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, 1999

                         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 (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 May 10, 1999
Common Stock,  $.01 par value                        1,756,384

<PAGE>

                               PS Financial, Inc.

                                   Form 10-QSB

                        Three Months Ended March 31, 1999

                         Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS                                          Page

 Condensed Consolidated Statements of Financial 
      Condition at March 31, 1999 and December 31, 1998                 3
      
 Condensed Consolidated Statements of Income for
      the three  months ended March 31, 1999 and 1998                   4
      
 Condensed Consolidated Statements of Changes in 
      Stockholders' Equity for the three
      months ended March 31, 1999 and 1998                              5

 Condensed Consolidated Statements of Cash Flows for
      the three months ended March 31, 1999 and 1998                    6
     
 Notes to the Condensed Consolidated Financial 
      Statements as of March 31, 1999                                   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,
                           1999 and December 31, 1998
                  (Dollars in thousands, expect per share data)

                                                      March 31,   December 31,
                                                        1999         1998
                                                    ----------- --------------
ASSETS

Cash on hand and in banks                           $     665     $    448
Interest-bearing deposit accounts in other
  financial institutions                                1,001        3,789
                                                    ---------     --------
         Total cash and cash equivalents                1,666        4,237

Interest-bearing term deposits in other 
   financial  institutions                                159          159
Equity securities available for sale                    3,239        3,278
Securities available-for-sale                          28,586       24,318
Mortgage-backed securities available-for-sale          10,155       11,354
Loans receivable, net                                  57,898       56,822
Federal Home Loan Bank stock                            1,319        1,319
Premises and equipment, net                               446          426
Accrued interest receivable                               783          803
Other assets                                              237           68
                                                    ---------     --------
         Total assets                               $ 104,488     $102,784
                                                    =========     ========

LIABILITIES AND EQUITY
Liabilities
  Deposits                                          $  56,981     $ 55,429
  Advances from borrowers for taxes and insurance         348          578
  Advances from the Federal Home Loan Bank             25,279       23,764
  Accrued interest payable and other liabilities        1,493        1,987
                                                    ---------     --------
           Total liabilities                           84,101       81,758

Stockholders' Equity
  Common stock $0.01 par value per share,
  2,500,000 shares authorized;
  2,182,125 issued and outstanding
                                                           22           22
  Additional paid-in capital                           21,638       21,638
  Retained earnings, substantially restricted           6,282        6,141
  Unearned ESOP shares                                 (1,053)      (1,077)
  Unearned stock awards                                  (876)        (941)
  Treasury stock, at cost, 425,741 and 338,737
     shares respectively                               (5,434)      (4,759)
  Accumulated other comprehensive income                 (192)           2
                                                    ---------     --------
      Total stockholders' equity                       20,387       21,026
                                                    ---------     --------
        Total liabilities and stockholders' equity  $ 104,488     $102,784
                                                    =========     ========

                                       3

<PAGE>





                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (Dollars in thousands, except per share data)


                                                      Three months ended
                                                           March 31,
                                                  ---------------------------
                                                    1999                1998
                                                  --------           --------
Interest income
  Loans                                           $  1,149           $   873
  Securities                                           346               539
  Mortgage-backed securities                           162               159
  Dividend income on equity securities                  67                 0
  Other interest earning assets                         54                33
                                                  --------           -------
     Total interest income                           1,778             1,604

Interest expense
  Deposits                                             574               431
  Federal Home Loan Bank advances                      326               224
                                                  --------           -------
     Total interest expense                            900               655
                                                  --------           -------

Net interest income                                    878               949

Provision for loan losses                                0                 0
                                                  --------           -------

Net interest income after provision for loan           878               949

Noninterest income
   Net gain on sale of securities                        0                23
   Other operating income                               20                13
                                                  --------           -------
      Total noninterest income                          20                36

Noninterest expense
   Compensation and benefits                           221               228
   Occupancy and equipment expense                      31                28
   Data processing                                      78                16
   Federal deposit insurance premiums                    8                 7
   Professional fees                                    13                17
   Other operating expenses                             61                50
                                                  --------           -------
      Total noninterest expense                        412               346
                                                  --------           -------

Income before income tax expense                       486               639
Income tax expense                                     127               225
                                                  --------           -------

Net income                                        $    359           $   414
                                                  ========           =======
Earnings per share
   Basic                                          $   0.22           $  0.21
                                                  ========           =======
   Diluted                                        $   0.22           $  0.21
                                                  ========           =======
                                       4


<PAGE>


                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (Dollars in thousands)

Three Months Ended March 31                            1999           1998
------------------------------------------------------------------------------
Common Shares
Balance at beginning of year                   $     22        $     22
------------------------------------------------------------------------------
Balance at March 31                            $     22        $     22
------------------------------------------------------------------------------
Additional Paid-In Capital
Balance at beginning of year                   $ 21,638        $ 21,602
Change in additional paid in capital                  0              17
------------------------------------------------------------------------------
Balance at March 31                            $ 21,638        $ 21,619
------------------------------------------------------------------------------
Retained Earnings, Substantially Restricted
Balance at beginning of year                   $  6,141        $  5,518
Net income for the period                           359 $ 359       414  $ 414
Dividends declared                                 (218)           (227)
------------------------------------------------------------------------------
Balance at March 31                            $  6,282        $  5,705
------------------------------------------------------------------------------
Unearned ESOP Shares
Balance at beginning of year                   $ (1,077)       $ (1,173)
Change in unearned ESOP shares                       24              24
------------------------------------------------------------------------------
Balance at March 31                            $ (1,053)       $ (1,149)
------------------------------------------------------------------------------
Unearned RRP Shares
Balance at beginning of year                   $   (941)       $ (1,117)
Change in RRP shares                                 43              44
------------------------------------------------------------------------------
Balance at March 31                            $   (898)       $ (1,073)
------------------------------------------------------------------------------
Treasury Stock
Balance at beginning of year                     (4,759)         (1,896)
Change in treasury stock                           (653)              0
------------------------------------------------------------------------------
Balance at March 31                            $ (5,412)       $ (1,896)
------------------------------------------------------------------------------
Accumulated Other Comprehensive Income
Balance at beginning of year                   $      2        $    153
Change in unrealized gain (loss) on securities     (194) (194)      (60)   (60)
available-for-sale net of tax
------------------------------------------------------------------------------
Balance at March 31                            $   (192)       $     93
------------------------------------------------------------------------------
Total Stockholders' Equity                     $ 20,387        $ 23,321
------------------------------------------------------------------------------


------------------------------------------------------------------------------
Comprehensive Income                                    $ 165            $ 354
------------------------------------------------------------------------------

                                       5

<PAGE>



                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
------------------------------------------------------------------------------
                                                           Three months ended
                                                                March 31,
                                                         ---------------------
                                                           1999         1998
                                                         -------     ---------
Cash flows from operating activities
  Net income                                             $  359      $    414
  Adjustments to reconcile net income
    to net cash from operating activities
   Depreciation                                              13            12
   Amortization of premiums and discounts
       on investment and  mortgage-backed 
       securities, net                                        0             5
   Net gain on sales of  securities 
       available-for-sale                                     0           (23)
   RRP Expense                                               43            44
   ESOP Expense                                              24            41
   Change in
     Deferred loan origination fees                         (11)          (12)
     Accrued interest receivable
         and other assets                                  (149)          728
     Other liabilities and deferred
         income taxes                                    (1,374)         (540)
                                                         ------      --------
       Net cash provided by 
          operating activities                           (1,095)          669

Cash flows from investing activities
   Proceeds from sale of securities 
      available-for-sale                                      0         3,500
   Proceeds from sale of mortgage-backed
      securities available-for-sale                           0         1,102
   Purchase of Federal Home Loan Bank
      stock                                                   0          (213)
   Proceeds from repayment of securities
      available-for-sale                                  1,143           510
   Maturities of securities 
      available-for-sale                                  3,500         4,500
   Purchase of securities 
      available-for-sale                                 (6,987)       (3,001)
   Purchase of mortgage-backed securities
      available-for-sale                                      0        (3,014)
   Purchase of equity securities 
      available-for-sale                                      0          (268)
   Net decrease (increase) in 
      interest-bearing term deposits in other
      financial institutions                                  0            (3)
   Net change in loans                                   (1,065)       (4,503)
   Capital expenditures, net                                (33)           (3)
                                                         ------      --------
      Net cash used in investing activities              (3,442)       (1,393)

Cash flows from financing activities
   Net increase (decrease) in deposits                    1,552          (159)
   Dividends paid                                          (218)       (7,756)
   Borrowings from FHLB                                   1,515         4,250
   Purchase of Treasury Stock                              (653)            0
   Net decrease in advance payments by 
      borrowers for insurance and taxes                    (230)         (207)
                                                         ------      --------
      Net cash used in financing activities               1,966        (3,872)



                                       6

<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
------------------------------------------------------------------------------
                                                           Three months ended
                                                                March 31,
                                                         ---------------------
                                                           1999         1998
                                                         -------     ---------

Decrease in cash and cash equivalents                    (2,571)       (4,596)

Cash and cash equivalents at 
   beginning of period                                    4,237         6,290
                                                         ------      --------
Cash and cash equivalents at end of period               $1,666      $  1,694
                                                         ======      ========
Supplemental disclosure of cash flow information
  Cash paid during the period for
    Interest                                             $  915      $    624
    Income taxes                                              0            95

Supplemental schedule of noncash investing activities
    Amount due to broker for purchase of securities         999           410


                                       7

<PAGE>


                               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 PS Financial,  Inc. as of
March 31, 1999 and 1998,  and the results of its  operations for the three month
period then ended.

NOTE 2 - 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, 1999.

                                  Tangible        Core          Risk based
                                  Capital        Capital         Capital
                                 ----------    -----------     ------------
                                               (In thousands)

Regulatory capital               $   15,566    $    15,566     $     15,817

Minimum capital requirement           2,031          4,062            3,714
                                 ----------    -----------     ------------
Excess regulatory capital
 over minimum  requirement       $   13,535    $    11,504     $     12,103
                                 ==========    ===========     ============


                                       8


<PAGE>


                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
              Notes to Condensed Consolidated Financial Statements
--------------------------------------------------------------------------------

NOTE 4 - EARNINGS PER SHARE

A  reconciliation  of the  numerators and  denominators  for earnings per common
share  computations  for the  three  months  ended  March  31,  1999 and 1998 is
presented below.

                                                    Three Months Ended March 31,
                                                   -----------------------------
                                                       1999            1998
                                                   -------------  --------------
Basic Earnings Per Share
  Net income                                       $    358,977   $    413,918
                                                   ============   ============
  Weighted average common shares outstanding          1,670,410      1,956,435
                                                   ============   ============
      Basic Earnings Per Share                     $       0.22   $       0.21
                                                   ============   ============

Earnings Per Share Assuming Dilution
 Net income                                        $    358,977   $    413,918
                                                   ============   ============
 Weighted average common shares outstanding           1,670,410      1,956,435

 Add dilutive effect of assumed exercises
     Incentive stock options                                  -         38,032
     Stock awards                                             -          3,284
 Weighted average common and dilutive 
     potential common shares  outstanding             1,670,410      1,997,751
                                                   ============   ============
     Diluted Earnings Per Share                    $       0.22   $       0.21
                                                   ============   ============


All of the  outstanding  options  at March 31,  1999 and 1998  relate to options
granted in 1997 at an exercise  price of $14.00.  In January  1998,  the Company
paid a special  dividend  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.

                                       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, 1999 and December 31, 1998

Total assets  increased $1.7 million from $102.8 million at December 31, 1998 to
$104.5  million  at March 31,  1999,  due  mainly  to  increases  in  securities
available  for sale of $4.2 million and an increase in net loans  receivable  of
$1.1 million,  partially  offset by a decrease in cash and cash  equivalents  of
$2.5 million.

The Company's net loans receivable  increased by $1.1 million from $56.8 million
at  December  31,  1998  to  $57.9   million  at  March  31,  1999.   Securities
available-for-sale  increased by $4.3 million from $24.3 million at December 31,
1998 to  $28.6  million  at March  31,  1998,  as cash  balances  and  principal
repayments from mortgage backed  securities were invested.  These increases were
mainly  offset by a decrease in cash and cash  equivalents  of $2.5 million from
$4.2  million at  December  31,  1998 to $1.7  million  at March 31,  1999 and a
decrease in mortgage  backed  securities  of $1.2 million from $11.4  million at
December 31, 1998 to $10.2 million at March 31, 1999.

Total liabilities at March 31, 1999 were $84.1 million compared to $81.8 million
at December 31, 1998,  an increase of $2.3  million.  The increase was primarily
due to an  increase  in FHLB  advances of $1.5  million,  from $23.8  million at
December 31, 1998 to $25.3 million at March 31, 1999.  Deposits  also  increased
$1.6 million from $55.4  million at December 31, 1998 to $56.9  million at March
31, 1999.

Stockholders'  equity at March  31,  1999 was $20.4  million  compared  to $21.0
million at December 31, 1998, a decrease of $639,000,  or 3.0%, due primarily to
net  income  of  $359,000,  partially  offset  by a  $194,000  increase  in  the
unrealized  loss  on  securities  available-for-sale,  a  $653,000  increase  in
treasury stock, and payment of regular dividends totaling $218,000.

Comparison  of  Operating  Results for the Three Months Ended March 31, 1999 and
March 31, 1998.

General
Net income for the three months ended March 31, 1999 was $359,000, a decrease of
$55,000,  or 13.3%, from net income of $414,000 for the three months ended March
31, 1998.  The  decrease in net income is  primarily  due to the decrease in the
ratio of interest earning assets to interest bearing liabilities  resulting from
the  Company's  attempt to better  leverage the  Company's  high  capital  level
through the use of FHLB advances to increase interest earning assets.

Interest Income
Interest  income for the three  months  ended  March 31,  1999 was $1.8  million
compared to $1.6 million for the three months ended March 31, 1998,  an increase
of  $174,000,  or 10.9%.  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 mortgage  loans.  The increase in the average
balance  was offset by a decrease  in yield on  interest-earning  assets for the
three months ended March 31, 1999. This decrease was primarily due to an decline
in long term interest rates in general.


Interest Expense
Interest expense for the three months ended March 31, 1999 was $900,000 compared
to $655,000 for the three months ended March 31, 1998,  an increase of $245,000,
or 37.4%.  The  increase in interest  expense was due to the  increased  average
balance of interest-bearing  liabilities during the three months ended March 31,
1999 compared to the three months ended March 31, 1998.

Provision for Loan Losses
The Bank's  provision  for loan losses was zero for the three months ended March
31,  1999 and 1998.  At March 31,  1999,  the Bank's  allowance  for loan losses
totaled  $251,000,  or .4% of total  loans.  The  amount  of the  provision  and


                                       10
<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

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 and
1998 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, 1999  increased to $5.2 million  compared to
$3.8  million at March 31,  1998.  Non-accruing  loans at March 31, 1999 totaled
$563,000 compared to $1.5 million at March 31, 1998.

Noninterest Income
Noninterest  income  for the  three  months  ended  March 31,  1999 was  $20,000
compared to $36,000 for the three months ended March 31, 1998.  The decrease was
primarily due to a $23,000  decrease in net gain on sales of securities in 1999,
partially offset by a $7,000 increase in other income.

Noninterest Expense
Noninterest  expense  was  $412,000  for the three  months  ended March 31, 1999
compared to $346,000 for the three  months ended March 31, 1998,  an increase of
$66,000.  The  increase  was  primarily  a result of a $62,000  increase in data
processing  expense due to the  Company's  decision  to change  data  processing
vendors and an increase of $11,000 in other operating expenses, partially offset
by a $4,000 decrease in professional  fees and a $7,000 decrease in compensation
and benefits.

Income Taxes
Income taxes were $127,000 for the three months ended March 31, 1999 compared to
$225,000 for the three  months  ended March 31, 1998, a decrease of $98,000,  or
43.6%.  The  decrease  was  primarily a result of a $153,000  decrease in pretax
earnings,  as well as an increase in earning from municipal securities which are
tax free for federal tax purposes.

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
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, 1998 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, 1999, $40.2 million, or 91.2%, of the Company's one- to four family

                                       11
<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


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, 1999, adjustable rate mortgage-backed securities
totaled $8.1 million which represented 7.8% 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, 1998,  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  (+/-400  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
-------------------- -------------- ---------------  ---------------  ----------
       +400               $9,915           11%        ($9,837)          (50)%
       +300               12,327           13          (7,425)          (38)
       +200               14,828           15          (4,924)          (25)
       +100               17,313           17          (2,439)          (12)
        ---               19,752           19            ---            ---
       -100               22,419           21           2,667            14
       -200               25,427           23           5,675            29
       -300               28,833           25           9,082            32
       -400               32,488           27          12,737            64

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  1998,  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.

Effective  January 1, 1999,  Statement  of Financial  Standards  (SFAS) No. 134,
"Accounting for Mortgage-Backed  Securities Retained after the Securitization of
Mortgage  Loans  Held  for  Sale  by  a  Mortgage  Banking  Enterprise",  became


                                       13
<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

effective.  SFAS No. 134 allows entities with mortgage banking  operations which
convert  pools of mortgages  into  securities  to classify  these  securities as
available-for-sale,   trading,  or  held-to-maturity,  instead  of  the  current
requirement to classify these pools as trading. This standard is not expected to
have a material effect on the Company.

American Institute of Certified Public  Accountants  Statement of Position 98-5,
effective in 1999, requires all start-up, pre-opening, and organization costs to
be expensed as incurred.  Any such costs  previously  capitalized  for financial
reporting  purposes  must be  written  off to  income  at the start of the year.
Statement  of Position  98-5 is not  expected  to have a material  impact on the
company.

Year 2000

As the year 2000 approaches,  a significant business issue has emerged regarding
how existing application software programs and operating systems can accommodate
the date value for the year 2000. Many existing software  application  products,
including  software  application  products used by the Company and its suppliers
and customers,  were designed to accommodate only a two-digit date value,  which
represents  the year.  For  example,  information  relating  to the year 1996 is
stored in the system as "96".  As a result,  the year 1999 (i.e.  "99") could be
the maximum date value that these systems will be able to process accurately. In
response to concerns about this issue, regulatory agencies have begun to monitor
holding companies' and banks' readiness for the year 2000 as part of the regular
examination  process.  The Company presently  believes that with modification to
existing  software,  conversion to new software,  and  conversion to a new third
party data processor,  the year 2000 issue will not pose significant operational
problems   for  the   Company's   computer   systems  or  business   operations.
Implementation  of the Company's plan to test in-house and out-sourced  software
has been  underway  since the first  quarter of 1998.  Testing  of  applications
considered  to be "mission  critical"  is  scheduled  for  completion  by second
quarter of 1999. Total compliance of all systems is expected by management to be
completed by the third quarter of 1999; management currently estimates that such
compliance  will  cost  $15,000.  The team for the plan is  responsible  for the
implementation  of the plan and reports to the Company's Board of Directors on a
monthly basis until the plan is completed.  However,  if such  modifications and
conversions are not made, or are not completed timely, the year 2000 issue could
have a material  adverse impact on the  operations of the Company.  In addition,
there can be no assurance  that  unforeseen  problems in the Company's  computer
systems,  or the systems of third parties on which the Company's computers rely,
will  not  have an  adverse  effect  on the  Company's  systems  or  operations.
Additionally,  failure of the  Company's  customers'  to  prepare  for year 2000
compatibility  could  have a  significant  adverse  effect  on  such  customer's
operations and  profitability,  thus inhibiting their ability to repay loans and
adversely  affecting  the  Company's  operations.  The  Company  does  not  have
sufficient  information  accumulated from customers of the Company to enable the
Company to assess the degree to which  customers'  operations are susceptible to
potential problems relating to the year 2000 issue.

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.

                                       14

<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------


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.




















                                       15


<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.   None











                                       16

<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 14, 1999                       By: /s/Kimberly Rooney
                                             ------------------------------
                                             Kimberly Rooney
                                             Chief Executive Officer
                                             (Principal Executive Officer)

Date: May 14, 1999                       By: /s/Jeffrey Przybyl
                                             ------------------------------
                                             Jeffrey Przybyl
                                             Chief Financial Officer
                                             (Principal Financial and 
                                                Accounting Officer)