10-Q 1 j9560301e10vq.txt PITTSBURGH FINANCIAL CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ Commission File Number 0-27522 PITTSBURGH FINANCIAL CORP. -------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 25-1772349 -------------------------------------------------- ------------------------ (State or other jurisdiction of incorporation or (IRS Employer organization) Identification Number) 1001 Village Run Road Wexford, Pennsylvania 15090 -------------------------------------------------- ------------------------ (Address of principal executive office) (Zip Code) (724) 933-4509 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of August 14, 2002, there were issued and outstanding 1,408,699 shares of the Registrant's Common Stock, par value $.01 per share. PITTSBURGH FINANCIAL CORP. TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition as of June 30, 2002 (unaudited) and September 30, 2001 3 Consolidated Statements of Income (unaudited) for the three and nine months ended June 30, 2002 and 2001. 4 Consolidated Statement of Changes in Stockholders' Equity (unaudited) for the nine months ended June 30, 2002. 5 Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2002 and 2001. 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 PART II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults Upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Security-Holders 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES PITTSBURGH FINANCIAL CORP. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

3 PITTSBURGH FINANCIAL CORP. CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to unaudited consolidated financial statements. 4 PITTSBURGH FINANCIAL CORP. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For the Period ended June 30, 2002 (Unaudited)

See accompanying notes to unaudited consolidated financial statements. 5 PITTSBURGH FINANCIAL CORP. CONSOLIDATED STATEMENT OF CASH FLOWS

See accompanying notes to unaudited consolidated financial statements. 6 PITTSBURGH FINANCIAL CORP. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying unaudited interim consolidated financial statements of Pittsburgh Financial Corp. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States. However, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Pittsburgh Savings Bank (d/b/a BankPittsburgh) (the "Bank") and Pittsburgh Home Capital Trust I. Pinnacle Settlement Group, LLC is a majority owned subsidiary of the Company. FraMal Holdings Corporation is a wholly owned subsidiary of the Bank. All significant intercompany balances and transactions have been eliminated in consolidation. The results of operations for the nine months ended June 30, 2002 are not necessarily indicative of the results to be expected for the year ending September 30, 2002. The unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto for the year ended September 30, 2001. Note 2 - Business The Company is a unitary bank-holding company headquartered near Pittsburgh, in Wexford, PA. The Bank, a wholly owned subsidiary of the Company, is a state chartered stock savings bank headquartered in Pittsburgh, Pennsylvania, and conducts business from nine offices in Allegheny and Butler counties. The Bank is primarily engaged in attracting retail deposits from the general public and using such deposits together with borrowings to originate loans. The Company's other wholly owned subsidiary, Pittsburgh Home Capital Trust I (the "Trust") is a Delaware business trust formed in December 1997 to issue $11.5 million of 8.56% Cumulative Trust Preferred Securities. These securities represent undivided beneficial interests in Pittsburgh Home Capital Trust I. The Trust purchased junior subordinated deferrable interest debentures which were issued by the Company. 7 The Company's majority owned subsidiary, Pinnacle Settlement Group, LLC ("PSG"), a Pennsylvania limited liability company, was formed in April 2002 for the purpose of engaging in the title insurance business, settlement and escrow business, and related or ancillary activities. The Company has an 80% equity interest and an 84% voting interest in PSG. An unrelated limited liability company and two individuals have the remaining minority interest. Framal Holding Corporation is a wholly owned subsidiary of the Bank, headquartered in Delaware. The Company and Bank are subject to the regulations of certain federal and state agencies and periodic examinations by certain regulatory authorities. Note 3 - Earnings per share Earnings per share are based on the weighted average number of shares of common stock. Basic earnings per share is calculated by dividing income available to holders of common shares by the weighted average number of common shares outstanding during the period. Options, warrants, and other potentially diluted securities are excluded from the basic calculation, but are included in diluted earnings per share. The following table sets forth the computation of basic and diluted earnings per share:

The Company accounts for its Employee Stock Ownership Plan (ESOP) in accordance with SOP 93-6, "Employers Accounting for Employee Stock Ownership Plans,"; shares controlled by the ESOP are not considered in the weighted average shares outstanding until the shares are committed for allocation to an employee's individual account. In accordance with SOP 93-6, uncommitted shares held by the ESOP (96,339 and 111,187 shares at June 30, 2002 and 2001, respectively) are excluded from basic average shares outstanding. 8 Note 4 - Recent Accounting and Regulatory Developments On October 1, 2002, the Company will adopt FAS No. 141, "Business Combinations," and FAS No. 142, "Goodwill and Other Intangible Assets." Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives. The impact of adoption is not expected to materially affect the Company's financial condition or results of operations. On October 1, 2002, the Company will adopt FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which replaces FAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Assets to be Disposed Of." This statement primarily defines one accounting model for long-lived assets to be disposed of by sale, including discontinued operations, and addresses implementation issues. The adoption of this statement is not expected to materially affect the Company's financial condition or results of operations. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION At June 30, 2002, the Company's total assets amounted to $407.8 million compared to $427.1 million at September 30, 2001, a decrease of $19.3 million or 4.5%. Cash and interest-bearing deposits decreased $12.0 million or 53.6%, to $10.4 million at June 30, 2002, compared to $22.4 million at September 30, 2001. The Company's net loans receivable decreased $31.3 million, or 11.0%, from $284.9 million at September 30, 2001 to $253.6 million at June 30, 2002. The decrease is primarily attributable to repayments of residential 1-4 family mortgage loans. Investments and mortgage-backed securities increased $17.8 million, or 17.6%, from $101.3 million at September 30, 2001 to $119.1 million at June 30, 2002. Bank owned life insurance totaled $6.2 million at June 30, 2002. Total liabilities decreased by $18.7 million or 4.6%, to $385.1 million at June 30, 2002 compared to $403.8 million at September 30, 2001. Deposits decreased by $21.4 million, or 10.0% to $191.6 million at June 30, 2002 compared to $213.0 million at September 30, 2001 primarily as a result of a $7.7 million decrease in retail deposits and a $13.7 million decrease in wholesale certificates of deposit. The decrease in retail deposits is the result of short term certificates of deposit that matured during the period that the Company chose not to reprice aggressively due to the current interest rate environment. Borrowings increased $2.8 million or 1.6% to $179.1 million at June 30, 2002 compared to $176.3 million at September 30, 2001. Guaranteed preferred beneficial interest in subordinated debt decreased $1.2 million or 11.0% from $10.9 million at September 30, 2001 to $9.7 million at June 30, 2002 as the Company repurchased approximately $1.2 million of the outstanding securities at an average cost of $9.47 per share. Total stockholders' equity decreased $600,000 or 2.6% to $22.7 million at June 30, 2002 compared to $23.3 million at September 30, 2001. The decrease was primarily attributable to the purchase of treasury shares totaling $1.5 million and $380,000 in cash dividends paid, which were partially offset by an increase in accumulated comprehensive income of $430,000. 10 RESULTS OF OPERATIONS GENERAL. The Company reported net income for the quarter ended June 30, 2002 of $254,000 as compared to $100,000 for the same quarter in 2001. For the nine months ended June 30, 2002, net income was $567,000 as compared to $113,000 for the nine months ended June 30, 2001. The increase of $154,000 in net income for the three months ended June 30, 2002 compared to the three months ended June 30, 2001 was primarily the result of an $139,000 increase in noninterest income, an $82,000 increase in net interest income, and a $90,000 decrease in provision for loan losses, which were partially offset by a $77,000 increase in noninterest expense and an $80,000 increase in income tax expense. The increase of $454,000 in net income for the nine months ended June 30, 2002 compared to the nine months ended June 30, 2001 was primarily the result of a $672,000 increase in noninterest income, a $30,000 increase in net interest income, and a $90,000 decrease in the provision for loan losses, which were partially offset by an $111,000 increase in noninterest expense and a $228,000 increase in income taxes. For the quarter ended June 30, 2002, the Company recognized a pre-tax net gain of $9,000 on the sale of foreclosed real estate as compared to a pre-tax net gain on sale of residential mortgages of $16,000 and a write down of an interest rate cap of $16,000 for the same period ended June 30, 2001. Excluding the results of these items, net income for the three months ended June 30, 2002 was $248,000 as compared to $100,000 for the same period in 2001, an increase of $148,000 or 148.0%. For the nine months ended June 30, 2002, the Company recognized a pre-tax net gain on investment sales of $8,000, and a pre-tax net gain of $23,000 on the sale of foreclosed real estate as compared to a pre-tax net loss on investment sales of $64,000, a write down of an interest rate cap of $91,000, and a pre-tax net loss on the sale of foreclosed real estate of $65,000, partially offset by a pre-tax net gain on the sale of residential mortgage loans of $16,000 for the nine months ended June 30, 2001. Excluding these items, net income for the nine months ended June 30, 2002 was $547,000 as compared to $266,000 for the same period in 2001, an increase of $281,000 or 105.6%. The Company's average interest rate spread increased to 1.83% for the three months ended June 30, 2002 from 1.61% for the three months ended June 30, 2001. The increase was primarily due to a decrease in the Company's cost of funds of 72 basis points from 5.71% for the three months ended June 30, 2001 to 4.99% for the three months ended June 30, 2002, partially offset by a decrease in the yield on the Company's earning assets of 50 basis points from 7.32% for the three months ended June 30, 2001 to 6.82% for the three months ended June 30, 2002. The Company's average interest rate spread increased to 1.73% for the nine months ended June 30, 2002 from 1.59% for the nine months ended June 30, 2001. The increase was primarily due to a decrease in the Company's cost of funds of 68 basis points from 5.85% for the nine months ended June 30, 2001 to 5.17% for the nine months ended June 30, 2002, partially offset by a decrease in yield on the Company's earning assets of 54 basis points from 7.44% for the nine months ended June 30, 2001 to 6.90% for the nine months ended June 30, 2002. As a result of the above, the Company's net interest income increased from $1.9 million for the three months ended June 30, 2001 to $2.0 million for the three months ended June 30, 2002, an increase of $82,000 or 4.2%. For the nine months ended June 30, 2001 and 2002, the Company's net interest income remained flat at $5.9 million. 11 Noninterest income, excluding investment sales, the write down of the interest rate cap and the sale of residential mortgages increased $139,000 or 46.5% for the quarter and $525,000 or 67.0% for the nine months ended June 30, 2002 as compared to the same periods a year ago. The increase was primarily due to an increase in fee income and income recognized from bank owned life insurance. Noninterest expense, excluding the gains or losses on sale of foreclosed real estate, remained flat at $2.0 million and increased $199,000 or 3.4%, respectively, for the three and nine months ended June 30, 2002 as compared to the year ago periods. The increase in noninterest expense was primarily attributable to an increase in compensation and other benefits of $75,000 from $2.82 million for the nine months ended June 30, 2001 to $2.89 million for the nine months ended June 30, 2002, and to the premises and occupancy costs, which increased $79,000 or 6.7% from $1.18 million for the nine months ended June 30, 2001 to $1.26 million for the nine months ended June 30, 2002. Marketing costs increased $66,000 from $197,000 for the nine months ended June 30, 2001 to $263,000 for the nine months ended June 30, 2002. The Company reported diluted earnings per share of $.19 for the quarter ended June 30, 2002, compared to $.07 for the quarter ended June 30, 2001. Excluding investment sales, the write down of an interest rate cap, the sale of residential mortgage loans and the sale of foreclosed real estate, diluted earnings per share were $.18 for the quarter ended June 30, 2002 compared to $.06 for the quarter ended June 30, 2001. Diluted earnings per share were $.41 for the nine months ended June 30, 2002 compared to $.07 for the nine months ended June 30, 2001. Excluding the aforementioned items, diluted earnings per share were $.40 for the nine months ended June 30, 2002 compared to $.17 for the nine months ended June 30, 2001. INTEREST INCOME. Interest income decreased $689,000 or 9.3% for the quarter ended June 30, 2002, compared to the same period in 2001. Interest income decreased $2.64 million or 11.4% for the nine months ended June 30, 2002, compared to the same period in 2001. The average balance of loans receivable decreased by $35.2 million for the quarter and $35.5 million for the nine months ended June 30, 2002, and the related yields decreased .10% from 7.70% to 7.60% for the quarter and .10% from 7.69% to 7.59% for the nine months ended June 30, 2002, when compared to the same period in 2001. The Company is continuing its efforts to diversify the loans receivable portfolio from the previous emphasis on one-to-four family residential lending to a broader based, full service commercial lending philosophy. It should be noted that the largest individual dollar component of the loans receivable portfolio continues to be residential lending, as this has been a Company strength, and the Company's primary business for many years. 12

14 The average balance of investment and mortgage-backed securities totaled $125.5 million with a weighted average yield of 5.62% and $118.2 million with a weighted average yield of 5.76% for the three and nine months ended June 30, 2002 compared to $99.3 million with a weighted average yield of 6.60% and $105.8 million with a weighted average yield of 6.92% the same periods in 2001. Loans receivable, net at June 30, 2002 and September 30, 2001 are summarized below:

INTEREST EXPENSE. Interest expense decreased $771,000 or 14.1% and $2.7 million or 15.4%, respectively, for the three and nine months ended June 30, 2002, compared to the same periods in 2001. The average cost of funds decreased to 4.99% from 5.71% and to 5.17% from 5.85%, respectively, for the three and nine months ended June 30, 2002 when compared to the same periods in 2001. The average balance of interest-bearing liabilities decreased $6.5 million and $16.6 million for the three and nine months ended June 30, 2002, when compared to the same periods in 2001. Average deposits decreased $11.6 million or 5.9% and $8.4 million or 4.2%, respectively, for the three and nine months ended June 30, 2002 when compared to the same periods in 2001. Average borrowed funds increased $6.3 million or 3.6% and decreased $7.0 million or 3.8%, respectively for the three and nine months ended June 30, 2002 when compared to the same periods in 2001. Interest expense associated with the trust preferred securities of Pittsburgh Home Capital Trust I totaled $211,000 and $680,000 for the three and nine months ended June 30, 2002 when compared to $248,000 and $757,000 for the same periods in 2001. 15 PROVISION FOR LOAN LOSSES. The Company recorded provisions for loan losses of $60,000 and $360,000 during the three and nine months ended June 30, 2002, as compared to $150,000 and $450,000 in the same periods in the prior years. It is management's policy to maintain an allowance for estimated losses based on the risk of loss in the loan portfolio. Management's periodic evaluation of the adequacy of the allowance is based on the Company's historical 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. Management classifies all delinquent assets as Special Mention, Substandard, Doubtful or Loss. A reserve level is estimated by management for each category of classified loans, with an estimated percentage applied to the delinquent loan category balance. In addition, management notes that there is an inherent risk of potential loan loss in the Company's overall, non-classified loan portfolio. This inherent risk is addressed by applying an estimated potential loss to the remaining unclassified loan portfolio. Activity for the period under analysis is also taken into account (charge offs, recoveries, provision). While management has allocated the allowance to different loan categories, the allowance is general in nature and is available for the loan portfolio in its entirety. Activity in the allowance for loan losses is summarized as follows for the nine months ended June 30, 2002 and 2001:

The Company designates all loans that are 90 or more days past due as non-performing. Generally, when loans are classified as non-performing, unpaid accrued interest is a reduction of interest income on loans receivable and is only recognized when cash payments are received. The Company's non-performing assets increased from $3.2 million at September 30, 2001 to $6.3 million at June 30, 2002. This $3.1 million increase was primarily attributable to a $2.0 million increase in non-accruing commercial loans and an $867,000 increase in one-to-four family mortgage loans, partially offset by a $23,000 decrease in real estate owned. The Company recognized a pre-tax net gain of $9,000 and $23,000 on the sale of foreclosed real estate for the three and nine months ended June 30, 2002 compared to no pre-tax net gain or and $65,000 for the same periods a year ago. 16 NONINTEREST INCOME. Noninterest income increased by $139,000 or 46.5% and $672,000 or 104.2%, respectively, for the three and nine months ended June 30, 2002 compared to the same periods in 2001. As noted above, the Company recognized a pre-tax net gain of $9,000 on the sale of foreclosed real estate for the three months ended June 30, 2002, as compared to a pre-tax net gain on sale of mortgage loans of $16,000, which was offset by a write down of an interest rate cap of $16,000, for the three months ended June 30, 2001. For the nine months ended June 30, 2002, the Company recognized a pre-tax net gain on investment sales of $8,000, and a pre-tax net gain of $23,000 on the sale of foreclosed real estate. For the nine months ended June 30, 2001, the Company recognized a pre-tax net loss on investment sales of $64,000, a $91,000 pre-tax loss on the write down of an interest rate cap, and a pre-tax net loss on the sale of foreclosed real estate of $65,000, partially offset by a pre-tax net gain on the sale of residential mortgage loans of $16,000. Service charges and other fees increased to $283,000 and $885,000 for the three and nine months ended June 30, 2002, compared to $219,000 and $607,000 for the same periods in 2001. Other income increased to $57,000 and $221,000 for the three and nine months ended June 30, 2002, compared to $81,000 and $176,000 for the same period in 2001. The increases in service charges and other fees and other income are primarily the result of increases to the Company's fee structure to remain competitive in the marketplace. Bank owned life insurance income amounted to $99,000 and $202,000 for the three and nine months ended June 30, 2002. Excluding the aforementioned items, noninterest income increased $139,000 or 46.5% for the three months ended June 30, 2002 and $525,000 or 67.0% for the nine months ended June 30, 2002. NONINTEREST EXPENSE. Noninterest expense remained flat at $2.0 million and $6.0 million for the three and nine months ended June 30, 2002 and 2001. There was a $43,000 and $75,000 increase in compensation and employee benefits, a $44,000 and $79,000 increase in premises and occupancy expenses, and a $11,000 and $66,000 increase in marketing costs, which were partially offset by a decrease of $10,000 and $17,000 in data processing costs for the three and nine months ended June 30, 2002 when compared to the same periods a year ago. These increases were also partially offset by a decrease of $9,000 and $88,000 on the sale of foreclosed real estate for the three and nine months ended June 30, 2002 when compared to the same periods in 2001. Federal insurance premium decreased $17,000 to $9,000 for the three months ended June 30, 2002 and decreased $17,000 to $43,000 for the nine months ended June 30, 2002 when compared to the same periods in 2001. The increase in compensation and employee benefits is the result of continued development of the commercial loan department and the development of the cash management department. The increase in premises and occupancy costs is due to the building or relocating of new branches for downtown Pittsburgh, Bloomfield, and Wexford along with the relocation of the Company's lending office and its corporate headquarters. The increase in marketing costs is the result of a general increase in marketing and advertising efforts. PROVISION FOR INCOME TAXES. The Bank recognized a provision for income taxes of $114,000 and $275,000 for the three and nine months ended June 30, 2002, compared to $34,000 and $47,000 for the same periods in 2001. The effective tax rates during the three and nine months ended June 30, 2002 and 2001 were 30.9% and 25.3%, and 32.6% and 29.4%, respectively. 17 LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of funds are deposits, FHLB borrowings, 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 borrowings from the FHLB of Pittsburgh. At June 30, 2002, the Company had $159.1 million of outstanding borrowings from the FHLB of Pittsburgh. The maximum remaining borrowing capacity at June 30, 2002 was $80.0 million. Liquidity management is both a daily and long-term function of business management. The Bank uses its sources of funds primarily to meet its ongoing commitments, to pay maturing savings certificates and savings withdrawals, to fund loan commitments and to maintain a portfolio of mortgage-backed and investment securities. At June 30, 2002, the total approved loan commitments outstanding amounted to $22.5 million including $4.0 million in loans in process, and unused lines of credit amounted to $15.0 million. Certificates of deposit scheduled to mature in one year or less at June 30, 2002, totaled $63.3 million. Management believes that a significant portion of maturing deposits will remain with the Bank. 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.

18 "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 In addition to historical information, forward-looking statements are contained herein that are subject to risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause future results to vary from current expectations, include, but are not limited to, the impact of economic conditions (both generally and more specifically in the markets in which the Company operates), the impact of competition for the Company's customers from other providers of financial services, the impact of government legislation and regulation (which changes from time to time and over which the Company has no control), and other risks detailed in this Form 10-Q and in the Company's other Securities and Exchange Commission ("SEC") filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements, to reflect events or circumstances that arise after the date hereof. Readers should carefully review the risk factors described in other documents the Company files from time to time with the SEC. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Management presently monitors and evaluates the potential impact of interest rate changes upon the level of net interest income and the economic value of the Company's equity ("EVE") on a monthly basis. EVE is the difference between incoming and outgoing discounted cash flows from assets, liabilities, and off-balance sheet contracts. The Company focuses primarily on the impact of a plus and minus 200 basis point immediate interest rate shock on its net interest income. The Company utilizes the Sendero system for its in-house modeling efforts and also works with an outside banking consultant in modeling its interest rate risk position. Quantitative and qualitative disclosures about market risk are presented in Item 7A of the Company's Annual Report on Form 10-K for the year ended September 30, 2001, filed with the SEC on December 27, 2001. Management believes there have been no material changes in the Company's market risk since September 30, 2001. 19 PITTSBURGH FINANCIAL CORP. PART II Item 1. Legal Proceedings Neither the Company nor the Bank is involved in any pending legal proceedings other than non-material legal proceedings occurring in the ordinary course of business. Item 2. Changes in Securities Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security-Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 99.1 Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). 99.2 Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350). (b) No Form 8-K reports were filed during the quarter. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PITTSBURGH FINANCIAL CORP. Date: August 14, 2002 By: /s/J.Ardie Dillen --------------------------------------- J. Ardie Dillen Chairman, President and Chief Executive Officer Date: August 14, 2002 By: /s/ Michael J. Kirk --------------------------------------- Michael J. Kirk Executive Vice President and Chief Financial Officer 21

PITTSBURGH FINANCIAL CORP 10-Q