UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended: March 31, 1997
[ ] 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 0-28864
PS FINANCIAL, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
Delaware 36-410473
- ---------------------------------------- -----------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
Chicago, Illinois 60632
- ---------------------------------------- -----------------------------
(Address of Principal Executive Offices) (Zip Code)
773/376-3800
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(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 the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding at March 31, 1997
- ---------------------------------------- -----------------------------
Common Stock, par value $0.01 2,020,304 shares
1
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
INDEX
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Financial Condition as of
March 31, 1997 and December 31, 1996................................. 3
Condensed Consolidated Statements of Income for the three months
ended March 31, 1997 and 1996........................................ 4
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the three months ended March 31, 1997 and 1996................... 5
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996................................. 6
Notes to the Condensed Consolidated Financial Statements as of
March 31, 1997....................................................... 8
Item 2. Management's Discussion and Analysis of the Financial Condition
and Results of Operation................................................ 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................................. 13
2
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
(Unaudited)
- --------------------------------------------------------------------------------
March 31, December 31,
1997 1996
---- ----
ASSETS
Cash on hand and in banks $ 450 $ 579
Interest-bearing deposit accounts in other
financial institutions 2,683 8,179
-------- --------
Total cash and cash equivalents 3,133 8,758
Interest-bearing term deposits in other financial
institutions 149 248
Securities available-for-sale 27,175 24,080
Mortgage-backed securities available-for-sale 7,695 4,702
Loans receivable, net 35,608 35,943
Federal Home Loan Bank stock 362 362
Premises and equipment, net 455 461
Accrued interest receivable 486 477
Other assets 55 102
-------- --------
Total assets $ 75,118 $ 75,133
======== ========
LIABILITIES AND EQUITY
Liabilities
Deposits $ 41,867 $ 42,203
Advances from borrowers for taxes and
insurance 214 477
Accrued interest payable and other liabilities 561 306
-------- --------
Total liabilities 42,642 42,986
Shareholders' equity
Common stock - $ 0.01 par value per share,
2,500,000 shares authorized; 2,182,125 shares
issued and outstanding $ 22 $ 22
Additional paid-in capital 21,170 21,170
Retained earnings, substantially restricted 13,099 12,669
Unearned ESOP shares (1,691) (1,691)
Unrealized loss on available-for-sale
securities, net (124) (23)
-------- --------
Total shareholders' equity 32,476 32,147
-------- --------
Total liabilities and shareholders' equity $ 75,118 $ 75,133
======== ========
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3
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
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Three months ended
March 31,
------------------
1997 1996
---- ----
Interest income
Loans $ 804 $ 815
Securities 371 183
Mortgage-backed securities 129 64
Other interest-earning assets 75 42
---------- ----------
Total interest income 1,379 1,104
Interest expense 424 436
Net interest income 955 668
Provision for loan losses -- --
---------- ----------
Net interest income after provision for loan losses 955 668
Noninterest income
Net gain on sale of securities 6 --
Other income 18 14
---------- ----------
Total noninterest income 24 14
Noninterest expense
Compensation and benefits 166 114
Occupancy and equipment expense 32 26
Data Processing 14 12
Federal deposit insurance premiums 7 24
Other operating expenses 61 35
---------- ----------
Total noninterest expense 280 211
---------- ----------
Income before income tax provision 699 471
Provision for income taxes 269 183
---------- ----------
Net income $ 430 $ 288
========== ==========
Earnings per share $ .21
==========
Average shares outstanding 2,020,304
==========
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4
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
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<TABLE>
<CAPTION>
Net Unrealized
Retained Loss on
Additional Earnings, Unearned Securities Total
Common Paid-in Substantially ESOP Available- Stockholders'
Stock Capital Restricted Shares for-Sale Equity
----- ------- ---------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ -- $ -- $11,667 $ -- $ 57 $ 11,724
Net income -- -- 288 -- -- 288
Change in net unrealized loss
on securities available-for-
sale net of tax -- -- -- -- (149) (149)
--- ------- ------- ------- ----- --------
Balance at March 31, 1996 $ -- $ -- $11,955 $ -- $ (92) $ 11,863
==== ======= ======= ======= ===== ========
Balance at December 31, 1996 $ 22 $21,170 $12,669 $(1,691) $ (23) $ 32,147
Net income -- -- 430 -- -- 430
Change in net unrealized loss
on securities available-for-
sale net of tax -- -- -- -- (101) (101)
---- ------- ------- ------- ----- --------
Balance at March 31, 1997 $ 22 $21,170 $13,099 $(1,691) $(124) $ 32,476
==== ======= ======= ======= ===== ========
</TABLE>
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5
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
(Unaudited)
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Three months ended
March 31,
------------------
1997 1996
---- ----
Cash flows from operating activities
Net income $ 430 $ 288
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 11 8
Amortization of discounts and premiums
on securities (12) 7
Net gain on sales of
securities available-for-sale (6) --
Change in
Deferred loan origination fees (14) (1)
Accrued interest receivable and other assets 100 32
Other liabilities and deferred income taxes 255 12
------- -------
Net cash provided by operating activities 764 346
Cash flows from investing activities
Proceeds from sales of securities available-
for-sale 4,001 --
Proceeds from sale of mortgage-backed
securities available-for-sale 1,014 --
Purchase of Federal Home Loan Bank Stock -- (21)
Proceeds from repayment of securities
available-for-sale 193 200
Proceeds from maturities of securities
available-for-sale 1,250 2,000
Purchase of securities available-for-sale (8,514) (3,508)
Purchase of mortgage-backed securities
available-for-sale (4,176) --
Net decrease in interest-bearing term
deposits in other financial institutions 99 --
Net change in loans 348 (1,060)
Capital expenditures, net (5) (3)
------- -------
Net cash used in investing activities (5,790) (2,392)
Cash flows from financing activities
Net increase (decrease) in deposits (336) 1,531
Net decrease in advances from
borrowers for insurance and taxes (263) (281)
------- -------
Net cash provided by (used in) financing activities (599) 1,250
------- -------
Decrease in cash and cash equivalents (5,625) (796)
Cash and cash equivalents at beginning of period 8,758 3,754
------- -------
Cash and cash equivalents at end of period $ 3,133 $ 2,958
======= =======
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6
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share data)
(Unaudited)
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Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 422 $ 441
Income taxes 5 80
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7
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PS FINANCIAL, INC.
CHICAGO, ILLINOIS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial condition of PS Financial, Inc. as of
March 31, 1997 and 1996, and the results of its operations and cash flows for
the three-month periods then ended.
NOTE 2 - CONVERSION
On November 26, 1996, Preferred Savings Bank ("Bank") converted from a state
chartered mutual savings bank to a federally chartered stock savings bank. The
Bank issued all of its common stock to PS Financial, Inc. ("Company") and at the
same time the Company issued 2,182,125 shares of common stock at $10.00 per
share to the ESOP, certain depositors of the Bank, and certain members of the
general public, all pursuant to a plan of conversion ("Conversion").
The ESOP purchased 174,570 shares of common stock representing 8% of the total
issued shares. The ESOP borrowed $1,745,700 from the Company to purchase the
stock using the stock as collateral for the loan. The loan is to be repaid
principally from the Bank's contributions to the ESOP over a period of up to 40
years.
NOTE 3 - CAPITAL REQUIREMENTS
Pursuant to federal regulations, savings institutions must meet three separate
capital requirements. The following is a summary of the Bank's regulatory
capital at March 31, 1997.
Tangible Core Risk based
Capital Capital Capital
------- ------- -------
(In thousands)
Regulatory capital $22,459 $22,459 $22,645
Minimum capital requirement 1,006 2,013 1,936
------- ------- -------
Excess regulatory capital over
minimum requirement $21,453 $20,446 $20,709
======= ======= =======
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8
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DSICUSSION AND ANAYLISIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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Comparison of Financial Condition at March 31, 1997 and December 31, 1996
Total assets of $75.1 million were unchanged from December 31, 1996 to March 31,
1997.
The Bank's net loans receivable by $335,000 from $35.9 million at December 31,
1996 to $35.6 million at March 31, 1997. Interest bearing term deposits
decreased $99,000 from $248,000 at December 31, 1996 to $149,000 at March 31,
1997.
Securities available-for-sale increased by $3.0 million from $24.1 million at
December 31, 1996 to $27.2 million at March 31, 1997. In addition, mortgage
backed securities increased by $3.0 million from $4.7 million at December 31,
1996 to $7.7 at March 31, 1997. These increases were mainly offset by a decrease
in cash and cash equivalents of $5.6 million from $8.7 million at December 31,
1996 to $3.1 million at March 31, 1997 as conversion proceeds were reinvested
into higher yielding assets.
Total liabilities at March 31, 1997 were $42.6 million compared to $43.0 million
at December 31, 1996, an decrease of $344,000. The decrease of $8,000 in other
liabilities was primarily due to a $263,000 decrease in advance payments from
borrowers for taxes and insurance due to the payment of taxes in the first
quarter partially offset by a $154,000 increase in current and deferred income
taxes payable and $101,000 increase in accrued interest payable.
Equity at March 31, 1997 was $32.5 million compared to $32.1 million at December
31, 1996, an increase of $329,000, or 1.0%, due primarily to net earnings of
$430,000 partially offset by an increase in the unrealized loss on securities
available-for-sale of $101,000.
Comparison of Operating Results for the Three Months Ended March 31, 1997 and
March 31, 1996
General
Net earnings for the three months ended March 31, 1997 were $430,000, a increase
of $142,000, or 49.3%, from net earnings of $288,000 for the three months ended
March 31, 1996. The increase in net earnings is primarily due to the increase in
the net interest margin resulting from the investment of cash proceeds from the
issuance of common stock in the conversion from a mutual savings bank to a stock
savings bank.
Interest Income
Interest income for the three months ended March 31, 1997 was $1.4 million
compared to $1.1 million for the three months ended March 31, 1996, an increase
of $275,000 or 24.9%. The increase in interest income was the result of an
increase in the average balance of interest-earning assets primarily due to an
increase in the average balance of securities available-for-sale and
mortgage-backed securities. The increase in the average balance was partially
offset by the decrease in yield on interest-earning assets for the three months
ended March 31, 1997. This decrease was primarily due to a decrease in the yield
on loans and US treasury and agency
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9
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PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DSICUSSION AND ANAYLISIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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securities. The decrease in loan yields are the result of repayments on
higher-yielding 15 year mortgages being replaced by lower-yielding balloon
mortgages.
Interest Expense
Interest expense for the three months ended March 31, 1997 was $424,000 compared
to $436,000 for the three months ended March 31, 1996, a decrease of $12,000, or
2.8%. The decrease of interest expense was primarily due to the decrease in the
average balance of interest-bearing deposits for the three months ended March
31, 1997 compared to the three months ended March 31, 1996. The decrease in the
average balance was partially offset by an increase in the average cost of funds
for deposits. The increase in the cost of funds was primarily due to the changes
in the current rate environment.
Provision for Loan Losses
The Bank's provision for loan losses was zero for the three months ended March
31, 1997 and 1996. At March 31, 1997, the Bank's allowance for loan losses
totaled $186,000, or .5% of total loans. The amount of the provision and
allowance for estimated losses on loans is influenced by current economic
conditions, actual loss experience, industry trends and other factors, such as
adverse economic conditions, including declining real estate values, in the
Bank's market area. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance for
loan losses. Such agencies may require the Bank to provide additions to the
allowance based upon judgments which differ from those of management. The
absence of a loan loss provision for the three months ended March 31, 1997 and
1996 is indicative of management's assessment of the adequacy of the allowance
for loan losses, given the trends in historical loss experience of the portfolio
and current economic conditions, as well as the fact that the majority of loans
are single-family residential loans and the loan-to-values are generally less
than 80%. Although management uses the best information available, future
adjustments to the allowance may be necessary due to economic, operating,
regulatory and other conditions that may be beyond the Bank's control.
Past due loan balances at March 31, 1997 increased slightly to $2.6 million
compared to $2.4 million at March 31, 1996. Non-accruing loans at March 31, 1997
totaled $1.1 million compared to $1.7 million at March 31, 1996.
Noninterest Income
Noninterest income for the three months ended March 31, 1997 was $24,000
compared to $14,000 for the three months ended March 31, 1996. The increase was
primarily due to a net gain of $6,000 on sales of securities in 1997.
Noninterest Expense
Noninterest expense was $280,000 for the three months ended March 31, 1997
compared to $211,000 for the three months ended March 31, 1996, an increase of
$69,000. The increase was primarily a result of a $52,000 increase in
compensation and benefits, including the
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10
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DSICUSSION AND ANAYLISIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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implementation of an ESOP, and an increase of $26,000 in other operating
expenses, offset in part by a decrease in Federal deposit insurance premiums.
Income Taxes
Income taxes were $269,000 for the three months ended March 31, 1997 compared to
$183,000 for the three months ended March 31, 1996, an increase of $86,000, or
47%. The increase was primarily a result of a $228,000 increase in pretax
earnings.
Impact of New Accounting Standards
In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125 ("SFAS No. 125"), "Accounting for Transfers and Extinguishments of
Liabilities." SFAS No. 125 provides accounting and reporting standard for
transfers and servicing of financial assets and extinguishments of liabilities.
SFAS No. 125 requires a consistent application of a financial-components
approach that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, and derecognizes liabilities when
extinguished. SFAS No. 125 also supersedes SFAS No. 122 and requires that
servicing assets and liabilities be subsequently measured by amortization in
proportion to and over the period of estimated net servicing income or loss and
requires assessment for asset impairment or increases obligation based on their
fair values. SFAS No. 125 applies to transfers and extinguishments occurring
after December 31, 1996, and early or retroactive application is not permitted.
Because the volume and variety of certain transactions will make it difficult
for some entities to comply, some provision have been delayed by SFAS No. 127.
The adoption of SFAS No. 125 did not have a material impact on the results of
operations or financial condition of the Bank.
On March 3, 1997, the Financial Accounting Standards Board (FASB) issued
Statement 128, "Earnings Per Share", which is effective for financial statements
beginning with year end 1997. Statement 128 simplifies the calculation of
earnings per share (EPS) by replacing primary EPS with basic EPS. It also
requires dual presentation of basic EPS and diluted EPS for entities with
complex capital structures. Basic EPS include no dilution and is computed by
dividing income available to common shareholders by the weighted-average common
shares outstanding for the period. Diluted EPS reflects the potential dilution
of securities that could share in earnings, such as stock options, warrants or
other common stock equivalents. The Company expects Statement 128 to have little
impact on its earnings per share calculations in future years, other than
changing terminology from primary EPS to basic EPS. All prior period EPS data
will be restated to conform with the new presentation.
Safe Harbor Statement
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposed of these safe harbor
provisions.
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11
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DSICUSSION AND ANAYLISIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies and expectations of the Company, are generally
identifiable by use of the words "believe", "expect", "intend", "anticipate",
"estimate", "project" or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on the operations
and future prospects of the Company and the subsidiaries include, but are not
limited to, changes in: interest rates, general economic conditions, legislative
/ regulatory changes, monetary and fiscal policies of the U.S. Government,
including policies of the U.S. Treasury and the Federal Reserve Board, the
quality or composition of the loan or investment portfolios, demand for loan
products, deposit flows, competition, demand for financial services in the
Company's market area and accounting principles, policies and guidelines. These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
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12
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits - None
b. Reports on Form 8-K - none
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.
PS FINANCIAL, INC
(Registrant)
By: /s/Kimberly Rooney
-----------------------------
Kimberly Rooney
Chief Executive Officer
(Principal Executive Officer)
May 19, 1997
By: /s/Jeffery Przybyl
-----------------------------
Jeffery Przybyl
Chief Financial Officer
May 19, 1997
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13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDED MARCH 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 450,479
<INT-BEARING-DEPOSITS> 2,031,762
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 34,870,198
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 35,607,679
<ALLOWANCE> 186,000
<TOTAL-ASSETS> 75,118,018
<DEPOSITS> 41,867,407
<SHORT-TERM> 0
<LIABILITIES-OTHER> 774,299
<LONG-TERM> 0
0
0
<COMMON> 21,821
<OTHER-SE> 32,954,492
<TOTAL-LIABILITIES-AND-EQUITY> 75,118,018
<INTEREST-LOAN> 803,916
<INTEREST-INVEST> 499,622
<INTEREST-OTHER> 75,761
<INTEREST-TOTAL> 1,379,299
<INTEREST-DEPOSIT> 424,327
<INTEREST-EXPENSE> 424,327
<INTEREST-INCOME-NET> 954,972
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 280,074
<INCOME-PRETAX> 698,985
<INCOME-PRE-EXTRAORDINARY> 429,796
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429,796
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.11
<LOANS-NON> 1,073,434
<LOANS-PAST> 2,565,944
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 186,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 186,000
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
