<PAGE>
 
                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D. C.  20549

(Mark One)

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

     For the quarterly period ended                March 31, 1997
                                    ----------------------------------------

                                       OR
 
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                        to
                                --------------------      ---------------------
Commission File Number                             0-13716
                                -----------------------------------------------
 
                        NORTH PITTSBURGH SYSTEMS, INC.
      -----------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              Pennsylvania                              25-1485389
----------------------------------------                -----------
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
      incorporation or organization)


            4008 Gibsonia Road, Gibsonia, Pennsylvania 15044-9311
            ------------------------------------------------------
                     (Address of principal executive offices)
                                   (Zip Code)

 
                                 412 443-9600
    ----------------------------------------------------------------------
             (Registrant's telephone number, including area code)

                                   No Change
     --------------------------------------------------------------------
             (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
                         YES     X        NO __________
                             --------                  


                      APPLICABLE ONLY TO CORPORATE USERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

                            Common Stock Outstanding
                            ------------------------

At April 25, 1997, the Registrant had 15,040,000 shares of common stock
outstanding, par value $.15625 per share, the only class of such stock issued.
<PAGE>
 
                                    PART I
                                    ITEM 1
                              FINANCIAL STATEMENTS
                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
                     (Thousands - Except Per Share Amounts)
<TABLE>
<CAPTION>
                                                       For the Three Months
                                                          Ended March 31
                                                       --------------------
                                                         1997       1996
                                                       --------   ---------
<S>                                                    <C>        <C>
Operating revenues:
    Local network services                              $ 2,340    $ 2,114
    Long distance and access services                    10,873     10,465
    Directory advertising, billing & other services         586        548
    Telecommunication equipment sales                       607        721
    Other operating revenues                              2,181      1,017
                                                       --------   ---------
        Total Operating Revenues                         16,587     14,865
                                                       --------   ---------
 
Operating expenses:
   Network and other operating expenses                   7,018      5,966
   Depreciation and amortization                          2,603      2,307
   State and local taxes                                    779        664
   Telecommunication equipment expenses                     550        671
                                                       --------   ---------
        Total Operating Expenses                         10,950      9,608
                                                       --------   ---------
   Net Operating Revenues                                 5,637      5,257

Other expense (income), net:
   Interest expense                                         420        395
   Interest income                                         (150)      (197)
   Sundry expense (income), net                              10         (8)
                                                       --------   ---------
                                                            280        190
                                                       --------   ---------
        Earnings before income taxes                      5,357      5,067

Income taxes:
    Current                                               2,162      2,011
    Deferred                                                  -          -
                                                       --------   ---------
                                                          2,162      2,011
                                                       --------   ---------
        Net earnings                                    $ 3,195    $ 3,056
                                                       ========   =========
Average common shares outstanding                        15,040     15,040*
                                                       ========   =========
Earnings per share of common stock                         $.21       $.20*
                                                       ========   =========
Dividends per share of common stock                        $.14       $.13*
                                                       ========   =========
 
</TABLE>
         *Adjusted for a 2 for 1 stock split-up effective May 22, 1996.

See accompanying notes to condensed consolidated financial statements.

                                       1
<PAGE>
 
                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                             (Thousands of Dollars)
<TABLE>
<CAPTION>

ASSETS                                                                   Mar. 31    Dec. 31
------                                                                    1997        1996
                                                                        ---------   --------
<S>                                                                     <C>        <C>
Current Assets:
    Cash and temporary investments                                       $ 10,764  $ 11,313
    Marketable securities available for sale                                  257       329
    Marketable securities held to maturity                                    351       451

    Accounts receivable:
       Customers                                                            4,698     4,090
       Access service settlements and other                                 6,251     5,270
       Prepaid Expenses                                                        97       163
    Inventories of construction and operating materials and
       supplies                                                             3,407     3,169
    Prepaid taxes                                                             702         -
                                                                        ---------   --------
              Total current assets                                         26,527    24,785
                                                                        ---------   --------
    Property, plant and equipment
        Land                                                                  506       357
        Buildings                                                          11,679    11,834
        Equipment                                                         110,970   108,878
                                                                        ---------   --------
                                                                          123,155   121,069
   Less accumulated depreciation and amortization                          62,562    60,333
                                                                        ---------   --------
                                                                           60,593    60,736
   Construction in progress                                                 6,011     4,858
                                                                        ---------   --------
              Total property, plant and equipment, net                     66,604    65,594

Investments                                                                 5,763     5,763
Deferred financing costs                                                    1,030     1,055
Prepaid pension cost                                                        1,234       622
Other assets                                                                1,446     1,704
                                                                        ---------   --------
                                                                         $102,604  $ 99,523
                                                                        =========   ======== 
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
    Current portion of long-term debt                                    $    765  $    753
    Obligations under capital lease                                           186       191
    Accounts payable                                                        5,523     4,702
    Accrued interest                                                          119       119
    Dividend payable                                                        2,106     1,955
    Taxes other than income taxes                                             494       657
    Accrued vacation                                                          704       705
    Other liabilities                                                         517       632
    Federal and state income taxes                                          2,161       670
                                                                        ---------   --------
              Total current liabilities                                    12,575    10,384
                                                                        ---------   --------
Long-term debt                                                             20,736    20,937
Obligations under capital lease                                               305       374
Unamortized investment tax credits                                            344       369
Deferred income taxes                                                       5,974     5,969
Postretirement benefits                                                     4,562     4,497
Other liabilities                                                           1,707     1,687

Shareholders' equity:
    Capital stock/Common stock                                              2,350     2,350
    Capital in excess of par value                                          2,215     2,215
    Retained earnings                                                      51,813    50,724
    Unrealized gain (loss) on available for sale securities, net               23        17
                                                                        ---------   --------
              Total shareholders' equity                                   56,401    55,306
                                                                        ---------   --------
                                                                         $102,604  $ 99,523
                                                                        =========   ======== 
</TABLE>
          See accompanying notes to condensed consolidated financial statements.

                                       2
<PAGE>
 
                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                            (Thousands of Dollars)
<TABLE>
<CAPTION>
                                                                           For the Three Months
                                                                              Ended March 31
                                                                           --------------------
                                                                               1997      1996
                                                                           ----------  ---------
<S>                                                                         <C>         <C>
Cash from operating activities:
       Net earnings                                                           $ 3,195   $ 3,056
       Adjustments to reconcile net earnings to net cash from
             operating activities:
 
             Depreciation and amortization                                      2,603     2,310
             Gain on sale of marketable securities                                (12)        -
             Provision for postretirement benefits other than pensions             65        56
             Investment tax credit amortization                                   (25)      (25)
             Changes in assets and liabilities:
                Accounts receivable                                            (1,589)     (367)
                Inventories of construction and operating materials &
                  supplies                                                       (238)      331
                Prepaid federal and state taxes                                  (702)     (642)
                Accounts payable                                                  821    (1,247)
                Taxes other than income taxes                                    (163)     (129)
                Other liabilities, accrued interest and accrued vacation          (96)     (122)
                Federal and state income taxes                                  1,491     1,521
                Deferred financing costs, prepaid pension costs
                  and other assets                                               (329)      990
                Other, net                                                        154       (71)
                                                                           ----------  ---------
                   Total adjustments                                            1,980     2,605
                                                                           ----------  ---------
                   Net cash from operating activities                           5,175     5,661
                                                                           ----------  ---------
 
Cash used for investing activities:
      Expenditures for property and equipment                                  (3,702)   (2,665)
      Net salvage on retirements                                                    2        22
                                                                           ----------  ---------
                   Net capital additions                                       (3,700)   (2,643)
                                                                           ----------  ---------
Proceeds from redemption of marketable securites held to maturity                 100     1,200
Purchase of marketable securities available for sale                              (55)      (65)
Proceeds from sale of marketable securities available for sale                    149       510
Investments in affiliated entities                                                  -         -
                                                                           ----------  ---------
                    Net cash used for investing activities                     (3,506)     (998)
                                                                           ----------  ---------
 
Cash used for financing activities:
       Cash dividends                                                          (1,955)   (1,805)
       Retirement of debt                                                        (189)     (174)
       Payment on capital lease obligations                                       (74)        -
                                                                           ----------  ---------
                    Net cash used for financing activities                     (2,218)   (1,979)
                                                                           ----------  ---------
 
Net (decrease) increase in cash and temporary investments                        (549)    2,684
 
Cash and temporary investments at beginning of period                          11,313     9,359
                                                                           ----------  ---------
Cash and temporary investments at end of period                               $10,764   $12,043
                                                                           ==========  =========
Interest paid                                                                 $   395   $   371
                                                                           ==========  =========
Income taxes paid                                                             $   667   $   557
                                                                           ==========  =========
Fixed assets acquired under capital leases                                    $     -   $     -
                                                                           ==========  =========
</TABLE>
          See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                NORTH PITTSBURGH SYSTEMS, INC. AND SUBSIDIARIES
              NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(1) GENERAL
    -------

The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission.  Consolidated herein are the
financial results of the Registrant's wholly-owned subsidiaries, North
Pittsburgh Telephone Company (North Pittsburgh), Penn Telecom, Inc., Pinnatech,
Inc. (Pinnatech) and Management Consulting Solutions, Inc. (MCSI).  Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.  Nevertheless, the
Registrant believes that its disclosures herein are adequate to make the
information presented not misleading and, in the opinion of management, all
adjustments (which consisted only of normal recurring accruals) necessary to
present fairly the results of operations for the interim periods have been
reflected.  It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Registrant's latest annual report to the Securities and
Exchange Commission on Form 10-K.


                                     ITEM 2
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1.  Financial Condition
    -------------------

 (a) General
     -------

There were no material changes in the Registrant's consolidated general
financial condition from the end of its preceding fiscal year on December 31,
1996 to March 31, 1997, the end of the three-month period reported herein.

 (b) Liquidity and Capital Resources
     -------------------------------

Consolidated capital expenditure commitments for the purchase and installation
of communications and other equipment at March 31, 1997 amounted to
approximately $2,033,000 with such amount being part of the 1997 Construction
Program of $23 million to $26 million.  Funds for financing construction
expenditures in the three-month period ended March 31, 1997 were generated from
internal sources.  Based on its 1997 construction budget, preliminary
construction budget for 1997 and projected cash flows, North Pittsburgh
anticipates cash flows provided by operating activities and cash reserves in
1997 to service long-term debt, to pay dividends and to finance approximately
25% of capital additions.  The balance of capital additions will be financed
from new borrowings.  Beginning in the second quarter of 1997, a portion of the
funds used for construction are expected to be obtained from new debt financing
from the Rural Utilities Service.  At March 31, 1997, construction work in
progress was $6,010,000.  An additional $5,736,000 is expected to be expended to
complete these projects.

The Registrant and its subsidiaries have not experienced any difficulty in the
past meeting either long-term or short-term cash commitments.  Cash flow
generated through regular operations has been adequate to not only finance a
significant portion of the capital requirements of the Registrant as discussed
in the previous paragraph but also to meet principal and interest payments on
long-term debt and all working capital requirements.  It is anticipated that
future long-term interest and principal payments will be made from the same
source of internally generated funds.

                                       4
<PAGE>
 
(c)  Regulatory/Competition
     ----------------------

The Federal Communications Commission (FCC) continues its work on Rulemakings
related to the Telecommunications Act of 1996 (1996 Act) and the Pennsylvania
Public Utility Commission (PA PUC) is proceeding to finalize its course of
action to fully implement the 1996 Act, or to the extent possible and
permissible, change the manner in which such regulations are implemented in
Pennsylvania before the impact on North Pittsburgh, a Rural Telephone Company
under the 1996 Act, can be fully understood and measured.  However, the clear
intent of the 1996 Act is to open up the local exchange market to competition.
This appears to mandate, among other items, that North Pittsburgh, at some point
in time, permit the resale of its service at wholesale rates, provide number
portability if feasible, provide dialing parity, provide interconnection to any
requesting carrier for the transmission and routing of telephone exchange
service and exchange access and provide access to network elements.  The Company
recently joined with seventeen (17) other rural companies in Pennsylvania to
file a Petition with the PA PUC requesting a temporary suspension of the
interconnection requirements of Section 251 of the 1996 Act for a two-year
period following resolution of the FCC's Universal Service and Access Reform
Orders.  The Petition was filed February 20, 1997, and the PA PUC is expected to
act on such Petition by August 19, 1997.

The 1996 Act, FCC and PA PUC regulatory proceedings and the thrust towards a
fully competitive marketplace have created some uncertainty in respect to the
levels of North Pittsburgh's revenue growth in the future.  However, its unique
location in a growing commercial/residential suburban traffic corridor to the
north of the City of Pittsburgh, its state-of-the-art switching transmission and
transport facilities and its extensive fiber network place North Pittsburgh in a
solid position to meet competition and minimize any loss of revenues.  In
addition, North Pittsburgh continues to make its network flexible and responsive
to the needs of its customers to meet competitive threats.  New services, access
line growth and anticipated usage growth will lessen or offset any reductions in
North Pittsburgh's revenue sources.

 2.  Results of Operations
     ---------------------

Total operating revenues increased $1,722,000 (11.6%) in the three-month period
ended March 31, 1997 over the comparable period in 1996.  This change was due to
increases in long distance and access services of $408,000 (3.9%), local network
services of $226,000 (10.7%), other operating revenues of $1,164,000 (114.4%)
offset by a decrease in telecommunication equipment sales of $114,000 (15.8%).
Higher long distance and access service revenues were generally the result of an
increase in the number of customers and in minutes of use.  Increased local
network service revenues were attributable to customer growth, growth in second
lines and expanded penetration of enhanced services.  The increase in other
operating revenues is primarily due to the growth of Pinnatech's Internet
services and MCSI's consulting and outsourcing services.  Telecommunication
equipment sales fluctuate from period to period depending on the sale of large
systems.

Total operating expenses for the three-month period ended March 31, 1997,
increased $1,342,000 (14.0%) over the preceding year.  That change is
principally the result of an increase in network and other operating expenses of
$1,052,000 (17.6%), an increase in depreciation and amortization of $296,000
(12.8%) offset by a decrease in telecommunication equipment expenses of $121,000
(18.0%). Approximately $979,000 of the $1,052,000 increase in network and other
operating expenses was directly associated with the increase in other operating
revenues of $1,164,000 discussed above.  The increase in depreciation and
amortization is the direct result of the growth in fixed assets to serve current
and future customer needs.  The decrease in telecommunication equipment expenses
is related to the decrease in equipment sales discussed above.  The increase in
total operating revenues discussed above coupled with the increase in total
operating expenses resulted in a 7.2% increase in net operating revenues in 1997
as compared to the same period in 1996.

Interest income decreased $47,000 primarily due to decreased levels of
investment in such instruments.

The increase in net operating revenues for the three-month period ended March
31, 1997, in conjunction with the increase in Sundry income, net, resulted in an
increase of $290,000 (5.7%) in earnings before income taxes.

                                       5
<PAGE>
 
                                    PART II
                               OTHER INFORMATION



Item 6.             Exhibits and Reports on Form 8-K
------              --------------------------------

       (a) Exhibits - Exhibit Index for Quarterly Reports on Form 10-Q.
           --------                                                    
<TABLE>
<CAPTION>
 
Exhibit
Number                                      Subject                             Applicability
---------------------------  ------------------------------------           ---------------------
<S>                          <C>                                            <C>  
 
  (2)                        Plan of acquisition, reorganization,           Not Applicable
                             arrangement, liquidation or
                             succession
 
  (3) (i)                    Articles of Incorporation                      Provided in Quarterly Report
                                                                            on Form 10-Q for the quarter
                                                                            ended June 30, 1996 and
                                                                            Incorporated Herein by
                                                                            Reference.
 
(3) (ii)                     By-Laws                                        Provided in Quarterly Report
                                                                            on Form 10-Q for the
                                                                            quarter ended June 30, 1996
                                                                            and Incorporated Herein
                                                                            by Reference.

(4)                          Instruments defining the rights of             Provided in Registration of
                             security holders including indentures          Securities of Certain Successor
                                                                            Issuers on Form 8-B filed on
                                                                            June 25, 1985 and Incorporated
                                                                            Herein by Reference.
 
  (10)                       Material Contracts                             Not Applicable
 
  (11)                       Statement re                                   Attached Hereto
                             computation of per
                             share earnings
 
  (15)                       Letter re unaudited                            Not Applicable
                             interim financial
                             information
 
  (18)                       Letter re change in accounting                 Not Applicable
                             principles
 
  (19)                       Report furnished to                            Not Applicable
                             security holders
 
  (22)                       Published report                               Not Applicable
                             regarding matters
                             submitted to a vote
                             of security holders
 
  (23)                       Consents of experts                            Not Applicable
                             and counsel
 
 (24)                        Power of attorney                              Not Applicable
 
 (27)                        Financial Data Schedule                        Attached Hereto
 
 (99)                        Additional exhibits                            Not Applicable
 
</TABLE>

  (b)  Reports on Form 8-K - No reports on Form 8-K were
       -------------------                              
       filed during the quarter ended March 31, 1997.

                                       6
<PAGE>
 
                                   SIGNATURES


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

                                          NORTH PITTSBURGH SYSTEMS, INC.
                                          ------------------------------
                                          (Registrant)



 Date   April 25, 1997                     /s/  A. P. Kimble             
     ---------------------                ---------------------------------- 
                                          A. P. Kimble, Vice President,  
                                          Secretary & Treasurer           


 Date   April 25, 1997                     /s/  N. W. Barthlow             
      ---------------------               ---------------------------------- 
                                          N. W. Barthlow, Vice President and
                                          Assistant Secretary
                                          

                                       7