<PAGE>


                                  FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

    For the quarterly period ended December 31, 1996

/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

    For the transition period from ______  to     


                        Commission File Number:  0-24350


                             TROY HILL BANCORP, INC.
                             -----------------------
       (Exact name of small business issuer as specified in its charter)


      Pennsylvania                                25-0844150
    ----------------                            --------------
(State or other jurisdiction of        (I.R.S. Employer Identification
incorporation or organization)         Number)


                               1706 Lowrie Street
                         Pittsburgh, Pennsylvania 15212
                         ------------------------------
           (Address of pricipal executive offices, including zip code)


                                 (412) 231-8238
                                 --------------
                           Issuer's Telephone number,
                              including area code

    Check whether the issuer (1) filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 
months (or for such shorter period that the registrant was required to file 
such reports), and (2) has been subject to such filing requirements for the 
past 90 days.  YES  x    NO
                   ---

    SHARES OUTSTANDING AS OF FEBRUARY 6, 1997: 1,067,917 SHARES OF COMMON 
STOCK, PAR VALUE $.01 PER SHARE.

    Transitional Small Business Disclosure Format (check one): Yes__ No  x
                                                                        ---

<PAGE>


                             TROY HILL BANCORP, INC.

                                      INDEX
                                      -----


Part I.    Financial Information                                            Page
--------------------------------------------------------------------------------

Item 1.            Financial Statements


                   Consolidated Statements of Financial                       1
                   Condition as of December 31, 1996
                   (Unaudited) and June 30, 1996


                   Consolidated Statements of
                   Earnings for the Three and Six Months
                   Ended December 31, 1996 and 1995
                   (Unaudited)                                                2


                   Consolidated Statements of Cash Flows
                   for the Three and Six Months ended
                   December 31, 1996 and 1995 (Unaudited)                     3


                   Consolidated Statement of
                   Stockholders' Equity for the
                   Six Months ended December 31,
                   1996 (Unaudited)                                           5


                   Notes to Unaudited Consolidated
                   Financial Statements                                       6


Item 2.            Management's Discussion and Analysis
                   of Financial Condition and Results of
                   Operations for the Three and Six Months
                   Ended December 31, 1996 and 1995.                          8

<PAGE>


Part II.   Other Information                                                Page
--------------------------------------------------------------------------------

Item 1.            Legal Proceedings                                         17
Item 2.            Changes in Securities                                     17
Item 3.            Defaults Upon Senior Securities                           17
Item 4.            Submission of Matters to a Vote of
                   Security Holders                                          17
Item 5.            Other Information                                         17
Item 6.            Exhibits and Reports on Form 8-K                          17
Signatures                                                                   18

<PAGE>


                            TROY HILL BANCORP, INC.
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



                                                     December 31,      June 30,
                                                        1996             1996
                                                        (Dollars in Thousands)
ASSETS:                                               (Unaudited)
                                                     ------------     ---------
                                
Cash and due from banks                                $   2,012      $   2,869
Investments and mortgage-backed 
    securities-available for sale                          9,066         11,731
Loans receivable                                          87,999         74,552
Office properties and equipment - net of
    accumulated depreciation                                 618            653
Federal Home Loan Bank stock - at cost                     1,448            929
Real estate owned                                            487            462
Accrued interest receivable                                  631            546
Deferred income tax benefits                                 333            359
Other                                                         34             82
                                                     ------------     ---------
                        Total assets                   $ 102,628      $  92,183
                                                     ------------     ---------
                                                     ------------     ---------

LIABILITIES

Deposit accounts                                       $  53,253      $  53,960
Advances from Federal Home Loan Bank                      28,950         18,583
Advances by borrowers for taxes and insurance              1,279          1,185
Accrued expenses and other liabilities                       680            415
                                                     ------------     ---------
                        Total liabilities                 84,162         74,143
                                                     ------------     ---------
                                                     ------------     ---------

STOCKHOLDERS' EQUITY

Preferred stock, no par value, 5,000,000 shares
       authorized and unissued                                --             --
Common stock, $.01 par value, 10,000,000 shares
       authorized, 1,124,125 shares issued                    11             11
Additional paid-in-capital                                10,645         10,614
Retained earnings                                          9,556          9,395
Treasury stock- at cost, 56,208 shares at
       June 30, 1996 and December 31, 1996                  (703)          (703)
Shares acquired by Recognition and Retention Plan           (328)          (463)
Unearned ESOP shares                                        (708)          (756)
Unrealized loss on investments and mortgage-
       backed securities available for sale                   (7)           (58)
Total stockholders' equity                                18,466         18,040
                                                     ------------     ---------
Total liabilities and stockholders' equity             $ 102,628      $  92,183
                                                     ------------     ---------
                                                     ------------     ---------

                                             1

<PAGE>

                                  Troy Hill Bancorp, Inc.
                             CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>

<CAPTION>


                                      Three months ended                              Six months ended
                                          December 31,                                  December 31,
                                        (In thousands,                                 (In thousands,
                                   except for per share data)                    except for per share data)
                                          (Unaudited)                                    (Unaudited)
                             -----------------------------------------    ----------------------------------------
                              1996                              1995          1996                         1995
                              ----                              ----          ----                         ----
<S>                           <C>                               <C>           <C>                          <C>

Interest income:

     Loans                     $1,843                             $1,306        $3,543                      $2,532
     Investment securities
          Taxable                 119                                132           214                         237
          Exempt from federal 
           income taxes            --                                 33            --                          77
     Mortgage-backed securities    32                                116           121                         232
     Interest-bearing deposits 
      and other                    51                                 34            71                          67
                               ------                             ------        ------                      ------
          Total interest  
           income               2,045                              1,621         3,949                       3,145
Interest expense:         
     Interest on deposit 
      accounts                    625                                639         1,239                       1,254
     Interest on advances and 
      other borrowings            421                                165           743                         288
                               ------                             ------        ------                      ------
          Total interest 
           expense              1,046                                804         1,982                       1,542
                               ------                             ------        ------                      ------
Net interest income               999                                817         1,967                       1,603
Provision for loan and 
 lease losses                      30                                 30            60                          60
                               ------                             ------        ------                      ------
Net interest income after 
 provision for loan and 
 lease losses                     969                                787         1,907                       1,543
Noninterest income:         
     Loan fees and service 
      charges                      15                                  7            35                          22
     Gain on sales of  loans       12                                 27            30                          59
      Gain (loss) on sales of 
       investments and mortgage-
       backed securities 
       available for sale          --                                (11)            6                          (11)
     Other                         40                                  9            55                           19
                               ------                             ------        ------                      -------
          Total noninterest 
           income                  67                                 32           126                           89
Noninterest expense:         
     Salaries and employee 
      benefits                    314                                211           528                           420
     Net occupancy expense         39                                 41            81                            74
     Federal deposit insurance     31                                 29            55                            57
     SAIF assessment               --                                 --           326                            --
     Other operating              174                                121           482                           235
                               ------                             ------        ------                      --------
          Total noninterest 
           expense                558                                402         1,472                           786
                               ------                             ------        ------                      --------
Earnings before  income taxes     478                                417           561                           846
Income taxes                      170                                159           201                           326
                               ------                             ------        ------                      --------
             NET EARNINGS      $  308                             $  258        $  360                      $    520
                               ------                             ------        ------                      --------
                               ------                             ------        ------                      --------

Earnings and dividends per share:
       Net earnings per share  $ 0.31                             $ 0.26        $ 0.36                      $    0.52
                               ------                             ------        ------                      ---------
                               ------                             ------        ------                      ---------
       Cash dividends declared 
        per share              $ 0.10                             $ 0.10        $ 0.20                      $    0.16
                               ------                             ------        ------                      ---------
                               ------                             ------        ------                      ---------

</TABLE>

                                            2

<PAGE>

                                  Troy Hill Bancorp, Inc.
                          STATEMENTS OF CONSOLIDATED CASH FLOWS


                                                        Six months ended
                                                          December 31,
                                                     (Dollars in thousands)
                                                           (Unaudited)
                                                     ----------------------
                                                     1996              1995
                                                     ----              ----
Cash flows from operating activities:
     Net earnings                                    $    360          $   520
     Adjustments to reconcile net income to 
        net cash provided by operating activities:
     Provision for loan and lease losses                   60               60
     Origination of loans for sale                     (1,216)          (4,803)
     Proceeds from sale of loans                        1,121            4,766
     Depreciation                                          37               33
     Amortization of deferred loan origination   
          fees and accretion of discounts                 (61)             (46)
     Increase in accrued interest   
        receivable                                        (85)             (33)
     Increase in accrued income taxes and other 
      liabilities                                         373              345
     Other                                                 95              (92)
                                                     --------          -------
              Net cash provided by    
                        operating activities              684              750
                                                     --------          -------
   
Cash flows from investing activities:   
     Purchases of investment securities                    --               --
     Purchases of mortgage-backed securities               --           (1,500)
     Sale of investment and mortgage-backed securities    
          available for sale                            2,557            5,350
     Principal repayments of mortgage-backed 
      securities                                          213              518
     Net increase in loans                            (13,345)          (8,702)
     Purchases of office properties and equipment          (2)              (5)
     Purchase of Federal Home Loan Bank Stock            (519)             (56)
                                                     --------          -------
              Net cash provided by    
                        investing activities          (11,096)          (4,395)
                                                     --------          -------

                                    (continued)
                                         3

<PAGE>

                             Troy Hill Bancorp, Inc.
                     STATEMENTS OF CONSOLIDATED CASH FLOWS

Cash flows from financing activities:   
    Net increase (decrease) in deposit accounts          (707)           3,768
    Net increase in advances from Federal Home Loan 
     Bank                                              10,367              833
    Net decrease in advances by borrowers for 
     taxes and insurance                                   94               (7)
    Dividends                                            (199)            (154)
                                                     --------          -------
              Net cash provided by    
                        financing activities            9,555            4,440
                                                     --------          -------
   
                Net increase in cash                     (857)             795
   
Cash and cash equivalents at beginning of period        2,869            1,469
                                                     --------          -------
   
Cash and cash equivalents at end of period           $  2,012          $ 2,264
                                                     --------          -------
                                                     --------          -------
      
Supplemental disclosures of cash flow information:   
   
     Cash paid during the period for:   
   
     Interest on deposits and borrowings             $  1,239          $ 1,254
                                                     --------          -------
                                                     --------          -------
   
     Income taxes                                    $    151          $   118
                                                     --------          -------
                                                     --------          -------
   
     Non-cash investing transactions:   
   
     Transfers from loans to real estate acquired    
          through foreclosure                        $     47          $    34
                                                     --------          -------
                                                     --------          -------

                                         4

<PAGE>

                              Troy Hill Bancorp, Inc.
                 Consolidated Statement of Stockholders' Equity

<TABLE>

<CAPTION>


                                                                               Unrealized Gain on
                                                    Shares acquired              Investment and      Shares acquired
                                         Additional   by Employee                Mortgage-backed     by Recognition     Total
                        Common  Treasury  Paid In   Stock Ownership  Retained  securities available  and Retention   Stockholders'
(Dollars in thousands)  Stock    Stock    Capital        Plan        Earnings      for sale              Plan           Equity
----------------------  ------  -------- ---------- ---------------  --------  --------------------  --------------- -------------
<S>                     <C>     <C>      <C>        <C>              <C>       <C>                   <C>             <C>

Balance at June 
30, 1996                $ 11    $ (703)  $ 10,614   $    (756)       $ 9,395   $    (58)             $  (463)        $  18,040
            
Purchase of 
Treasury Stock                      --         --          --             --         --                   --                --
            
Amortization of 
Recognition and 
Retention Plan awards     --        --         --          --             --         --                  135              135
            
Accrual for Employee Stock            
Ownership Plan (ESOP)     --                   31          48             --         --                   --               79
            
Cash dividends declared on             
Common Stock at $.20 per            
share                     --                   --           --           (199)        --                   --             (199)
            
Increase in unrealized 
gain on securities 
available for sale        --                   --           --             --         51                   --               51
            
            
Net income                --                   --           --            360         --                   --              360
                        ----    ------   --------   ----------       --------  ---------             --------        ---------
            
Balance at 
December 31, 1996       $ 11    $ (703)  $ 10,645   $  (708)          $ 9,556   $     (7)            $   (328)       $  18,466
                        ----    ------   --------   ----------       --------  ---------             --------        ---------
                        ----    ------   --------   ----------       --------  ---------             --------        ---------
                                                          
                                                          5

</TABLE>

<PAGE>

                                    TROY HILL BANCORP, INC. 
                   NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The accompanying unaudited consolidated financial statements have been 
prepared in accordance with the instructions for Form 10-Q and therefore do 
not include information or footnotes necessary for a complete presentation of 
financial condition, results of operations, cash flows and changes in 
stockholders' equity in conformity with generally accepted accounting 
principles. However, all adjustments (consisting only of normal recurring 
adjustments) which, in the opinion of management, are necessary for a fair 
presentation have been included. The results of operations for the three and 
six months ended December 31, 1996 are not necessarily indicative of the 
results which may be expected for the entire fiscal year or any other interim 
period.

Corporate Reorganization

On September 16, 1996, the Company entered into an Agreement and Plan of 
Reorganization (the "Agreement") with PennFirst Bancorp, Inc. ("PennFirst"), 
a Pennsylvania-chartered thrift holding company which is headquartered in 
Ellwood City, Pennsylvania. Pursuant to the Agreement, the Company will merge 
with and into PennFirst and Troy Hill will operate as a separate subsidiary 
of PennFirst for a minimum period of one year. Each shareholder of the 
Company will be entitled to receive $21.15 in either cash or shares of 
PennFirst common stock for each share of Company common stock, subject to an 
overall requirement that 40% of the outstanding Company common stock be 
exchanged for cash. The Merger is subject to, among other things, the receipt 
of all requisite regulatory approvals as well as the approval of the 
respective shareholders of PennFirst and the Company. In connection 
therewith, a Special Meeting of Shareholders of PennFirst and the Company 
will be held for the purpose of approving the Merger on March 18, 1997 and 
March 17, 1997, respectively.

Earnings per share

Earnings per share for the three and six months ended December 31,1996 have 
been calculated based on the weighted average number of common and common 
equivalent shares outstanding (987,291 shares and 980,067 shares 
respectively), and for the three and six months ended December 31, 1995 
(990,163 and 992,765 shares respectively), during the period.

                                  6

<PAGE>

Recent Accounting and Legislative Developments

In October 1995, the Financial Accounting Standards Board ("FASB") issued 
SFAS No. 123, "Accounting for Stock-Based Compensation," establishing 
financial accounting and reporting standards for stock-based employee 
compensation plans. This statement encourages all entities to adopt a new 
method of accounting to measure compensation cost of all employee stock 
compensation plans based on the estimated fair value of the award at the date 
it is granted. Companies are, however, allowed to continue to measure 
compensation cost for those plans using the intrinsic value based method of 
accounting, which generally does not result in compensation expense 
recognition for most plans. Companies that elect to remain with the existing 
accounting are required to disclose in a footnote to the financial statements 
pro forma net income and, if presented, earnings per share, as if this 
statement had been adopted. The accounting requirements of this statement are 
effective for transactions entered into fiscal years that begin after 
December 15, 1995; however, companies are required to disclose information 
for awards granted in their first fiscal year beginning after December 15, 
1994. Management of the Savings Bank has not completed an analysis of the 
potential effects of this Statement on the Savings Bank's financial condition 
or results of operations. 

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers and 
Servicing of Financial Assets and Extinguishment of Liabilities." Pursuant to 
SFAS No. 125, after a transfer of financial assets, an entity would be 
required to recognize all financial assets and servicing it controls and 
liabilities it has incurred and, conversely, would not be required to 
recognize financial assets when control has been surrendered and liabilities 
when extinguished. SFAS No. 125 provides standards for distinguishing 
transfers of financial assets that are sales from transfers that are secured 
borrowings. SFAS No. 125 will be effective with respect to the transfer and 
servicing of financial assets and the extinguishement of liabilities occuring 
after December 31, 1996, with earlier application prohibited. The Savings 
Bank has not completed an analysis of the potential effects of this Statement 
on the Savings Bank's financial condition or results of operations.

On November 14, 1995, the Federal Deposit Insurance Corporation ("FDIC") 
approved a final rule regarding deposit insurance premiums. The final rule 
reduced deposit insurance premiums for Bank Insurance Fund ("BIF") member 
institutions from 23 to 0 basis points (subject to a $2,000 minimum) for 
institutions in the lowest risk category, while holding deposit insurance 
premiums for Savings Association Insurance Fund ("SAIF") members at their 
current levels (23 basis points for institutions in the lowest risk 
category). On September 30, 1996, President Clinton signed into law 
legislation which will eliminate the premium differential between 
SAIF-insured institutions and BIF-insured institutions by recapitalizing the 
SAIF's reserves to the required ratio.  The legislation provides that all 
SAIF member institutions pay a special one-time assessment to recapitalize 
the SAIF, which in the aggregate will be sufficient to bring the reserve 
ratio in the SAIF to 1.25% of insured deposits. The legislation also  
provides for the merger of the BIF and the SAIF, with such merger being 
conditioned upon the prior elimination of the thrift 

                                    7

<PAGE>

charter. Effective October 8, 1996, FDIC regulations imposed a one-time 
special assessment equal to 65.7 basis points for all SAIF-assessable 
deposits as of March 31, 1995, which was collected on November 27, 1996. Troy 
Hill's one-time special assessment amounted to $326,000. Net of related tax 
benefits, the one-time special assessment amounted to $214,000.

On October 16, 1996, the FDIC proposed to lower assessment rates for SAIF 
members to reduce the disparity in the assessment rates paid by BIF and SAIF 
members. Beginning October 1, 1996, effective SAIF rates range from zero 
basis points to 27 basis points. From 1997 through 1999, SAiF members will 
pay 6.4 basis points to fund the Financing Corporation while BIF member 
institutions will  pay approximately 1.3 basis points. Troy Hill's insurance 
premiums, which have amounted to 23 basis points will be reduced to 6.4 basis 
points. Based upon the $53.2 million of assessable deposits at December 31, 
1996, Troy Hill would expect to pay $22,600 less in insurance premiums per 
quarter during 1997.

TROY HILL BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THREE AND SIX MONTHS ENDED DECEMBER 31, 1996

General

On June 24, 1994, Troy Hill Federal Savings and Loan Association successfully 
completed its conversion from a federally chartered, mutual savings and loan 
association to a federally chartered stock savings bank known as Troy Hill 
Federal Savings Bank (the "Savings Bank") and the concurrent formation of 
Troy Hill Bancorp, Inc. (the "Company" or "Troy Hill"), the parent holding 
company of the Savings Bank. The operating results of the Company depend 
primarily upon its net interest income, which is determined by the difference 
between interest and dividend income on interest-earning assets, principally 
loans, mortgage-backed securities and investment securities, and interest 
expense on interest-bearing liabilities, which principally consist of 
deposits and borrowings. The Company's net income also is affected by its 
provision for loan and lease losses, as well as the level of its noninterest 
income, including loan fees and service charges, gain on sale of loans, and 
other income, and its noninterest expenses, such as salaries and employee 
benefits, net occupancy expense, federal deposit insurance and miscellaneous 
other expenses, and income taxes.

In general, financial institutions are vulnerable to an increase in interest 
rates to the extent that interest-bearing liabilities mature or reprice more 
rapidly than interest-earning assets.  The lending activities of financial 
institutions, including the Savings Bank, have historically emphasized the 
origination of long-term, fixed-rate loans 

                                  8

<PAGE>

secured by single-family residences, and the primary source of funds of such 
institutions has been deposits, which largely mature or are subject to 
repricing within a short period of time.  This has historically caused the 
income earned by Troy Hill on its loan portfolio to adjust more slowly to 
changes in interest rates than its cost of funds. While having liabilities 
that reprice more frequently than assets is generally beneficial to net 
interest income in times of declining interest rates, such an asset/liability 
mismatch is generally detrimental during periods of rising interest rates.

To reduce the effect of adverse changes in interest rates on its operations, 
the Company has implemented the asset and liability management policies 
described below.

Asset and Liability Management

Troy Hill maintains a program designed to monitor its exposure to material 
and prolonged increases in interest rates. The principal determinant of the 
exposure of the Company's earnings to interest rate risk is the timing 
difference between the repricing or maturity of the Company's 
interest-earning assets and the repricing or maturity of its interest-bearing 
liabilities. The Company's Board of Directors establishes and monitors the 
Company's asset and liability management policies.

The Company has adopted a strategy designed to improve the interest rate 
sensitivity of its assets relative to its liabilities. The primary elements 
of this strategy include: (i) maintaining a high level of liquid assets that 
can be reinvested in higher yielding investments should interest rates rise; 
(ii) emphasizing investments in (A) shorter-term (15 years or less), 
fixed-rate single-family residential loans and (B) residential construction 
loans, which generally have adjustable or floating interest rates and/or 
shorter maturities than traditional single-family residential loans; (iii) to 
the extent market conditions permit, increasing the origination of 
adjustable-rate single-family residential loans ("ARMs"), (iv) maintaining 
the weighted average maturity of the Company's investment portfolio at five 
years or less and (v) selling of newly originated loans with maturities of 
greater than fifteen years.

As of December 31, 1996, the implementation of the asset and liability 
initiatives resulted in the following: (i) $16.8 million or 19.0% of the 
Company's total loan portfolio had adjustable interest rates or maturities of 
less than 12 months; (ii) $1.1 million or 48.5% of the Company's 
mortgage-backed securities were secured by ARMs; and (iii) $5.5 million or 
82.1% of the Company's investment securities portfolio had scheduled 
maturities of five years or less.

                                    9

<PAGE>

RESULTS OF OPERATIONS

General

The Company reported net earnings of $308,000 and $258,000 during the three 
months ended December 31, 1996 and 1995, and $360,000 and $520,000 during the 
six months ended December 31, 1996 and 1995, respectively.  The $50,000 or 
19.4% increase in net earnings for the three months ended December 31, 1996, 
as compared to the same period in the prior year, is primarily due to a 
$182,000 increase in net interest income and a $35,000 increase in total 
noninterest income, which were partially offset by a $156,000 increase in 
total noninterest expense and an $11,000 increase in income taxes. The 
$160,000 or 30.8% decrease in net earnings for the six months ended December 
31, 1996, as compared to the same period in the prior year, is primarily the 
result of the $686,000 increase in total noninterest expense, which includes 
the special one-time assessment to recapitalize the SAIF of $326,000 (before 
taxes) and a $440,000 increase in total interest expense which were partially 
offset by an $804,000 increase in total interest income, a $37,000 increase 
in total noninterest income and a $125,000 decrease in income taxes. If not 
for this one-time assessment, net earnings for the six months ended December 
31, 1996 would have been $574,000, or a 10.4% increase over the 1995 period.

Net Interest Income

Net interest income is determined by the Company's interest rate spread 
(i.e., the difference between the yields earned on its interest-earning 
assets and the rates paid on its interest-bearing liabilities) and the 
relative amounts of interest-earning assets and interest-bearing liabilities.

The Company's net interest income increased by $182,000 or 22.3% and $364,000 
or 22.7% during the three and six months ended December 31, 1996 when 
compared to the respective periods in 1995. 

Interest Income

Interest on loans increased by $537,000 or 41.1% and $1.0 million or 40.0% 
for the three and six months ended December 31, 1996, when compared with the 
same periods in 1995.  The increase in interest on loans was due primarily to 
an increase in the average balance of loans receivable for the three and six 
months ended December 31, 1996 when compared to the same periods in 1995. 

Interest and dividends on investment securities and other interest-earning 
assets (consisting primarily of U.S. Government and agency obligations, 
corporate obligations, interest-bearing deposits and FHLB of Pittsburgh 
stock) decreased by $29,000 or 14.6% and $96,000 or 25.2%  during the three 
and six months ended December 31, 

                                    10

<PAGE>

1996 when compared with the same periods in 1995.  The decrease was the 
result of the sale of U.S. Government and agency obligations to fund newly 
originated loans.

Interest on mortgage-backed securities decreased $84,000 or 72.4% and 
$111,000 or 47.8% during the three and six months ended December 31, 1996, 
respectively when compared with the same periods in 1995. The decrease during 
the three month period was due primarily to a decrease of $4.2 million in the 
average balance of mortgage-backed securities outstanding for the three 
months ended December 31, 1996 when compared to the same period in 1995. The 
decrease during the six month period was due to a decrease of $3.3 million in 
the average balance of mortgage-backed securities outstanding for the six 
months ended December 31, 1996 when compared to the same period in 1995. The 
decrease was the result of the sale of mortgage-backed securities to fund 
newly originated loans. 

Interest Expense

Interest expense on deposits, the largest component of the Company's 
interest-bearing liabilities, decreased by $14,000 or 2.2% and $15,000 or 
1.2% for the three and six months ended December 31, 1996 when compared to 
the same periods in 1995. The decreases were due primarily to decreases of 
$453,000 and $991,000 in the average balance of deposits outstanding for the 
three and six months ended December 31, 1996 when compared to the same 
periods in 1995.

Interest on borrowings (consisting of advances from the FHLB of Pittsburgh) 
increased $256,000 or 155.2% and $455,000 or 158.0% during the three and six 
months ended December 31, 1996, when compared with the same periods in 1995. 
The increases were due to an increase in the average balance of such 
borrowings of $18.4 million and $16.7 milllion during the three and six 
months ended December 31, 1996 as compared to the same periods in 1995.  The 
Savings Bank reinvested these additional advances from the Federal Home Loan 
Bank of Pittsburgh into permanent and construction loans secured by 
single-family residences.

Provision for Loan and Lease Losses

Provisions for loan and lease losses are charged to earnings to bring the 
total allowance to a level considered appropriate by management based on 
historical experience, the volume and type of lending conducted by the 
Savings Bank, the status of past due principal and interest payments, general 
economic conditions, particularly as they relate to the Savings Bank's market 
area, and other factors related to the collectibility of the Savings Bank's 
loan portfolio.

The Savings Bank's provisions for loan and lease losses during the three and 
six month periods ended December 31, 1996 when compared to the same periods 
in 1995 remained constant. The Company's total allowance for loan and lease 
losses amounted 

                                   11

<PAGE>

to .82% of the Company's total loan portfolio at December 31, 1996, as 
compared with 1.10% at December 31, 1995. As of December 31, 1996, the 
Company's total allowance for loan and lease losses amounted to 53.3% of 
total nonperforming loans as compared to 34.9% as of December 31, 1995. 
   
Noninterest Income

The Company's noninterest income increased by $35,000 and $37,000 during the 
three and six months ended December 31, 1996, when compared with the same 
periods in 1995. The increases were primarily due to profits on the sale of 
real estate owned and rental income on real estate owned.

Noninterest Expense

Noninterest expense increased by $156,000 or 38.8% and $686,000 or 87.3% 
during the three and six months ended December 31, 1996 when compared with 
the same periods in 1995. The increase during the three month period ended 
was primarily due to a $103,000 increase in salaries and employee benefits 
and a $32,000 increase in expenses incurred with respect to the merger with 
PennFirst Bancorp, Inc. The increase during the six month period ended was  
primarily due to a $108,000 increase in salaries and employee benefits, a 
$326,000 one-time SAIF assessment and a $157,000 increase in expenses 
incurred with respect to the merger with PennFirst Bancorp, Inc.

Income Taxes

The Company recognized $170,000 in income tax expense which reflected an 
effective rate of 35.6% for the three months ended December 31, 1996, as 
compared to $159,000 with an effective tax rate of 38.1% for the comparable 
1995 period. The Company recognized $201,000 in income tax expense which 
reflected an effective tax rate of 35.8% for the six months ended December 
31, 1996, as compared to $326,000 with an effective tax rate of 38.5% for the 
same period in 1995. 

Liquidity and Capital Resources

The Company's liquidity, represented by cash and cash equivalents, is a 
product of its operating, investing and financing activities. The Company's 
primary sources of funds are deposits, borrowings, amortization, prepayment 
and maturities of outstanding loans and mortgage-backed securities, sales of 
loans, maturities of investment securities and other short-term investments 
and funds provided from operations. While scheduled loan and mortgage-backed 
securities amortization and maturing investment securities and short-term 
investments are relatively predictable sources of funds, deposit flows and 
loan and mortgage-backed securities prepayments are greatly influenced by 
general interest rates, economic conditions and competition. The Company 
manages 

                                 12

<PAGE>

the pricing of its deposits to maintain a steady deposit balance. In 
addition, the Company invests excess funds in overnight deposits and other 
short-term interest-earning assets which provides liquidity to meet lending 
requirements. The Company has been able to generate enough cash through the 
retail deposit market, its traditional funding source, to offset the cash 
utilized in investing activities. In addition, the Company may, to the extent 
deemed necessary, utilize borrowings for liquidity (primarily consisting of 
advances from the FHLB of Pittsburgh). At December 31, 1996, the Company had 
$29.0 million of outstanding advances from the FHLB of Pittsburgh. The 
increased borrowings were used to fund newly originated loans. 

Liquidity management is both a daily and long-term function of business 
management.  Excess liquidity is generally invested in short-term investments 
such as overnight deposits. On a longer-term basis, the Company maintains a 
strategy of investing in various lending products. 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 a portfolio of investment and mortgage-backed securities.

At December 31, 1996, the total approved loan commitments outstanding 
amounted to $471,000. At the same date, commitments under unused lines of 
credit amounted to $4.0 million and the unadvanced portion of construction 
loans approximated $5.0 million.  Certificates of deposit scheduled to mature 
in one year or less at December 31, 1996 totaled $18.2 million. Management 
believes that a significant portion of maturing deposits will remain with the 
Savings Bank.

The Company's total consolidated assets were $102.6 million at December 31, 
1996, an increase of $10.4 million  or 11.3% over total consolidated assets 
at June 30, 1996.

Total consolidated stockholders' equity was $18.5 million at December 31, 
1996, an increase of $426,000 or 2.4% over total consolidated stockholders' 
equity at June 30, 1996. 

Federally insured savings institutions are required to maintain minimum 
levels of regulatory capital.  Pursuant to the Financial Institutions Reform, 
Recovery, and Enforcement Act of 1989 ("FIRREA"), the Office of Thrift 
Supervision ("OTS") has established capital standards applicable to all 
savings institutions. These standards generally must be as stringent as the 
comparable capital requirements imposed on national banks. The OTS also is 
authorized to impose capital requirements in excess of these standards on 
individual institutions on a case-by-case basis.

Savings institutions must satisfy three different OTS capital requirements. 
Under these standards, savings institutions must maintain "tangible" capital 
equal to at least 1.5% of adjusted total assets, "core" capital equal to at 
least 3% of adjusted total assets and "total" capital (a combination of core 
and "supplementary"  capital) equal to at least 8% 

                                13

<PAGE>

of "risk-weighted" assets.  For purposes of the regulation, core capital is 
defined as common stockholders' equity (including retained earnings), 
noncumulative perpetual preferred stock and related surplus, minority 
interest in the equity accounts of fully consolidated subsidiaries, certain 
nonwithdrawable accounts and pledged deposits and qualifying supervisory 
goodwill. Core capital is generally reduced by the amount of savings 
institutions intangible assets, although limited exceptions to the deduction 
of intangible assets are provided for purchased mortgage servicing rights, 
qualifying supervisory goodwill and certain other intangibles, all of which 
are currently not relevant to the calculation of the Savings Bank's 
regulatory capital.  Tangible capital is core capital less all intangible 
assets, with a limited exception for purchased mortgage servicing rights. The 
following table sets forth the Savings Bank's compliance with each of the 
above described regulatory capital requirements at December 31, 1996. 

                                 14

<PAGE>


                         Tangible              Core             Risk-Based
                         Capital              Capital             Capital
                         --------             -------           ----------
                                      (Dollars in Thousands)

Regulatory
capital                  $14,639               $14,639            $15,149

Minimum
required
regulatory
capital                    1,480                 2,959              4,897
                         -------               -------            -------

Excess
regulatory
capital                  $13,159               $11,680            $10,252
                         -------               -------            -------
                         -------               -------            -------

Regulatory
capital as
a percentage
of assets(1)               14.84%                14.84%             24.75%

Minimum capital
required as a
percentage                  1.50%                 3.00%              8.00%
                         -------                ------             ------
                              

Excess regulatory
capital as a
percentage in
excess of
requirement                13.34%                11.84%             16.75%
                         -------                ------            -------
                         -------                ------            -------


(1)  Tangible and core capital are computed as a percentage of adjusted total 
     assets of $98.6 million.  Risk-based capital is computed as a percentage 
     of total risk-weighted assets of $61.2 million.

Impact of Inflation and Changing Prices 

The 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 

                                15

<PAGE>

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.

                                  16

<PAGE>

PART II--OTHER INFORMATION
___________________________

ITEM 1.        Legal Proceedings

               The Company is involved only in routine legal proceedings 
               occurring in the ordinary course of business which in the 
               aggregate are believed by management to be immaterial to the 
               financial condition of the Company.

ITEM 2.        Changes in Securities

               Not applicable

ITEM 3.        Defaults Upon Senior Securities

               Not applicable

ITEM 4.        Submission of Matters to a Vote of Security Holders
                    
               Not applicable.

ITEM 5.        Other Information

               Not applicable.

ITEM 6.        Exhibits and Reports on Form 8-K

               a) Exhibit 27:  Financial Data Schedule

                                   17

<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.

                                             TROY HILL BANCORP, INC.



February 7, 1997                             By: /s/ Ellry N. Davis
                                                 ---------------------------
                                                 Ellry N. Davis
                                                 President and Chief Executive
                                                 Officer

February 7, 1997                             By: /s/ Lawrence C. Kerr
                                                 ----------------------------
                                                 Lawrence C. Kerr
                                                 Treasurer

                                       18