September 30, 1996                                    21,821       20,958,806              --      (1,831,720)  
   Treasury stock purchased                               --               --      (2,948,004)             --   
   Stock acquired for the
      RRP                                                 --               --              --              --   
   ESOP shares released                                   --           58,605              --         162,222   
   RRP amortization                                       --               --              --              --   
   Cash dividends declared
      on common stock of
      $.29 per share                                      --               --              --              --   
   Change in unrealized gain
      on investment securities
      available for sale, net of
      taxes                         $  647,000            --               --              --              --   
   Net income                        1,983,296            --               --              --              --   
                                    ----------
   Comprehensive income             $2,630,296
                                    ==========      ------------------------------------------------------------
September 30, 1997                                    21,821       21,017,411      (2,948,004)     (1,669,498)
   Treasury stock purchased                               --               --      (1,575,488)             --   
   ESOP shares released                                   --           80,044              --         155,278   
   Exercise of stock options                              --           (3,324)         11,624              --   
   RRP amortization                                       --               --              --              --   
   Return of capital                                      --       (4,785,567)             --              --   
   Cash dividends declared
      on common stock of
      $.31 per share                                      --               --              --              --   
   Change in unrealized
      gain on investment
      securities available for
      sale, net of taxes            $  715,900            --               --              --              --   
   Less reclassification
      adjustment for gains
      included in net income          (122,900)           --               --              --              --   
   Other comprehensive
      income                           593,000            --               --              --              --   
   Net income                        1,901,518            --               --              --              --   
                                    ----------
Comprehensive income                $2,494,518
                                    ==========      ------------------------------------------------------------
September 30, 1998                                  $ 21,821     $ 16,308,564     $(4,511,868)    $(1,514,220)  
                                                    ============================================================
</TABLE>


<TABLE>
<CAPTION>
                                                      Accumulated
                                       Unearned         Other                               Total
                                        Shares       Comprehensive       Retained       Stockholders'
                                        of RRP          Income           Earnings           Equity
                                    -------------------------------------------------------------------

<S>                                   <C>             <C>              <C>              <C>         
September 30, 1995                    $        --     $       --     $10,609,836     $10,609,836
   Issuance of stock
      April 1, 1996                            --             --              --      20,981,250
   Stock acquired by ESOP                      --             --              --      (1,928,082)
   ESOP shares released                        --             --              --          95,739
   Cash dividends declared
      on common stock of
      $.05 per share                           --             --        (109,105)       (109,105)
   Change in unrealized loss
      on investment securities
      available for sale, net of
      taxes                                    --        (50,000)             --         (50,000)
   Net Income                                  --             --         772,378         772,378
                                    
   Comprehensive income             
                                    ------------------------------------------------------------
September 30, 1996                             --        (50,000)     11,273,109      30,372,016
   Treasury stock purchased                    --             --              --      (2,948,004)
   Stock acquired for the
      RRP                              (1,063,170)            --              --      (1,063,170)
   ESOP shares released                        --             --              --         220,827
   RRP amortization                       194,920             --              --         194,920
   Cash dividends declared
      on common stock of
      $.29 per share                           --             --        (592,500)       (592,500)
   Change in unrealized gain
      on investment securities
      available for sale, net of
      taxes                                    --        647,000              --         647,000
   Net income                                  --             --       1,983,296       1,983,296
                                    
   Comprehensive income             
                                    ------------------------------------------------------------
September 30, 1997                       (868,250)       597,000      12,663,905      28,814,385
   Treasury stock purchased                    --             --              --      (1,575,488)
   ESOP shares released                        --             --              --         235,322
   Exercise of stock options                   --             --              --           8,300
   RRP amortization                       212,640             --              --         212,640
   Return of capital                           --             --              --      (4,785,567)
   Cash dividends declared
      on common stock of
      $.31 per share                           --             --        (604,645)       (604,645)
   Change in unrealized
      gain on investment
      securities available for
      sale, net of taxes                       --             --              --              --
   Less reclassification
      adjustment for gains
      included in net income                   --             --              --              --
   Other comprehensive
      income                                   --        593,000              --         593,000
   Net income                                  --             --       1,901,518       1,901,518
                                    
Comprehensive income                
                                    ------------------------------------------------------------
September 30, 1998                    $  (655,610)    $1,190,000     $13,960,778     $24,799,465
                                    ============================================================
</TABLE>


See notes to consolidated financial statements.


20

<PAGE>   17



CONSOLIDATED STATEMENTS OF CASH FLOWS

=========================================================================[ LOGO]

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED SEPTEMBER 30
                                                                            1998               1997               1996
                                                                     ---------------------------------------------------
<S>                                                                  <C>                 <C>                <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                           $   1,901,518       $  1,983,296       $    772,378
Adjustments to reconcile net income to net cash
provided by operating activities:
  Depreciation and goodwill amortization                                   263,001            205,664            172,083
  Amortization and accretion of premiums and discounts on
     assets and deferred loan fees                                      (1,759,096)         1,250,836            149,762
  Amortization of RRP and release of ESOP shares                           447,962            415,747             95,739
  Provision for loan losses                                                610,000            360,000            300,000
  Purchase of equity securities, trading                                (9,541,568)        (4,327,987)                --
  Sale of equity securities, trading                                     8,873,780          3,423,112                 --
  Deferred tax provision (benefit)                                        (515,155)            40,514           (310,868)
  Other, net                                                              (173,371)          (507,965)         1,498,550
                                                                     ---------------------------------------------------
Net cash provided by operating activities                                  107,071          2,843,217          2,677,644

CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations                                                      (80,980,474)       (81,963,200)       (65,962,930)
Loan principal repayments                                               49,638,160         40,085,559         31,099,129
Proceeds from loan sales                                                        --            617,700          1,935,500
Purchases of:
  Available-for-sale securities                                       (110,933,742)       (36,627,877)       (18,656,078)
  Held-to-maturity securities                                                   --        (10,000,000)                --
Proceeds from sales, maturities and principal repayments of:
  Available-for-sale securities                                         48,046,845          9,802,735         17,955,731
Purchases of land, premises and equipment                                 (846,156)          (825,980)          (153,070)
Proceeds from branch deposit acquisition                                        --         10,547,750                 --
Other, net                                                              (3,425,929)        (1,255,705)          (167,257)
                                                                     ---------------------------------------------------
Net cash used in investing activities                                  (98,501,296)       (69,619,018)       (33,948,975)

CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in checking, passbook,
  and money market deposit accounts                                      1,812,185         (2,867,790)        (2,223,204)
Net increase in certificates of deposit                                 13,440,627          6,709,329         11,067,579
Increase in advances from the Federal Home Loan Bank                    53,566,730         65,200,000          7,500,000
Increase in reverse repurchase agreements                               25,000,000                 --                 --
Net proceeds from issuance of guaranteed preferred
  beneficial interest in subordinated debt                              10,781,166                 --                 -- 
Proceeds from issuance of stock, net of shares acquired by ESOP                 --                 --         19,053,168
Cash dividends paid to stockholders                                       (604,645)          (592,500)          (109,105)
Return of capital distribution paid to stockholders                     (4,785,567)                --                 --
Purchase of RRP shares                                                          --         (1,063,170)                --
Purchase of treasury stock                                              (1,563,864)        (2,948,004)                --
                                                                     ---------------------------------------------------
Net cash provided by financing activities                               97,646,632         64,437,865         35,288,438
                                                                     ---------------------------------------------------

Net (decrease) increase in cash and cash equivalents                      (747,593)        (2,337,936)         4,017,107
Cash and cash equivalents at beginning of year                           5,223,774          7,561,710          3,544,603
                                                                     ---------------------------------------------------
Cash and cash equivalents at end of year                             $   4,476,181       $  5,223,774       $  7,561,710
                                                                     ===================================================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest (includes interest credited on deposits of
  $7,231,999, $5,780,308, and $5,006,336 in 1998, 1997,
     and 1996, respectively)                                         $  16,272,020       $ 10,129,159       $  7,300,703
  Income taxes                                                           1,231,000          1,237,534            393,016

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
  AND FINANCING ACTIVITIES
Foreclosed mortgage loans transferred to real estate owned           $   1,538,881       $    911,072       $    133,256
</TABLE>

See notes to consolidated financial statements.


                                                                              21




<PAGE>   18



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

1. BASIS OF PRESENTATION AND ORGANIZATION

The consolidated financial statements include the accounts of Pittsburgh Home
Financial Corp. (the Company) and its wholly owned subsidiaries, Pittsburgh Home
Savings Bank (the Bank) and Pittsburgh Home Capital Trust I (the "Trust"). 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 eight 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 11) 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 $4.7 million of checking
deposits, 3% of the next $43.1 million of checking deposits and 10% of total
checking deposits over $47.8 million. These required reserves, net of allowable
credits, amounted to $614,000 at September 30, 1998.

INVESTMENT SECURITIES TRADING

Trading securities, comprised primarily of bank and thrift equities held
principally for resale in the near term, are classified as trading account
securities and recorded at their fair values based on quoted market prices.
Unrealized gains and losses on trading account securities are included in
earnings during the period.

INVESTMENT SECURITIES AVAILABLE FOR SALE

Investment securities available for sale are carried at fair value based upon
quoted market prices. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are reported as a net amount in a separate
component of stockholders' 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.

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 RECEIVABLE, NET

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.


22
<PAGE>   19

========================================================================= [LOGO]

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. A reserve 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.

Impaired loans consist of nonhomogeneous 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.
Nonaccrual, substandard and doubtful commercial and other real estate loans are
evaluated for impairment and have been included in management's assessment of
the adequacy of the allowance.

The allowance for loan losses is increased by charges to income and decreased by
chargeoffs (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 operations. 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.

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

Financial Accounting Standards Board Statement No. 128, "Earnings Per Share"
(Statement No. 128), is effective in 1998 and provides a simpler calculation
called basic Earnings Per Share (EPS) which replaces primary EPS under
Accounting Principles Board Opinion No. 15. Basic EPS is calculated by dividing
income available to common shareholders by the weighted average number of common
shares outstanding during the period. Options, warrants, and other potentially
dilutive securities are excluded from the basic calculation, but are included in
diluted EPS. All prior periods have been restated and recorded in accordance
with Statement No. 128. As discussed in Note 11, 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.


                                                                              23
<PAGE>   20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations.

<TABLE>
<CAPTION>
                                                                   1998                  1997                  1996
                                                                ------------------------------------------------------
<S>                                                             <C>                   <C>                   <C>       
Numerator for basic and diluted
   earnings per share--net income                               $1,901,518            $1,983,296            $  772,378
Denominator:
   Denominator for basic earnings per share--
      weighted average shares                                    1,725,921             1,792,430             2,011,919
Effect of dilutive securities:
   Employee stock options                                           55,007                30,845                    --
   Unvested Management Recognition Plan Stock                       32,547                18,736                    --
                                                                ------------------------------------------------------
Dilutive potential common shares                                    87,554                49,581                    --
                                                                ------------------------------------------------------
Denominator for diluted earnings per share--adjusted
   weighted average shares and assumed conversions               1,813,475             1,842,011             2,011,919
                                                                ======================================================
Basic earnings per share                                             $1.10                 $1.11                 $0.15
                                                                ======================================================
Diluted earnings per share                                           $1.05                 $1.08                 $0.15
                                                                ======================================================
</TABLE>

TREASURY STOCK

The acquisition of treasury stock is recorded under the cost method. At the date
of subsequent reissue, the treasury stock account is reduced by the cost of such
stock on the average cost basis, with any excess proceeds being credited to
additional paid-in capital.

STOCK OPTIONS

In October 1995, the Financial Accounting Standards Board (FASB) issued FAS No.
123, "Accounting for Stock-Based Compensation," which is effective for the
Company's fiscal year ended September 30, 1997. 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." Since the Company has elected to use the accounting in Opinion No.
25, pro forma disclosures of net income and earnings per share are made as if
the fair value method of accounting, as defined by FAS No. 123 had been applied
(see Note 11).

GOODWILL AMORTIZATION

Amortization of goodwill related to a branch acquisition is computed using the
straight-line method over ten years.

INTEREST RATE CAP AGREEMENT

The Company enters into interest rate caps as a means of hedging interest rate
risk on floating rate liabilities. The costs of cap transactions are deferred
and amortized over the contract period. The amortized costs of cap transactions
are included in interest expense on advances and other borrowings.

NEW ACCOUNTING STANDARDS

Effective October 1, 1997, the Company adopted FASB Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
securities, which are reported separately in stockholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of Statement 130. For the years
ended September 30, 1998, 1997, and 1996, comprehensive income was $2,494,518,
$2,630,296, and $722,378, respectively.

As of October 1, 1997, the Company adopted the provisions of SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishment
of Liabilities," relating to repurchase agreements, securities lending and other
similar transactions and pledged collateral, which had been delayed until after
December 31, 1997 by SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement 125, an amendment of FASB Statement 125." The
effect of adopting the additional provisions of Statement 125 as amended by
Statement 127 had no material impact on the Company's financial positions or
results of operations.


24
<PAGE>   21

========================================================================= [LOGO]

During 1997, the FASB issued Statement 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This statement requires public companies to
disclose certain information about reportable operating segments in complete
sets of financial statements of the company and in interim condensed financial
statements. These disclosure requirements will have no effect on the Company's
financial position or results of operations.

The FASB has issued FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and hedging activities. The standard is effective for fiscal years
beginning after June 15, 1999, and will be adopted by the Company for the year
ended September 30, 2000. The Company is in the process of determining the
impact of adoption.

RECLASSIFICATIONS

Certain reclassifications have been made in prior year financial statements to
conform to current presentation.

3. INVESTMENT SECURITIES

Securities classified by type at September 30, 1998 and 1997 are summarized
below by scheduled maturity.

<TABLE>
<CAPTION>
                                                                         AVAILABLE FOR SALE
                                                                         SEPTEMBER 30, 1998
                                                   -----------------------------------------------------------
                                                      AMORTIZED      UNREALIZED      UNREALIZED        MARKET
                                                        COST            GAIN            LOSS            VALUE
                                                   -----------------------------------------------------------
<S>                                                <C>               <C>             <C>          <C>         
U.S. Government and agency obligations due:
  Within 12 months                                 $  1,198,046      $   5,000       $     --     $  1,203,046
  Beyond 12 months but within 5 years                 1,996,234         42,000             --        2,038,234
  Beyond 5 years but within 10 years                 13,100,139        186,000          1,000       13,285,139
  Beyond 10 years                                    14,366,100        411,000             --       14,777,100
                                                   -----------------------------------------------------------
                                                     30,660,519        644,000          1,000       31,303,519
Mortgage-backed securities:
Government National Mortgage Association:
  Within 12 months                                           --             --             --               --
  Beyond 12 months but within 5 years                     4,209            113             --            4,322
  Beyond 5 years but within 10 years                    689,230         36,349             --          725,579
  Beyond 10 years                                    51,919,479        613,093             --       52,532,572
Federal National Mortgage Association:
  Within 12 months                                           --             --             --               --
  Beyond 12 months but within 5 years                    10,648            251             --           10,899
  Beyond 5 years but within 10 years                         --             --             --               --
  Beyond 10 years                                    21,530,468        376,195             --       21,906,663
Federal Home Loan Mortgage Corporation:
  Within 12 months                                      111,633            391             --          112,024
  Beyond 12 months but within 5 years                   277,175             --          8,159          269,016
  Beyond 5 years but within 10 years                     48,126            210            332           48,004
  Beyond 10 years                                     3,305,132         84,184          2,295        3,387,021
Collateralized Mortgage Obligations:
  Within 12 months                                           --             --             --               --
  Beyond 12 months but within 5 years                        --             --             --               --
  Beyond 5 years but within 10 years                         --             --             --               --
  Beyond 10 years                                     5,513,067         37,704         31,704        5,519,067
                                                   -----------------------------------------------------------
                                                     83,409,167      1,148,490         42,490       84,515,167

Equity securities                                    14,336,224        206,814        152,814       14,390,224
                                                   -----------------------------------------------------------
Total available-for-sale securities                $128,405,910     $1,999,304       $196,304     $130,208,910
                                                   ===========================================================

                                                                          HELD TO MATURITY
                                                                         SEPTEMBER 30, 1998
                                                   -----------------------------------------------------------
                                                      AMORTIZED      UNREALIZED      UNREALIZED        MARKET
                                                        COST            GAIN            LOSS            VALUE
                                                   -----------------------------------------------------------
Agency Obligations:
Federal National Mortgage Association:
Beyond 5 years but within 10 years                 $ 10,000,000     $   33,700       $     --     $ 10,033,700
                                                   ===========================================================
</TABLE>

                                                                              25
<PAGE>   22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

<TABLE>
<CAPTION>
                                                                         AVAILABLE FOR SALE
                                                                         SEPTEMBER 30, 1997
                                                   -----------------------------------------------------------
                                                      AMORTIZED      UNREALIZED      UNREALIZED        MARKET
                                                        COST            GAIN            LOSS            VALUE
                                                   -----------------------------------------------------------
<S>                                                <C>                <C>             <C>          <C>        
U.S. Government and agency obligations due:
  Within 12 months                                 $  1,499,844       $  3,949        $    --      $ 1,503,793
  Beyond 12 months but within 5 years                 8,233,521         19,382          8,703        8,244,200
  Beyond 5 years but within 10 years                  8,314,181         80,226          8,055        8,386,352
  Beyond 10 years                                     6,556,338        198,700         12,421        6,742,617

Corporate obligations due:
  Within 12 months                                      499,843          1,922             --          501,765
  Beyond 12 months but within 5 years                        --             --             --               --
                                                   -----------------------------------------------------------
                                                     25,103,727        304,179         29,179       25,378,727
Mortgage-backed securities:
Government National Mortgage Association:
  Within 12 months                                           --             --             --               --
  Beyond 12 months but within 5 years                     7,864            265             --            8,129
  Beyond 5 years but within 10 years                    831,834         27,363             --          859,197
  Beyond 10 years                                    18,686,822        291,974          2,777       18,976,019
Federal National Mortgage Association:
  Within 12 months                                           --             --             --               --
  Beyond 12 months but within 5 years                    13,248            455             --           13,703
  Beyond 5 years but within 10 years                         --             --             --               --
  Beyond 10 years                                     9,639,373        124,996         10,436        9,753,933
Federal Home Loan Mortgage Corporation:
  Within 12 months                                      505,153             --          2,382          502,771
  Beyond 12 months but within 5 years                   620,593         11,351             --          631,944
  Beyond 5 years but within 10 years                     65,185          2,463             --           67,648
 Beyond 10 years                                      7,330,507         94,099         22,371        7,402,235
                                                   -----------------------------------------------------------
                                                     37,700,579        552,966         37,966       38,215,579

Equity securities                                       679,062        114,000             --          793,062
                                                   -----------------------------------------------------------
Total available for sale securities                 $63,483,368       $971,145        $67,145      $64,387,368
                                                   ===========================================================

                                                                         HELD TO MATURITY
                                                                        SEPTEMBER 30, 1997
                                                   -----------------------------------------------------------
                                                      AMORTIZED      UNREALIZED      UNREALIZED        MARKET
                                                        COST            GAIN            LOSS            VALUE
                                                   -----------------------------------------------------------
Agency Obligations:
Federal National Mortgage Association:
Beyond 5 years but within 10 years                  $10,017,166       $ 36,873        $    --      $10,054,039
                                                   ===========================================================
</TABLE>

U.S. Government obligations carried at approximately $1 million at September 30,
1998 were pledged to secure deposits and for other purposes required or
permitted by law.

Gross realized gains and gross realized losses on sales of available for sale
securities were $305,458 and $119,247, respectively, in 1998 and $2,184 and
$1,328 respectively, in 1997. There were no sales of securities in 1996.

Trading securities unrealized holding losses of $394,896 and unrealized holding
gains of $116,212 were included in earnings for the years ended September 30,
1998 and 1997, respectively. There were no trading securities in 1996.


26
<PAGE>   23

========================================================================= [LOGO]

4. LOANS RECEIVABLE, NET

Loans receivable, net at September 30, 1998 and 1997 are summarized below:

<TABLE>
<CAPTION>
                                                   1998                     1997
                                               -------------------------------------
<S>                                            <C>                       <C>          
First mortgage loans:
Secured by 1-4 family residence                $170,100,323             $152,113,126
1-4 family residential construction              30,558,277               25,101,543
Other                                             7,531,381                2,596,036
Less loans in process                           (12,227,046)             (10,003,493)
Deferred loan costs                                  90,338                   43,292
                                               -------------------------------------
Total first mortgage loans                      196,053,273              169,850,504
                                               =====================================

Home equity loans and lines                      13,371,773                8,820,868
Other loans                                       4,293,852                4,086,773
Less allowance for loan losses                   (1,737,973)              (1,419,196)
                                               -------------------------------------
                                               $211,980,925             $181,338,949
                                               =====================================
</TABLE>

Activity in the allowance for loan losses is summarized as follows for the years
ended September 30:

<TABLE>
<CAPTION>
                                            1998                   1997                   1996
                                        --------------------------------------------------------
<S>                                     <C>                     <C>                     <C>        
Balance at beginning of year            $1,419,196             $1,128,279             $  920,685
Provision charged to income                610,000                360,000                300,000
Chargeoffs                                (363,393)               (76,317)              (113,347)
Recoveries                                  72,170                  7,234                 20,941
                                        --------------------------------------------------------
Balance at end of year                  $1,737,973             $1,419,196             $1,128,279
                                        ========================================================
</TABLE>


Real estate loans in arrears three months or more or in process of foreclosure
at September 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                      NUMBER                             % OF REAL
                     OF LOANS            AMOUNT        ESTATE LOANS
                     ----------------------------------------------
<S>                     <C>            <C>                 <C>  
1998                    45             $2,810,242          1.58%
1997                    70             $3,268,866          2.11%
</TABLE>

The Bank had outstanding loan origination commitments of $17,740,720 and
$9,216,350, including $3,202,776 and $2,243,863 available on lines of credit, at
September 30, 1998 and 1997, respectively. There were no loans committed to be
sold at September 30, 1998 and 1997.

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 and surrounding counties in Pennsylvania.

5. PREMISES AND EQUIPMENT

Premises and equipment and the related accumulated depreciation at September 30,
1998 and 1997 consist of the following:

<TABLE>
<CAPTION>
                                                 1998                 1997
                                          -----------------------------------
<S>                                         <C>                <C>        
Land                                        $1,149,808         $   996,558
Buildings and improvements                   2,230,557           1,703,577
Furniture and equipment                      1,608,180           1,373,807
Construction in progress                        82,971             151,418
                                          -----------------------------------
                                             5,071,516           4,225,360
Less accumulated depreciation               (1,755,951)         (1,525,964)
                                          -----------------------------------
                                            $3,315,565          $2,699,396
                                          ===================================
</TABLE>

Depreciation expense was $229,987, $180,904 and $172,083 for the years ended
September 30, 1998, 1997 and 1996, respectively.


                                                                              27
<PAGE>   24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

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

YEAR ENDING SEPTEMBER 30

<TABLE>
<S>                                      <C>      
1999                                     $  91,447
2000                                        94,636
2001                                        96,968
2002                                        77,416
2003                                        53,987
2004 and thereafter                        157,276
                                          --------
Total minimum payments                    $571,730
                                          ========
</TABLE>

Total rental expense for these leases charged to earnings was $88,300, $64,286,
and $62,367, for the years ended September 30, 1998, 1997, and 1996,
respectively.

6. DEPOSITS

Deposits at September 30, 1998 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
                                                  1998                                       1997
BALANCES BY                      -------------------------------------      ----------------------------------
INTEREST RATE                       AMOUNT                  PERCENT            AMOUNT                  PERCENT

<S>                              <C>                          <C>           <C>                          <C> 
SAVINGS ACCOUNTS:
Regular checking                 $  1,624,085                 1.1%          $  2,371,840                 1.7%
Interest checking                  11,126,464                 7.2              7,233,769                 5.2
Passbook                           26,266,587                17.1             26,065,424                18.8
Variable money market               3,595,736                 2.3              5,130,329                 3.7
                                 -----------------------------------------------------------------------------
                                   42,612,872                27.7             40,801,362                29.4
CERTIFICATE ACCOUNTS:
3.50%--4.49%                               --                  --                253,904                 0.2
4.50%--5.49%                       26,078,956                16.9             32,185,036                23.2
5.50%--6.49%                       74,170,480                48.2             46,734,056                33.7
6.50%--7.49%                       10,505,657                 6.8             17,988,704                13.0
7.50%--8.49%                          507,834                 0.3                650,600                 0.4
8.50%--9.49%                          107,200                 0.1                117,200                 0.1
                                 -----------------------------------------------------------------------------
                                  111,370,127                72.3             97,929,500                70.6
                                 -----------------------------------------------------------------------------
                                 $153,982,999               100.0%          $138,730,862               100.0%
                                 =============================================================================
</TABLE>


Individual retirement accounts totaled $14,604,241 and $13,040,158 at September
30, 1998 and 1997, respectively.

Accrued interest payable on deposits included in other liabilities was $306,682
and $593,029 at September 30, 1998 and 1997, respectively.

The contractual maturity of certificate accounts are as follows:

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30
                                        --------------------------------------------------
                                             1998                                   1997
                                        --------------------------------------------------

<S>                                     <C>                                    <C>        
Less than one year                      $ 68,175,211                           $64,680,940
One to two years                          18,948,064                            16,066,946
Two to three years                         8,528,455                             4,553,434
Three to four years                        3,155,582                             2,272,106
Thereafter                                12,562,815                            10,356,074
                                        --------------------------------------------------
                                        $111,370,127                           $97,929,500
                                        ==================================================
</TABLE>

Certificate accounts of $100,000 or more at September 30, 1998 and 1997 were
$18,573,341 and $12,475,142, respectively.

The weighted average interest rates for all deposits at September 30, 1998 and
1997 was 4.60% and 4.81%, respectively.


28
<PAGE>   25

========================================================================= [LOGO]

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

<TABLE>
<CAPTION>
                                                  1998           1997            1996
                                           ----------------------------------------------

<S>                                        <C>              <C>               <C>        
Checking and money market accounts         $  271,747      $  225,973       $  192,839
Passbook accounts                             686,904         873,895          791,561
Certificates                                5,987,001       5,337,064        4,388,417
                                           ----------------------------------------------
                                           $6,945,652      $6,436,932       $5,372,817
                                           ==============================================
</TABLE>

7. NOTES PAYABLE AND OTHER BORROWINGS

FHLB ADVANCES

The Bank is a member of the Federal Home Loan Bank (FHLB) System. As a member,
the Bank has the ability to borrow "advances" which are collateralized by
certain mortgages and investment 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, 1998                      SEPTEMBER 30, 1997
                                    ----------------------------------        -----------------------------
STATED MATURITY                       WEIGHTED                                  WEIGHTED
                                    AVERAGE RATE            AMOUNT            AVERAGE RATE        AMOUNT
                                    -----------------------------------------------------------------------
<S>                                   <C>            <C>                         <C>         <C>           
Less than 12 months                   6.42%           $ 12,700,000               5.84%         $  9,250,000
One to two years                      6.18%             20,000,000               6.42%           12,700,000
Two to three years                    6.23%              9,500,000               6.18%           20,000,000
Three to four years                   5.89%             45,250,000               6.78%            4,500,000
Thereafter                            5.53%             67,816,730               6.03%           55,250,000
                                    -----------------------------------------------------------------------
                                      5.84%           $155,266,730               6.12%         $101,700,000
                                    =======================================================================
</TABLE>

Approximately $112,500,000 of the outstanding FHLB advances are adjustable rate
notes with a weighted average yield of 5.58% at September 30, 1998. 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, 1998 is $86,548,270. The
advances are subject to restrictions or penalties in the event of prepayment.

REVERSE REPURCHASE AGREEMENTS

The Bank enters into sales of securities under agreements to repurchase. These
transactions are reflected as a liability on the accompanying Consolidated
Statements of Financial Condition. The dollar amount of securities underlying
the agreements remains in the asset account, although the securities underlying
the agreements are delivered to primary dealers who manage the transactions. All
of the agreements were to repurchase identical securities.

At September 30, 1998, reverse repurchase agreements outstanding amounted to $25
million with a weighted average rate of 5.46% and a maturity date of May 8,
2008. After two years, $5 million of reverse repurchase agreements may be called
with the remaining amount of $20 million callable after three years. Securities
underlying these reverse repurchase agreements consisted of mortgage-backed
securities with carrying values of $32.6 million (market value of $33.0 million)
at September 30, 1998. The maximum amounts of outstanding reverse repurchase
agreements during the year ended September 30, 1998 were $25 million.

8. TRUST PREFERRED SECURITIES

On January 30, 1998, the Company issued, through a wholly owned subsidiary,
Pittsburgh Home Capital Trust I (the Trust) 8.56% Cumulative Trust Preferred
Securities (Preferred Securities) and received proceeds of $10,764,829 (net of
$735,171 of offering costs). The Preferred Securities have an aggregate
liquidation amount of $11,500,000, which are redeemable at the option of the
Company on or after January 30, 2028 or upon occurrence of certain regulatory
events. Holders of Preferred Securities are entitled to receive cumulative cash
distributions, at the annual rate of 8.56% of the liquidation amount of $10 per
Preferred Security, accruing from the date of original issuance and payable
quarterly in arrears. The Company has guaranteed the payment of distributions
and payments on liquidation of redemption of the Preferred Securities, but only
in each case to the extent of funds held by the Trust.


                                                                              29
<PAGE>   26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

The Preferred Securities represent preferred undivided beneficial interests in
the assets of the Trust, which consist solely of 8.56% Subordinated Debentures
(the Subordinated Debentures) issued by the Company to the Trust. The
Subordinated Debentures bear interest at 8.56%, payable quarterly. The
Subordinated Debentures are unsecured and are effectively subordinated to all
existing and future liabilities of the Company. The Company has the right, at
any time, so long as no event of default has occurred, to defer payments of
interest on the Subordinated Debentures for a period not to exceed 20
consecutive quarters. Exercise of this right by the Company will result in the
deferral of quarterly payments on the Preferred Securities; however, interest
will continue to accrue on the Subordinated Debentures and unpaid dividends
accumulate on the Preferred Securities. The proceeds from the Preferred
Securities qualify as Tier I capital with respect to the Company under
risk-based capital guidelines established by the Federal Reserve. Federal
Reserve guidelines for calculation of Tier I capital limit the amount of
cumulative preferred stock which can be included in Tier I capital to 25% of
total Tier I capital.

9. RETURN OF CAPITAL DISTRIBUTION

On December 19, 1997, the Company paid a one-time cash distribution of $2.50 per
share. The Company obtained a private letter ruling from the Internal Revenue
Service which allowed stockholders to treat $2.43 per share of this distribution
as a return of capital. The return of capital was reflected as a reduction to
additional paid-in capital in the Company's financial statements. For the
stockholders, the return of capital is treated as a reduction in the cost basis
of the shares and is not subject to income taxes until the shares are sold. The
remaining $.07 per share was treated as an ordinary dividend. The total
distribution paid was $4,923,423 on 1,969,369 shares of stock.

10. INCOME TAXES

Income tax expense in the consolidated statements of income for the years ended
September 30, 1998, 1997, and 1996, respectively, includes the following
components:

<TABLE>
<CAPTION>
                                         1998           1997             1996
                                   ---------------------------------------------
<S>                                <C>            <C>                <C>      
Federal:
  Current                          $1,190,420     $  847,556         $ 697,035
  Deferred                           (515,155)        40,514          (310,868)
State:
  Current                             209,221        190,230            55,774
                                   ---------------------------------------------
                                   $  884,486     $1,078,300         $ 441,941
                                   =============================================
</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
                                                                1998           1997              1996
                                                            ---------------------------------------------
<S>                                                             <C>            <C>               <C>  
Expected federal tax rate                                       34.0%          34.0%             34.0%
State income taxes, net of federal income tax effect             5.0            4.1               3.0
Tax-exempt interest income                                      (4.0)          (2.9)             (4.1)
Other, net                                                      (3.3)            --               3.5
                                                            ---------------------------------------------
Actual effective tax rate                                       31.7%          35.2%             36.4%
                                                            =============================================
</TABLE>


30
<PAGE>   27

========================================================================= [LOGO]

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, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                    1998               1997
                                                            --------------------------------------
<S>                                                                <C>               <C>     
Deferred federal income tax assets:
   Allowance for loan losses                                       $590,911          $482,527
   Parent NOL carryforward                                          399,338                --
                                                            --------------------------------------
Total deferred federal income tax assets                            990,249           482,527

Deferred federal income tax liabilities:
   Tax-based bad debt reserve in excess of base year                115,626           139,055
   Unrealized gain on securities available for sale                 613,000           307,000
  Other                                                              39,905            23,908
                                                            --------------------------------------
Total deferred federal income tax liabilities                       768,531           469,963
                                                            --------------------------------------
Net deferred federal income tax assets                             $221,718          $ 12,564
                                                            ======================================
</TABLE>

The Company and the Bank have elected to file separate federal tax returns on
the current and prior years. It is anticipated that the Company and the Bank
will file a consolidated return in future years and utilize the Company's
(parent) loss carryforward to offset future taxes.

Retained earnings at September 30, 1998 include financial statement tax bad debt
reserves of $3,303,000. 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 is permitted for
up to two years, as a result of the Bank satisfying a specified mortgage
origination test for 1996 and 1997. At September 30, 1998, the Bank had $341,000
in excess of the base year reserves, and subject to prevailing corporate tax
rates, the Bank will owe $115,626 in federal taxes, which is reflected as a
deferred tax liability. No provision is required to be made for the $2,894,000
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.

11. EMPLOYEE BENEFIT 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 condition. 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.

In connection with the Company's return of capital (see Note 9), the Company
petitioned the Internal Revenue Service in a private letter ruling request to
treat the return of capital distribution to the ESOP's unallocated shares as
being attributable to the proceeds of the original loan from the Company to the
ESOP since it represents the diminution in value of those shares. As such, the
Company used the return of capital distribution on the unallocated shares held
by the ESOP to acquire 20,848 shares of the Company's stock on the open market.


                                                                              31
<PAGE>   28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

Compensation expense for the ESOP was $235,321, $220,827, and $95,739 for the
years ended September 30, 1998, 1997 and 1996, respectively. The total shares
allocated to participants in the ESOP were 37,480 and 23,421 at September 30,
1998 and 1997, respectively.

The following summarizes the status of the ESOP shares at September 30:

<TABLE>
<CAPTION>
                                                           1998               1997               1996
                                                       -------------------------------------------------
<S>                                                       <C>                <C>                <C>    
Beginning balance of unreleased ESOP shares               151,149            165,842            174,570
Additional shares purchased                                20,848                 --                 --
Shares released for allocation                            (14,059)           (14,693)            (8,728)
                                                       -------------------------------------------------
Ending balance of unreleased ESOP shares                  157,938            151,149            165,842
                                                       =================================================

Fair value of unreleased shares at September 30        $2,132,163         $2,890,725         $1,969,373
                                                       =================================================
</TABLE>

STOCK OPTION PLAN

At a special meeting of the stockholders held on October 15, 1996, the Company's
stockholders 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.

In connection with the Company's return of capital dividend (see Note 9), the
Company petitioned the Internal Revenue Service in a private letter ruling
request to treat the return of capital dividend impact on the Company's stock
option plan as a "corporate transaction" as opposed to a modification since the
related dividend did not cause a reduction in the market value of the Company's
stock price. The Company did receive a favorable ruling to this petition, and
the adjustment of the stock option strike price of $1.25 was reviewed and did
meet the "spread" and "ratio" tests; thus, the reduced strike price is presented
as such in the table below.

The grant price of all options is equal to the fair market value of the
Company's common stock at the grant date. The following table summarizes the
changes in stock options outstanding, at and during the two year period ended
September 30, 1998:


<TABLE>
<CAPTION>
                                                                                                               WEIGHTED
                                                                                                                AVERAGE
                                                                                                               EXERCISE
Exercise price per share      $10.375       $11.75      $13.625     $13.75      $18.50         TOTAL            PRICE
                             ============================================================================================
<S>                           <C>           <C>         <C>         <C>         <C>          <C>               <C>         
Outstanding
  at October 1, 1996               --           --           --         --          --            --           $    --
     Granted                  152,737        9,000       17,456      5,500          --       184,693            10.850
     Exercised                     --           --           --         --          --            --
     Forfeited                 (8,182)          --           --         --          --        (8,182)           10.375
                             --------------------------------------------------------------------------------------------
Outstanding
  at September 30, 1997       144,555        9,000       17,456      5,500          --       176,511            10.872
     Granted                       --           --           --         --      19,000        19,000            18.500
     Exercised                   (800)          --           --         --          --          (800)           10.375
     Forfeited                     --       (2,000)          --         --          --        (2,000)           11.750
                             --------------------------------------------------------------------------------------------

Outstanding
  at September 30, 1998       143,755        7,000       17,456      5,500      19,000       192,711           $11.617
                             ============================================================================================

Exercisable
  at September 30, 1998        28,111        1,800        3,491      1,100          --        34,502           $10.883
                             ============================================================================================
</TABLE>

The Company accounts for stock options in accordance with Opinion No. 25. The
following pro forma information regarding net income and earnings per share
assumes the adoption of Statement No. 123 for stock options granted during the
year ended September 30, 1998. The estimated fair value of the options is
amortized to expense over the option and vesting period. The fair value was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions: risk free interest rates of 6.0% and
a dividend yield of 1.3%; volatility factors of the expected market price of the
Company's common stock of .203 and a weighted average expected life of seven
years.


32
<PAGE>   29

========================================================================= [LOGO]

<TABLE>
<CAPTION>
                                                                          1998              1997
                                                                    ----------------------------
<S>                                                                 <C>               <C>       
Net income before stock options                                     $1,901,518        $1,983,296
Compensation expense (tax effected) from stock options                 101,271            76,929
                                                                    ----------------------------
Pro forma net income                                                $1,800,247        $1,906,367
                                                                    ============================
Pro forma dilutive earnings per share                                    $0.99             $1.03
                                                                    ============================
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

RECOGNITION AND RETENTION PLAN AND TRUST

At a special meeting of the stockholders held on October 15, 1996, the
stockholders of the Company approved and established 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. During the year ended September 30,
1997, the Company contributed $1,063,170 to the trust to purchase 87,285 shares
of common stock in connection with the Company's public offering necessary to
establish the plan. Shares awarded under the Recognition and Retention Plan
(RRP) shall become vested and exercisable at the rate of 20% per year over five
years on each annual anniversary date. The Company is amortizing the prepaid
compensation and recording additions to stockholders' equity as the shares vest.
Compensation expense attributable to the plan amounted to $212,640 and $194,920
in 1998 and 1997, respectively.

The Company's return of capital distribution, (see Note 9), paid on shares in
the Recognition and Retention Plan and Trust were treated as a special credit to
participant's accounts and will be released in the same manner and term as the
original award. As original shares are released, the related special
distribution on shares will also be released.

THRIFT PLAN                                                        

Effective October 1, 1995, 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. The Bank
contributed $35,923, $31,922, and $26,700 to the 401(k) for the years ended
September 30, 1998, 1997, and 1996, respectively.

PENSION PLAN                                                    

The Bank participates in a retirement plan which covers all eligible employees
through the Financial Institution Retirement Fund, a member of the Pentegra
Group, which is a multiemployer defined benefit plan. The fund does not compute
and provide separate actuarial valuations or segregation of plan assets by
employer. The actuarial cost method used for funding the plan is the projected
benefit method. Pension expense was approximately $15,000, $60,000, and $60,000
for the periods ended September 30, 1998, 1997, and 1996, respectively. The Bank
has been notified by the plan administrator that the plan is fully funded at
June 30, 1998, which is the plan year-end.

12. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK         

Interest rate cap agreements are instruments used by the Company in hedging
certain short-term liabilities. An interest rate cap is an agreement whereby the
seller of the cap contractually agrees to pay the buyer the difference between
the actual interest rate and the strike rate per the cap contract (if the actual
rate is higher than the strike rate). At September 30, 1998, the Company had
notional balances of interest rate cap agreements totaling $25 million. The Bank
would receive variable interest payments based on the spread between the
variable three-month LIBOR rate and the strike price of the caps if the variable
three-month LIBOR rate is higher than the strike rate. The strike price of the
agreement held by the Bank at September 30, 1998 was 7.00%. Unamortized costs at
September 30, 1998 were $221,000 and were included in other assets. The
agreement has an expiration date of March 6, 2003.


                                                                              33
<PAGE>   30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

13. STOCKHOLDERS' 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, 1998                           SEPTEMBER 30, 1997
                                              --------------------------------------------------------------------------------------
                                                TIER I         TIER I       TOTAL RISK-      TIER I         TIER I       TOTAL RISK-
                                               LEVERAGE      RISK-BASED        BASED        LEVERAGE      RISK-BASED        BASED
                                               CAPITAL        CAPITAL         CAPITAL       CAPITAL        CAPITAL         CAPITAL
                                              --------------------------------------------------------------------------------------
                                                                         (Dollars in Thousands)

<S>                                            <C>            <C>            <C>            <C>            <C>            <C>     
Equity capital (1)                             $ 31,049       $ 31,049       $ 31,049       $ 23,828       $ 23,828       $ 23,828
Plus general valuation allowances (2)                --             --          1,738             --             --          1,419
                                              --------------------------------------------------------------------------------------
Total regulatory capital                         31,049         31,049         32,787         23,828         23,828         25,247
Minimum required capital                         14,993          6,761         13,522         10,834          5,039         10,078
                                              --------------------------------------------------------------------------------------
Excess regulatory capital                        16,056         24,288         19,265         12,994         18,789         15,169
                                              ======================================================================================
Adjusted total assets                          $374,565       $169,022       $169,022       $270,859       $125,979       $125,979
                                              ======================================================================================

Regulatory capital as a percentage                 8.29%         18.37%         19.40%          8.80%         18.91%         20.04%
Minimum capital required as a percentage           4.00           4.00           8.00           4.00           4.00           8.00
                                              ======================================================================================
Excess regulatory capital as a percentage          4.29%         14.37%         11.40%          4.80%         14.91%         12.04%
                                              ======================================================================================
Well-capitalized requirement                       5.00%          6.00%         10.00%          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.

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 stockholders' equity below applicable regulatory capital requirements
or if such declaration and payment would otherwise violate regulatory
requirements.

14. 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 $24,253, $48,480, and $51,880
at September 30, 1998, 1997, and 1996, respectively. There were no new loans
granted and repayments approximated $24,227 in fiscal 1998.

15. 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 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.


34
<PAGE>   31

========================================================================= [LOGO]

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.

Interest rate cap: The fair value of interest rate swaps, caps and floors which
represent the estimated amount the Company would receive or pay to terminate the
contracts or agreements, taking into account current interest rates and when
appropriate, the current creditworthiness of the counterparties are obtained
from dealer quotes.

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.


<TABLE>
<CAPTION>
                                                           SEPTEMBER 30, 1998                          SEPTEMBER 30, 1997
                                                  ------------------------------------------------------------------------------
                                                    CARRYING                FAIR                CARRYING                 FAIR
                                                     VALUE                  VALUE                VALUE                   VALUE
                                                  ------------------------------------------------------------------------------
<S>                                               <C>                   <C>                   <C>                   <C>         
ASSETS
Cash and interest-bearing deposits                $  4,476,181          $  4,476,181          $  5,223,774          $  5,223,774
Investment securities available for sale           130,208,910           130,208,910            64,387,368            64,387,368
Investments securities held to maturity             10,000,000            10,033,700            10,017,166            10,054,039
Trading securities                                   1,415,291             1,415,291               955,587               955,587
Loans receivable, net                              211,980,925           218,439,925           181,338,949           185,012,000
Federal Home Loan Bank stock                         7,863,400             7,863,400             5,110,000             5,110,000
Interest rate market cap                               221,000                59,682                    --                    --

LIABILITIES
Deposits                                           153,982,999           155,176,999           138,730,862           138,538,000
Advances from Federal Home Loan Bank               155,266,730           161,425,000           101,700,000           102,114,000
Advance payments by borrowers                        1,618,579             1,618,579             1,649,312             1,649,312
Reverse repurchase agreements                       25,000,000            26,567,000                    --                    --
Guaranteed preferred beneficial
   interests in subordinated debt                   10,781,166            11,658,470                    --                    --
</TABLE>



                                                                              35
<PAGE>   32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

16. 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  
                                    1997        1998        1998         1998          1998  
                                -------------------------------------------------------------

<S>                               <C>         <C>         <C>         <C>           <C>      
Total interest income             $5,319      $5,990      $6,372      $ 6,733       $24,414  
Total interest expense             3,470       3,909       4,390        4,744        16,513  
                                -------------------------------------------------------------
Net interest income                1,849       2,081       1,982        1,989         7,901  
Provisions for loan losses           120         120         120          250           610  
                                -------------------------------------------------------------
Net interest income after
     provision for loan
     losses                        1,729       1,961       1,862        1,739         7,291  

Total noninterest income             327         179         165          (92)          579  
Total noninterest expense          1,193       1,352       1,267        1,272         5,084  
                                -------------------------------------------------------------
Income before income
     taxes                           863         788         760          375         2,786  
Income taxes                         292         278         264           50           884  
                                -------------------------------------------------------------
Net income                        $  571      $  510      $  496      $   325       $ 1,902  
                                =============================================================

Basic earnings per share (1)      $  .33      $  .30      $  .29      $   .19       $  1.10  
                                =============================================================

Diluted earnings per share (1)    $  .31      $  .28      $  .27      $   .18       $  1.05  
                                =============================================================
</TABLE>


<TABLE>
<CAPTION>
                                            Three Months Ended                 Year Ended
                                --------------------------------------------
                                December       March        June   September    September
                                    1996        1997        1997        1997         1997
                                ---------------------------------------------------------

<S>                               <C>         <C>         <C>         <C>         <C>    
Total interest income             $3,930      $4,328      $4,679      $5,027      $17,964
Total interest expense             2,284       2,547       2,829       3,148       10,808
                                ---------------------------------------------------------
Net interest income                1,646       1,781       1,850       1,879        7,156
Provisions for loan losses            75          75         105         105          360
                                ---------------------------------------------------------
Net interest income after
     provision for loan
     losses                        1,571       1,706       1,745       1,774        6,796

Total noninterest income             110          88         227         304          729
Total noninterest expense            996       1,165       1,098       1,205        4,464
                                ---------------------------------------------------------
Income before income
     taxes                           685         629         874         873        3,061
Income taxes                         242         206         327         303        1,078
                                ---------------------------------------------------------
Net income                        $  443      $  423      $  547      $  570      $ 1,983
                                =========================================================

Basic earnings per share (1)      $  .23      $  .24      $  .32      $  .33      $  1.11
                                =========================================================

Diluted earnings per share (1)    $  .23      $  .23      $  .31      $  .32      $  1.08
                                =========================================================
</TABLE>


 (1) - Quarterly per share amounts do not add to total for the years ended
     September 1998 and 1997, due to rounding.


36

<PAGE>   33

========================================================================= [LOGO]

17. 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 statement of financial condition as
of September 30, 1998 and 1997 and related statements of income and cash flows
are as follows:


<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION                                                  YEAR ENDED
                                                                            1998                  1997
                                                                      -----------------------------------
<S>                                                                    <C>                    <C>        
ASSETS
Cash and cash equivalents                                              $ 2,711,341            $   708,992
Investment securities available for sale                                        --              2,795,721
Investment securities trading                                                   --                955,587
Investment in Pittsburgh Home Savings Bank                              32,509,194             24,343,750
Other assets                                                               511,640                 51,335
                                                                      -----------------------------------
Total assets                                                           $35,732,175            $28,855,385
                                                                      ===================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Guaranteed preferred beneficial interest in subsidiary debt            $10,781,166            $        --
Other liabilities                                                          151,544                 41,000
                                                                      -----------------------------------
Total liabilities                                                       10,932,710                 41,000
Total stockholders' equity                                              24,799,465             28,814,385
                                                                      -----------------------------------
Total liabilities and stockholders' equity                             $35,732,175            $28,855,385
                                                                      ===================================

STATEMENTS OF INCOME
                                                                                    YEAR ENDED
                                                                             1998                1997
                                                                      -----------------------------------

Interest and dividend income                                           $    56,709            $   277,902
Interest expense                                                          (674,518)                    --
Noninterest income                                                          69,206                310,071
Noninterest expense                                                       (583,425)              (612,731)
                                                                      -----------------------------------
(Loss) before income taxes and equity in earnings of subsidiary         (1,132,028)               (24,758)
Income tax credit (expense)                                                375,314                 (2,300)
                                                                      -----------------------------------
(Loss) before equity in earnings of subsidiary                            (756,714)               (27,058)
Equity in earnings of Pittsburgh Home Savings Bank                       2,658,232              2,010,354
                                                                      -----------------------------------
Net income                                                             $ 1,901,518            $ 1,983,296
                                                                      ===================================
</TABLE>


                                                                              37
<PAGE>   34


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                                    1998                     1997
                                                                -----------------------------------
<S>                                                             <C>                      <C>        
OPERATING ACTIVITIES
Net income                                                      $ 1,901,518             $ 1,983,296
Adjustments to reconcile net income to net cash used
  in operating activities:
Equity in earnings of Pittsburgh Home Savings Bank               (2,658,232)             (2,010,354)
Amortization of ESOP and RRP shares                                 447,962                 415,747
Net trading securities purchases and sales                          904,875                (955,587)
Change in other assets and liabilities                              900,074                 (20,533)
                                                                -----------------------------------
Net cash used in operating activities                             1,496,197                (587,431)

INVESTING ACTIVITIES
Purchases of available-for-sale securities                       (1,040,000)               (500,000)
Proceeds from sales of available-for-sale securities              3,719,062               1,000,000
                                                                -----------------------------------
Net cash provided by investing activities                         2,679,062                 500,000

FINANCING ACTIVITIES
Proceeds from issuance of guaranteed preferred
  beneficial interest in subordinated debt                       10,781,166                      --
Capital contribution to bank subsidiary                          (6,000,000)                     --
Return of capital paid to stockholders                           (4,785,567)                     --
Cash dividend on common stock                                      (604,645)               (592,500)
Purchase of stock for Treasury and RRP                           (1,563,864)             (4,011,174)
                                                                -----------------------------------
Net cash provided by (used in) financing activities              (2,172,910)             (4,603,674)
                                                                -----------------------------------

Increase (decrease) in cash                                       2,002,349              (4,691,105)
Cash at beginning of year                                           708,992               5,400,097
                                                                -----------------------------------
Ending cash and cash equivalents                                $ 2,711,341             $   708,992
                                                                ===================================
</TABLE>



38
<PAGE>   35

CORPORATE INFORMATION
                                                                          [LOGO]
--------------------------------------------------------------------------------

CORPORATE HEADQUARTERS
PITTSBURGH HOME FINANCIAL CORP.
438 Wood Street, Pittsburgh, Pennsylvania 15222
(412) 281-0780  FAX: (412) 281-3750


ANNUAL MEETING
The Annual Stockholders Meeting will be held at 11:00 a.m., on January 28, 
1999, at The Library Center, GRW Theater, Second Level, 414 Wood Street, 
Pittsburgh, Pennsylvania 15222. Stockholders are encouraged to attend.

TRANSFER AGENT
Chase Mellon Shareholder Services L.L.C.
Attention: Investment Services
P.O. Box 750, Pittsburgh, PA 15230
(800) 756-3353

GENERAL INQUIRIES AND REPORTS
Pittsburgh Home Financial Corp. is required to file an annual report on Form 
10-K for its fiscal year ended September 30, 1998, with the Securities and 
Exchange Commission. Copies of this annual report and quarterly reports may be 
obtained without charge by contacting Michael J. Kirk, Executive Vice President 
and Chief Financial Officer.

DIVIDEND REINVESTMENT PLAN
Pittsburgh Home Financial Corp. maintains a Dividend Reinvestment/Cash Purchase 
Plan for registered holders of its common stock. A brochure describing the Plan 
and application to participate may be obtained by contacting Michael J. Kirk, 
Executive Vice President and Chief Financial Officer.

STOCK INFORMATION
Pittsburgh Home Financial Corp. is traded on the NASDAQ Stock Market under the 
symbol "PHFC." As of September 30, 1998, Pittsburgh Home Financial Corp. had 
1,871,701 shares of common stock outstanding and approximately 1,600 
stockholders of record.

STOCK PRICE
The following table illustrates Pittsburgh Home Financial Corp.'s high and low 
quarterly closing stock price on the NASDAQ Stock Exchange and the cash 
dividends per share paid during the year.

<TABLE>
<CAPTION>
QUARTER ENDED                       HIGH                 LOW            DIVIDENDS
<S>                                <C>                 <C>              <C>
September, 1998                    $17.75              $13.00            $ .06
June, 1998                          18.75               16.75              .06
March, 1998                         18.63               17.00              .06
December, 1997                      21.50               17.75              .13
Return of Capital Distribution                                           $2.43

September, 1997                    $19.50              $15.00            $ .06
June, 1997                          15.25               14.00              .06
March, 1997                         15.50               13.00              .06
December, 1996                      13.63               11.50              .05
</TABLE>

                                                                              41