FORM 10-QSB
Securities and Exchange Commission
Washington, D.C. 20549
[x] Quarterly Report pursuant to Section 13 or 15 (d)
Of The Securities Exchange Act of 1934
[ ] For the Three and Nine Months Ended September 30, 1996:
Commission File Number 0-28864
PS Financial, Inc.
(Exact name of the registrant as specified in its charter)
Delaware 36-410473
(State of incorporation) (I.R.S. Employer Identification Number)
4800 South Pulaski Road, Chicago, Illinois 60632
(Address of principal executive offices)
(312) 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 No (First Filing Pursuant to Rule 15d-13(a))
---------- ----------------------------------------
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 October 25, 1996
----- --------------------------------------
Common Stock, $.01 par value -0-
PS Financial, Inc.
Form 10-QSB
Three and Nine Months Ended September 30, 1996
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page
Condensed Consolidated Statements of Financial Condition
at September 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income for the three and
nine months ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Changes in Equity for the
nine months ended September 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995 6
Notes to the Condensed Consolidated Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 8
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Part II - Other Information
Other Information 12
Signatures 13
2
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 1996 and December 31, 1995
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1996 1995
---- ----
ASSETS
Cash on hand and in banks $ 503,995 $ 916,175
Interest-bearing deposit accounts in other
financial institutions 1,413,530 2,837,617
---------------- ---------------
Total cash and cash equivalents 1,917,525 3,753,792
Interest-bearing term deposits in other financial
institutions 248,000 248,000
Securities available-for-sale 15,192,346 13,959,023
Loans receivable, net 35,867,057 34,525,038
Federal Home Loan Bank stock 362,100 341,400
Premises and equipment, net 464,505 466,647
Accrued interest receivable 267,924 180,960
Other assets 183,962 45,456
---------------- ---------------
Total assets $ 54,503,419 $ 53,520,316
================ ===============
LIABILITIES AND EQUITY
Liabilities
Deposits $ 41,632,562 $ 41,046,705
Advances from borrowers for taxes and
insurance 213,240 459,105
Accrued interest payable 61,827 71,874
Other liabilities 327,408 218,232
---------------- ---------------
Total liabilities 42,235,037 41,795,916
Equity
Retained earnings, substantially restricted 12,378,848 11,666,976
Net unrealized gain (loss) on securities
available-for-sale, net of tax (110,466) 57,424
---------------- ---------------
Total equity 12,268,382 11,724,400
---------------- ---------------
Total liabilities and equity $ 54,503,419 $ 53,520,316
================ ===============
- -------------------------------------------------------------------------------------------------------------------
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Nine months ended Three months ended
September 30, September 30
1996 1995 1996 1995
---- ---- ---- ----
Interest income
Loans $ 2,552,018 $ 2,363,576 $ 905,565 $ 790,724
Securities 744,743 605,272 257,280 232,750
Other 121,207 220,133 35,038 54,727
------------ ------------- ------------ ------------
Total interest income 3,417,968 3,188,981 1,197,883 1,078,201
Interest expense
Deposits 1,300,282 1,194,048 432,769 426,969
------------ ------------- ------------ ------------
Net interest income 2,117,686 1,994,933 765,114 651,232
Provision for loan losses 50,000 - - -
------------ ------------- ------------ ------------
Net interest income after provision for loan 2,067,686 1,994,933 765,114 651,232
Noninterest income
Net loss on sale of securities - (357) - (357)
Other 43,998 39,343 13,682 12,589
------------ ------------- ------------ ------------
Total noninterest income 43,998 38,986 13,682 12,232
Noninterest expense
Compensation and benefits 347,951 347,047 127,956 119,838
Occupancy and equipment expense 86,271 76,773 30,026 29,751
Data processing 37,057 32,599 12,582 11,006
Federal insurance premiums 336,218 69,429 288,818 23,058
Other 111,461 104,409 33,869 38,250
------------ ------------- ------------ ------------
Total noninterest expense 918,958 630,257 493,251 221,903
------------ ------------- ------------ ------------
Income before income tax expense 1,192,726 1,403,662 285,545 441,561
Income tax expense 480,854 549,051 123,379 170,848
------------ ------------- ------------ ------------
Net income $ 711,872 $ 854,611 $ 162,166 $ 270,713
============ ============= ============ ============
- -------------------------------------------------------------------------------------------------------------------
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Nine Month Period Ended September 30, 1996 and 1995
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Unrealized
Gain (Loss)
on Securities
Retained Available-
Earnings for-Sale Total
-------- -------- -----
Balance at January 1, 1995 $ 10,612,445 $ (100,942) $ 10,511,503
Net income for the period 854,611 - 854,611
Change in unrealized gain (loss) on
securities available-for-sale, net of tax - 161,118 161,118
---------------- --------------- ---------------
Balance at September 30, 1995 $ 11,467,056 $ 60,176 $ 11,527,232
================ =============== ===============
Balance at January 1, 1996 $ 11,666,976 $ 57,424 $ 11,724,400
Net income for the period 711,872 - 711,872
Change in unrealized gain (loss) on
securities available-for-sale - (167,890) (167,890)
---------------- --------------- ---------------
Balance at September 30, 1996 $ 12,378,848 $ (110,466) $ 12,268,382
================ =============== ===============
- -------------------------------------------------------------------------------------------------------------------
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------
Nine months ended
September 30,
1996 1995
---- ----
Cash flows from operating activities
Net income $ 711,872 $ 854,611
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 24,957 25,355
Amortization of premiums and discounts on
investment and mortgage-backed securities, net 15,374 25,349
Amortization of deferred loan origination fees (30,314) 6,887
Net gains on sales of
Securities available-for-sale - (11,751)
Provision for losses on loans 50,000 -
Federal Home Loan Bank stock dividend - (4,700)
Change in
Accrued interest receivable (86,964) (108,208)
Other assets (138,506) (43,190)
Accrued interest payable and other liabilities 202,029 78,655
------------- -------------
Net cash provided by operating activities 748,448 823,008
Cash flows from investing activities
Net increase in loans receivable (1,361,705) (1,279,804)
Purchase of Federal Home Loan Bank Stock (20,700) (28,100)
Purchase of securities available-for-sale (5,499,758) (6,933,342)
Maturities of securities available-for-sale 3,500,000 2,200,000
Proceeds from sale of securities available-for-sale - 1,018,903
Principal payments on mortgage-backed securities
and collateralized mortgage obligations 480,271 231,221
Net decrease in interest-bearing term deposits in
other financial institutions - 4,705,818
Investment in office properties and equipment, net (22,815) (23,051)
------------- -------------
Net cash used in investing activities (2,924,707) (108,355)
Cash flows from financing activities
Net increase in deposits 585,857 810,807
Net increase (decrease) in advance payments by
borrowers for insurance and taxes (245,865) 80,335
------------- -------------
Net cash provided by financing activities 339,992 891,142
------------- -------------
Increase (decrease) in cash and cash equivalents (1,836,267) 1,605,795
Cash and cash equivalents at beginning of period 3,753,792 1,428,681
------------- -------------
Cash and cash equivalents at end of period $ 1,917,525 $ 3,034,476
============= =============
PS FINANCIAL, INC.
CHICAGO, ILLINOIS
Notes to Condensed Consolidated Financial Statements
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 Preferred Savings Bank
(the Bank) as of September 30, 1996 and 1995, and the results of its
operations for the three and nine months then ended and cash flows for the
nine-month periods then ended.
NOTE 3 - CAPITAL REQUIREMENTS
Pursuant to federal regulations, savings institutions must meet three separate
capital requirements. The following is a reconciliation of the Bank's capital
under generally accepted accounting principles (GAAP) to regulatory capital at
September 30, 1996.
Tangible Core Risk based
Capital Capital Capital
------- ------- -------
(In thousands)
GAAP capital $ 12,268 $ 12,268 $ 12,268
Unrealized loss on securities
available-for-sale 111 111 111
General valuation allowances - - 186
---------- ---------- ----------
Regulatory capital 12,379 12,379 12,565
Minimum capital requirement 820 1,640 1,613
---------- ---------- ----------
Excess regulatory capital over
minimum requirement $ 11,559 $ 10,739 $ 10,952
========== ========== ==========
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Comparison of Financial Condition at September 30, 1996 and December 31, 1995
Total assets at September 30, 1996 were $54.5 million compared to $53.5
million at December 31, 1995, an increase of $1.0 million, or 1.9%. The Bank
increased the amount of net loans receivable by $1.4 million from $34.5
million at December 31, 1995 to $35.9 million at September 30, 1996. In
addition, securities available-for-sale increased by $1.2 million from $14.0
million at December 31, 1995 to $15.2 million at September 30, 1996. These
increases were partially offset by a decrease in cash and cash equivalents of
$1.9 million from $3.8 million at December 31, 1995 to $1.9 million at
September 30, 1996.
Total liabilities at September 30, 1996 were $42.2 million compared to $41.8
million at December 31, 1995, an increase of $439,000. The increase in total
liabilities was primarily due to a $586,000 increase in deposits partially
offset by a $246,000 decrease in advance payments from borrowers for taxes and
insurance due to the payment of taxes in August.
Equity at September 30, 1996 was $12.3 million compared to $11.7 million at
September 30, 1996, an increase of $544,000, or 4.6%, due to net earnings of
$712,000 partially offset by an increase in the unrealized loss on securities
available-for-sale of $168,000.
Comparison of Operating Results for the Three Months Ended September 30, 1996
and September 30, 1995
General
Net earnings for the three months ended September 30, 1996 were $162,000, a
decrease of $109,000, or 40.2%, from net earnings of $271,000 for the three
months ended September 30, 1995. The decrease in net earnings resulted
primarily from an increase in the FDIC insurance premiums of $162,000, net of
tax, as a result of a special SAIF assessment equal to approximately 65.7
basis points on all SAIF deposit balances as of March 31, 1995. This special
assessment was enacted into law on September 30, 1996. The increase in
noninterest expense was partially offset by an increase in the net interest
margin.
Interest Income
Interest income for the three months ended September 30, 1996 was $1.2 million
compared to $1.1 million for the three months ended September 30, 1995, an
increase of $120,000, or 11.1%. 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 net loans receivable. In addition,
the yield on interest-earning assets increased for the three months ended
September 30, 1996. This increase was primarily due to an increase in the
yield on loans and mortgage-backed securities. The increase in the yields on
loans and mortgage-backed securities is reflective of the current rate
environment.
Interest Expense
Interest expense for the three months ended September 30, 1996 was $433,000
compared to $427,000 for the three months ended September 30, 1995, an
increase of $6,000, or 1.4%. The increase of interest expense was primarily
due to the increase in the average balance of interest-bearing deposits for
the three months ended September 30, 1996 compared to the three months ended
September 30, 1995. The increase in the average balance was offset by a
decrease in the average cost of funds for deposits. The decrease in the cost
of funds was primarily due to higher rate certificates of deposit maturing and
repricing at slightly lower rates.
Provision for Loan Losses
The Bank's provision for loan losses was zero for the three months ended
September 30, 1996 and 1995. At September 30, 1996, the Bank's allowance for
loan losses totaled $186,000, or .52% 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 September 30, 1996 and 1995 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 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.
Noninterest Income
Noninterest income for the three months ended September 30, 1996 was $14,000
compared to $12,000 for the three months ended September 30, 1996. The
increase was due to a slight increase in service charges.
Noninterest Expense
Noni terest expense was $493,000 for the three months ended September 30, 1996
compared to $222,000 for the three months ended September 30, 1995, an
increase of $271,000. The increase was primarily a result of a $264,000
increase in FDIC insurance as a result of a one-time special SAIF assessment
of approximately 65.7% of deposit balances as of March 31, 1995. The special
assessment was enacted into law on September 30, 1996.
Income Taxes
Income taxes were $123,000 for the three months ended September 30, 1996
compared to $171,000 for the three months ended September 30, 1995, a decrease
of $48,000, or 28.1%. The decrease was primarily a result of a decrease in
pretax earnings of $156,000.
Comparison of Operating Results for the Nine Months Ended September 30, 1996
and September 30, 1995
General
Net earnings for the nine months ended September 30, 1996 were $712,000, a
decrease of $143,000, or 20.0%, from net earnings of $855,000 for the nine
months ended September 30, 1995. The decrease in net earnings resulted
primarily from an increase in the FDIC insurance premiums of $162,000, net of
tax, as a result of the special SAIF assessment as discussed above.
Interest Income
Interest income for the nine months ended September 30, 1996 was $3.4 million
compared to $3.2 million for the nine months ended September 30, 1995, an
increase of $229,000, or 7.2%. 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 net loans receivable. In addition,
the yield on interest-earning assets increased for the nine months ended
September 30, 1996. This increase was primarily due to an increase in the
yield on loans and mortgage-backed securities. The increase in the yields on
loans and mortgage-backed securities reflects the current rate
environment.
Interest Expense
Interest expense for the nine months ended September 30, 1996 was $1.3 million
compared to $1.2 million for the nine months ended September 30, 1995, an
increase of $106,000, or 8.9%. The increase of interest expense was primarily
due to the increase in the average balance of interest-bearing deposits for
the three months ended September 30, 1996 compared to the three months ended
September 30, 1995. The increase in the average balance was offset by a
decrease in the average cost of funds for deposits. The decrease in the cost
of funds was primarily due to higher rate certificates of deposit maturing and
repricing at slightly lower rates.
Provision for Loan Losses
The Bank's provision for loan losses was $50,000 for the nine months ended
September 30, 1996 compared to zero for the nine months ended September 30,
1995. The increase was primarily a result of increased delinquencies of
multi-family and commercial real estate loans. Management does not anticipate
increased delinquencies to become a trend. At September 30, 1996, the Bank's
allowance for loan losses totaled $186,000, or .52% 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 nine months
ended Sseptember 30, 1995 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 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.
Noninterest Income
Noninterest income for the nine months ended September 30, 1996 was $44,000
compared to $39,000 for the nine months ended September 30, 1996. The increase
was due to a slight increase in service charges.
Noninterest Expense
Noninterest expense was $919,000 for the nine months ended September 30, 1996
compared to $630,000 for the nine months ended September 30, 1995, an increase
of $289,000. The increase was primarily a result of a $267,000 increase in
FDIC insurance as a result of a one-time special SAIF assessment of
approximately 65.7% of deposit balances as of March 31, 1995 as discussed
above. In addition, occupancy and equipment expense increased by $9,000 due to
remodeling expenses.
Income Taxes
Income taxes were $481,000 for the nine months ended September 30, 1996
compared to $549,000 for the nine months ended September 30, 1995, a decrease
of $68,000, or 12.4%. The decrease was primarily a result of a decrease in
pretax earnings of $211,000.
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. None
3
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.
Date: November 25, 1996 By: /s/Kimberly Rooney
-------------------------- ---------------------------------------------
Kimberly Rooney
Chief Executive Officer
(Principal Executive Officer)
Date: November 25, 1996 By: /s/Jeffrey Przybyl
-------------------- ---------------------------------------------
Jeffrey Przybyl
Chief Financial Officer
(Principal Financial and Accounting Officer)
4