United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[x] Quarterly Report pursuant to
Section 13 or 15 (d) Of The
Securities Exchange Act of 1934
For the Three Months Ended March 31, 2000
[ ] Transition Report under Section 13 or 15(d)
Of The Securities Exchange Act of 1934
Commission File Number 0-28864
PS Financial, Inc.
- --------------------------------------------------------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 36-4101473
- --------------------------------------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
4800 South Pulaski Road, Chicago, Illinois 60632
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(773) 376-3800
- --------------------------------------------------------------------------------
(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
stock, as of the latest practicable date.
Class: SHARES OUTSTANDING at May 10, 2000
- --------------------------------------------------------------------------------
Common Stock, $.01 par value 1,302,057
<PAGE>
PS Financial, Inc.
Form 10-QSB
March 31, 2000
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS Page
Condensed Consolidated Statements of Financial
Condition at March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Income
for the three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Stockholders'
Equity for the three months ended March 31, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 6
Notes to the Condensed Consolidated Financial Statements
as of March 31, 2000 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION March 31,
2000 and December 31, 1999
- --------------------------------------------------------------------------------
(Dollars in thousands, expect per share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- --------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 431 $ 868
Interest-bearing deposit accounts in other financial institutions 5,283 2,437
--------- --------
Total cash and cash equivalents 5,714 3,305
Interest-bearing term deposits in other financial institutions 159 159
Equity securities available for sale 1,249 1,917
Securities available for sale 33,391 33,633
Mortgage-backed securities available-for-sale 5,381 5,636
Loans receivable, net 70,903 72,179
Federal Home Loan Bank stock 1,927 1,927
Premises and equipment, net 530 477
Accrued interest receivable 991 1,051
Other assets 1,221 1,072
--------- --------
Total assets $ 121,466 $121,356
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits $ 65,972 $ 63,983
Advances from borrowers for taxes and insurance 380 733
Advances from the Federal Home Loan Bank 35,417 37,405
Accrued interest payable and other liabilities 5,430 363
--------- --------
Total liabilities 107,199 102,484
Stockholders' Equity
Common stock $0.01 par value per share, 2,500,000 shares authorized;
2,182,125 issued
22 22
Additional paid-in capital 21,648 21,644
Retained earnings, substantially restricted 7,028 6,862
Unearned ESOP shares (956) (981)
Unearned stock awards (723) (767)
Treasury stock, at cost, 855,914 and 488,681 shares, respectively
(10,948) (6,425)
Accumulated other comprehensive loss (1,804) (1,483)
--------- --------
Total stockholders' equity 14,267 18,872
--------- --------
Total liabilities and stockholders' equity $ 121,466 $121,356
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
Three months ended
March 31,
------------------
2000 1999
------- -------
Interest income
Loans $ 1,469 $ 1,149
Securities 557 346
Mortgage-backed securities 91 162
Dividend income on equity investments 29 67
Other interest earning assets 110 54
------- -------
Total interest income 2,256 1,778
Interest expense
Deposits 758 574
Federal Home Loan Bank advances 499 326
------- -------
Total interest expense 1,257 900
------- -------
Net interest income 999 878
Provision for loan losses 7 0
------- -------
Net interest income after provision for loan losses 992 878
Noninterest income
Net loss on sale of securities (58) 0
Other operating income 37 20
------- -------
Total noninterest income (21) 20
Noninterest expense
Compensation and benefits 249 221
Occupancy and equipment expense 38 31
Data processing services 22 78
Federal deposit insurance premiums 3 8
Professional fees 60 13
Other operating expenses 64 61
------- -------
Total noninterest expense 436 412
------- -------
Income before income tax expense 535 486
Income tax expense 149 127
------- -------
Net income $ 386 $ 359
======= =======
Basic earnings per share $ 0.25 $ 0.22
======= =======
Diluted earnings per share $ 0.25 $ 0.22
======= =======
See accompanying notes to consolidated financial statements.
4
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31 2000 1999
- ------------------------------------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Common Stock
Balance at beginning of year $ 22 $ 22
-------- -------
Balance at March 31 $ 22 $ 22
======== =======
Additional Paid-In Capital
Balance at beginning of year $ 21,644 $21,638
Change in additional paid in capital 4 0
-------- -------
Balance at March 31 $ 21,648 $21,638
======== =======
Retained Earnings, Substantially Restricted
Balance at beginning of year $ 6,862 $ 6,141
Net income for the period 386 $ 386 359 $ 359
Dividends declared (220) (218)
-------- -------
Balance at March 31 $ 7,028 $ 6,282
======== =======
Unearned ESOP Shares
Balance at beginning of year $ (981) $(1,077)
Change in unearned ESOP shares 25 24
-------- -------
Balance at March 31 $ (956) $(1,053)
======== =======
Unearned RRP Shares
Balance at beginning of year $ (767) $ (941)
Change in RRP shares 44 43
-------- -------
Balance at March 31 $ (723) $ (898)
======== =======
Treasury Stock
Balance at beginning of year $ (6,425) $(4,759)
Change in treasury stock (4,523) (653)
-------- -------
Balance at March 31 $(10,948) $(5,412)
======== =======
Accumulated Other Comprehensive Income
Balance at beginning of year $ (1,483) $ 2
Change in unrealized gain (loss) on securities
available-for-sale, net of tax
(321) (321) (194) (194)
-------- ----- ------- -----
Balance at March 31 $ (1,804) $ (192)
======== =======
Total Stockholders' Equity $ 14,267 $20,387
======== =======
Comprehensive Income $ 65 $ 165
===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities
Net income $ 386 $ 359
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses 7 -
Depreciation 20 13
Amortization of premiums and discounts on investment and
mortgage-backed securities, net
(22) -
Net loss on sales of securities available-for-sale 58 -
RRP Expense 44 43
ESOP Expense 29 24
Change in
Deferred loan origination fees (10) (11)
Accrued interest receivable and other assets (110) (149)
Other liabilities and deferred income taxes 544 (1,374)
-------- --------
Net cash provided by (used in) operating activities 946 (1,095)
Cash flows from investing activities
Proceeds from repayment of securities available-for-sale 192 1,143
Maturities of securities available-for-sale 637 3,500
Purchase of securities available-for-sale - (6,987)
Net change in loans 1,279 (1,065)
Capital expenditures, net (73) (33)
-------- --------
Net cash provided by (used in) investing activities 2,035 (3,442)
Cash flows from financing activities
Net increase in deposits 1,989 1,552
Dividends paid (220) (218)
Borrowings from FHLB 8,500 1,900
Repayment of FHLB borrowings (10,488) (385)
Purchase of Treasury Stock - (653)
Net decrease in advance payments by borrowers for insurance and taxes
(353) (230)
-------- --------
Net cash provided by (used in) financing activities (572) 1,966
-------- --------
Change in cash and cash equivalents 2,409 (2,571)
Cash and cash equivalents at beginning of period 3,305 4,237
-------- --------
Cash and cash equivalents at end of period $ 5,714 $ 1,666
======== ========
</TABLE>
6
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest $ 1,264 $ 915
Income taxes - -
Supplemental schedule of noncash investing activities
Amount due to broker for purchase of securities - 999
Supplemental schedule of non cash financing activity
Amount due to shareholders for purchase of tendered shares 4,523 -
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
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 condensed 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 condensed 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, 2000 and the results of its operations for the
three month periods ended March 31, 2000 and 1999.
The condensed financial statements should be read in conjunction with the
audited financial statements and accompanying notes (or "notes thereto") of the
Company for the years ended December 31, 1999, 1998 and 1997.
NOTE 2 - EARNINGS PER SHARE
A reconciliation of the numerators and denominators for earnings per common
share computations for the three months ended March 31, 2000 and 1999 is
presented below.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
---------- ----------
<S> <C> <C>
Basic Earnings Per Share
Net income $ 386,418 $ 358,977
========== ==========
Weighted average common shares outstanding 1,532,463 1,670,410
========== ==========
Basic Earnings Per Share $ 0.25 $ 0.22
========== ==========
Earnings Per Share Assuming Dilution
Net income $ 386,418 $ 358,977
========== ==========
Weighted average common shares outstanding 1,532,463 1,670,410
Add dilutive effect of assumed exercises
Incentive stock options - -
Stock awards 10,727 -
========== ==========
Weighted average common and dilutive potential common shares
outstanding 1,543,190 1,670,410
========== ==========
Diluted Earnings Per Share $ 0.25 $ 0.22
========== ==========
</TABLE>
All of the outstanding options at March 31, 2000 and 1999 relate to options
granted in 1997 at an exercise price of $14.00. In January 1998, the Company
paid a special dividend, which was declared in 1997, which resulted in a change
in equity structure. This event allowed the Company to modify the stock option
agreements to adjust the exercise price to $11.02, which was an adjustment in
direct proportion to the decrease in exercise price as compared to market value
as a result of the change in equity structure.
8
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
Notes to Condensed Consolidated Financial Statements
- --------------------------------------------------------------------------------
NOTE 3 - MODIFIED DUTCH TENDER OFFER
On March 1, 2000, the Company offered to purchase up to 333,858 shares of its
common stock through a modified dutch tender offer. Upon expiration of the offer
on March 29, 2000, the Company agreed to purchase 367,233 shares of its common
stock at a price of $12.00 per share. Final payment for these shares took place
on April 7, 2000. Funding for the purchase consisted of $3.5 million of cash,
$577,000 on a variable rate loan with a current rate of 7.25%, and $300,000 on a
variable rate line of credit with a current rate of 8.27%.
NOTE 4 - SUBSEQUENT EVENT
At the 2000 annual meeting held on May 3, 2000, shareholders approved a
stockholder proposal on the sale of the Company, details of which are disclosed
in the proxy statement to the 2000 annual meeting.
9
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Comparison of Financial Condition at March 31, 2000 and December 31, 1999
Total assets increased $110,000 to $121.5 million at March 31, 2000 from $121.4
million at December 31, 1999, due mainly to increases in cash and cash
equivalents of $2.4 million.
The Company's net loans receivable decreased by $1.3 million to $70.9 million at
March 31, 2000 from $72.2 million at December 31, 1999. Securities
available-for-sale decreased by $1.2 million to $40.0 million at March 31, 2000
from $41.2 million at December 31, 1999, as maturities of equity securities and
principal repayments from mortgage backed securities were accumulated to pay for
treasury shares tendered in the dutch auction tender offer. These decreases were
mainly offset by an increase in cash and cash equivalents of $2.4 million to
$5.7 million at March 31, 2000 from $3.3 million at December 31, 1999.
Total liabilities at March 31, 2000 were $107.2 million compared to $102.5
million at December 31, 1999, an increase of $4.7 million. The increase was due
mainly to an accrual recorded in the first quarter of $4.5 million as the
Company was contractually liable to purchase 367,233 shares in the dutch auction
tender offer which expired on March 29, 2000. The settlement of these shares
actually took place on April 7, 2000. During the period, deposits increased $2.0
million to $66.0 million at March 31, 2000 from $64.0 million at December 31,
1999, while FHLB advances decreased $2.0 million to $35.4 million at March 31,
2000 from $37.4 million at December 31, 1999.
Stockholders' equity at March 31, 2000 was $14.3 million compared to $18.9
million at December 31, 1999, a decrease of $4.6 million, or 24.3%, due
primarily to the recording of the liability for the purchase of $4.5 million of
treasury stock in the dutch auction tender offer, a $321,000 increase in the
unrealized loss on securities available-for-sale, and payment of regular
dividends totaling $220,000, partially offset by net income of $386,000.
Comparison of Operating Results for the Three Months Ended March 31, 2000 and
March 31, 1999.
General
Net income for the three months ended March 31, 2000 was $386,000, an increase
of $27,000, or 7.5%, from net income of $359,000 for the three months ended
March 31, 1999. The increase in net income is primarily due to a $17.6 million
increase in interest earning assets.
Interest Income
Interest income for the three months ended March 31, 2000 was $2.3 million
compared to $1.8 million for the three months ended March 31, 1999, an increase
of $478,000, or 26.6%. 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 mortgage loans.
Interest Expense
Interest expense for the three months ended March 31, 2000 was $1.3 million
compared to $900,000 for the three months ended March 31, 1999, an increase of
$357,000, or 39.7%. The increase in interest expense was due to the increased
average balance of interest-bearing liabilities during the three months ended
March 31, 2000 compared to the three months ended March 31, 1999, as well as an
increase in the Company's cost of funds due to an increase in short term deposit
rates.
10
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Provision for Loan Losses
The Bank's provision for loan losses was $7,000 for the three months ended March
31, 2000 compared to zero for the three months ended March 31, 1999. At March
31, 2000, the Bank's allowance for loan losses totaled $274,000, or .2% 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, 1999 was 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-value ratios 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, 2000 decreased to $3.7 million compared to
$5.2 million at March 31, 1999. Included in the past due loan balances are
non-accruing loans at March 31, 2000 totaling $1.3 million compared to $563,000
at March 31, 1999.
Noninterest Income
Noninterest income for the three months ended March 31, 2000 was a loss of
$21,000 compared to income of $20,000 for the three months ended March 31, 1999.
The decrease was primarily due to a $58,000 loss on sales of securities in 2000,
partially offset by a $17,000 increase in other income.
Noninterest Expense
Noninterest expense was $436,000 for the three months ended March 31, 2000
compared to $412,000 for the three months ended March 31, 1999, an increase of
$24,000. The increase was primarily a result of a $28,000 increase in
compensation expense and a $47,000 increase in professional fees, partially
offset by a $56,000 decrease in data processing expenses. Data processing
expense was higher in 1999 due to a system conversion that was completed in the
first quarter of 1999.
Income Taxes
Income taxes were $149,000 for the three months ended March 31, 2000 compared to
$127,000 for the three months ended March 31, 1999, an increase of $22,000, or
17.3%. The increase was primarily a result of a $49,000 increase in pretax
earnings.
Asset/Liability Management
In an attempt to manage its exposure to changes in interest rates, management
monitors the Company's interest rate risk. The Board of Directors meets at least
quarterly to review the Company's interest rate risk position and profitability.
The Board of Directors also reviews the Company's portfolio, formulates
investment strategies and oversees the timing and implementation of transactions
to assure attainment of the Company's objectives in the most effective manner.
In addition, the Board reviews on a quarterly basis the Company's
asset/liability position, including simulations of the effect on the Company's
capital of various interest rate scenarios.
In managing its asset/liability mix, PS Financial, depending on the relationship
between long- and short-term interest rates, market conditions and consumer
preference, often places more emphasis on managing net interest margin than on
11
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
better matching the interest rate sensitivity of its assets and liabilities in
an effort to enhance net interest income. Management believes that the increased
net interest income resulting from a mismatch in the maturity of its asset and
liability portfolios can, during periods of declining or stable interest rates,
provide high enough returns to justify the increased exposure to sudden and
unexpected increases in interest rates.
The Company's interest rate risk increased during the twelve months ended
December 31, 1999 due to the large increase in fixed rate loans, funded by fixed
rate time deposits and FHLB advances. However, management has taken a number of
steps to limit to some extent its interest rate risk. First, the Company focuses
its fixed rate loan originations on loans with maturities of 15 years or less.
At March 31, 2000, $52.3 million, or 94.1%, of the Company's one- to four family
residential loan portfolio consisted of fixed rate loans having original terms
to maturity of 15 years or less. Second, the Company offers balloon loans of 10
years or less in an attempt to decrease its asset/liability mismatch. Third, the
Company has maintained a mortgage-backed securities portfolio with
adjustable-rates. At March 31, 2000, adjustable rate mortgage-backed securities
totaled $5.4 million which represented 4.6% of interest-earning assets. Fourth,
the Company has attempted to reinvest the proceeds of most of its borrowings
into assets with maturities which are anticipated to be similar to those of its
borrowings. Finally, a substantial proportion of the Company's liabilities
consists of passbook savings accounts which are believed by management to be
somewhat less sensitive to interest rate changes than certificate accounts.
Generally, the investment policy of the Company is to invest funds among various
categories of investments and maturities based upon the Company's need for
liquidity, to achieve the proper balance between its desire to minimize risk and
maximize yield, to provide collateral for borrowings, and to fulfill the
Company's asset/liability management policies. Investments generally include
interest-bearing deposits in other federally insured financial institutions,
FHLB stock, U.S. Government securities and municipal securities.
PS Financial's cost of funds responds to changes in interest rates due to the
relatively short-term nature of its deposit portfolio. Consequently, the results
of operations are heavily influenced by the levels of short-term interest rates.
PS Financial offers a range of maturities on its deposit products at competitive
rates and monitors the maturities on an ongoing basis.
12
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
An approach used by management to quantify interest rate risk is net portfolio
value ("NPV") analysis. In essence, this approach calculates the difference
between the present value of liabilities, expected cash flows from assets and
cash flows from off balance sheet contracts. The following table sets forth, at
December 31, 1999, an analysis of the Bank's interest rate risk as measured by
the estimated changes in NPV resulting from instantaneous and sustained parallel
shifts in the yield curve (+/-300 basis points, measured in 100 basis point
increments).
Estimated Increase
Change in Interest Estimated Ratio of NPV (Decrease) in NPV
Rates NPV to ------------------
(Basis Points) Amount Total Assets Amount Percent
- ------------------ -------- -------------- -------- ---------
(dollars in thousands)
+300 $5,194 4.8% $(11,027) (68)%
+200 8,779 7.9 (7,443) (46)
+100 12,498 10.8 (3,724) (23)
--- 16,222 13.5 --- ---
-100 19,757 15.9 3,536 22
-200 23,569 18.3 7,347 45
-300 27,830 20.7 11,608 72
Certain assumptions utilized in assessing interest rate risk were employed in
preparing the preceding table. These assumptions relate to interest rates, loan
prepayment rates, deposit decay rates, and the market values of certain assets
under the various interest rate scenarios. It was also assumed that delinquency
rates will not change as a result of changes in interest rates although there
can be no assurance that this will be the case. Even if interest rates change in
the designated amounts, there can be no assurance that the Company's assets and
liabilities would perform as set forth above. In addition, a change in U.S.
Treasury rates in the designated amounts accompanied by a change in the shape of
the Treasury yield curve would cause significantly different changes to the NPV
than indicated above.
Impact of New Accounting Standards
In June 1999, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value. The
accounting for changes in the fair value (i.e. gains or losses) of a derivative
instrument depends on whether it has been designated and qualifies as part of a
hedging relationship and, if so, on the reason for holding it. If certain
conditions are met, entities may elect to designate a derivative instrument as a
hedge of exposure to change in fair value, cash flows, or foreign currencies. If
the hedged exposure is a fair value exposure, the gain or loss on the derivative
instrument is recognized in earnings in the period of change together with the
offsetting loss or gain on the hedged item attributable to the risk being
hedged. If the hedged exposure is a cash flow exposure, the effective portion of
the gain or loss on the derivative instrument is reported initially as a
component of other comprehensive income (outside earnings) and subsequently
reclassified into earnings when the forecasted transaction affects earnings. Any
amount excluded from the assessment of hedge effectiveness as well as the
ineffective portion of the gain or loss is reported in earnings immediately.
Accounting for foreign currency hedges is similar to accounting for fair value
and cash flow hedges. If the derivative instrument is not designated as a hedge,
the gain or loss is recognized in earnings in the period of change. This
Statement will have no effect on the Company.
13
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Year 2000
The Company successfully completed its Year 2000 changeover without any
problems or disruptions to operations. While management believes that it is
unlikely, there can be no assurance that problems not yet apparent to the
Company or its vendors will not arise as the year progresses. Management will
continue to monitor all business processes and relationships with third parties
to ensure that all processes continue to function properly. Total expenditures
on the Year 2000 project were $11,000.
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 purpose of these safe harbor
provisions. Forward-looking statements, which are based on certain assumption
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.
14
<PAGE>
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
a. None
b. (1) A current report on Form 8-K was filed on March 17, 2000 to
announce fourth quarter and year end earnings
(2) A current report was filed on February 2, 2000 to announce
annual meeting date.
15
<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.
PS FINANCIAL, INC.
(Registrant)
Date: May 15, 2000 By: /s/Kimberly Rooney
--------------------------------
Kimberly Rooney
Chief Executive Officer
(Principal Executive Officer)
Date: May 15, 2000 By: /s/Jeffrey Przybyl
--------------------------------
Jeffrey Przybyl
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16
<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, 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 431
<INT-BEARING-DEPOSITS> 5,283
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,021
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 70,903
<ALLOWANCE> 274
<TOTAL-ASSETS> 121,466
<DEPOSITS> 65,972
<SHORT-TERM> 22,400
<LIABILITIES-OTHER> 5,410
<LONG-TERM> 13,417
0
0
<COMMON> 22
<OTHER-SE> 14,245
<TOTAL-LIABILITIES-AND-EQUITY> 121,466
<INTEREST-LOAN> 1,469
<INTEREST-INVEST> 677
<INTEREST-OTHER> 110
<INTEREST-TOTAL> 2,256
<INTEREST-DEPOSIT> 758
<INTEREST-EXPENSE> 1,257
<INTEREST-INCOME-NET> 999
<LOAN-LOSSES> 7
<SECURITIES-GAINS> (58)
<EXPENSE-OTHER> 436
<INCOME-PRETAX> 535
<INCOME-PRE-EXTRAORDINARY> 535
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 386
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 3.37
<LOANS-NON> 1,513
<LOANS-PAST> 2,140
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 267
<CHARGE-OFFS> 7
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 274
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
