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 Six Months Ended June 30, 2000

                [ ] Transition Reports 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       (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 August 14, 2000
--------------------------------------------------------------------------------
Common Stock,  $.01 par value                1,302,057

<PAGE>
                               PS Financial, Inc.

                                   Form 10-QSB

                         Six Months Ended June 30, 2000

                         Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS                                               Page
         Condensed Consolidated Statements of Financial Condition
           at June 30, 2000 and December 31, 1999                             3

         Condensed Consolidated Statements of Income for the
           three months and six  months ended June 30, 2000 and 1999          4

         Condensed Consolidated Statements of Stockholders' Equity
           for the six months ended June 30, 2000 and 1999                    5

         Condensed Consolidated  Statements of Comprehensive
           Income (Loss) for the three months and six months
           ended June 30, 2000 and 1999                                       6

         Condensed Consolidated Statements of Cash Flows for the
           six months ended June 30, 2000 and 1999                            7

         Notes to the Condensed Consolidated Financial Statements
           as of June 30, 2000                                                9

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                           11

                           Part II - Other Information

         Item 1.  Legal Proceedings                                          17

         Item 2.  Changes in Securities and use of Proceeds                  17

         Item 3.  Defaults Upon Senior Securities                            17

         Item 4.  Submission of Matters to a Vote of Security Holders        17

         Item 5.  Other Information                                          17

         Item 6.  Exhibits and Reports on Form 8-K                           17

                                       2

<PAGE>
                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
            CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                       June 30, 2000 and December 31, 1999
                  (Dollars in thousands, expect per share data)
--------------------------------------------------------------------------------

                                                        June 30, December 31,
                                                          2000       1999
                                                       ---------   --------
ASSETS
Cash on hand and in banks                              $     520   $    868
Interest-bearing deposit accounts
   in other  financial institutions                        1,397      2,437
                                                       ---------   --------
   Total cash and cash equivalents                         1,917      3,305

Interest-bearing term deposits in other
   financial  institutions                                   153        159
Equity securities                                            967      1,917
Securities available-for-sale                             33,188     33,633
Mortgage-backed securities
   available-for-sale                                      5,020      5,636
Loans receivable, net                                     69,683     72,179
Federal Home Loan Bank stock                               1,961      1,927
Premises and equipment, net                                  513        477
Accrued interest receivable                                1,033      1,051
Other assets                                               1,187      1,072
                                                       ---------   --------
Total assets                                           $ 115,622   $121,356
                                                       =========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
   Deposits                                            $  62,644   $ 63,983
   Advances from borrowers for taxes and insurance           724        733
   Advances from the Federal Home Loan Bank
     and other borrowings                                 37,246     37,405
   Accrued interest payable and other liabilities            726        363
                                                       ---------   --------
     Total liabilities                                   101,340    102,484

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                             21,652     21,644
   Retained earnings, substantially restricted             7,099      6,862
   Unearned ESOP shares                                     (932)      (981)
   Unearned stock awards                                    (679)      (767)
   Treasury stock, at cost, 855,914 and
     488,681 shares respectively                         (10,948)    (6,425)
   Accumulated other comprehensive loss                   (1,932)    (1,483)
                                                       ---------   --------
     Total stockholders' equity                           14,282     18,872
                                                       ---------   --------
     Total liabilities and stockholders' equity        $ 115,622   $121,356
                                                       =========   ========

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>


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

                                            Six Months Ended  Three Months ended
                                               June 30,            June 30,
                                           ---------------    ----------------
                                            2000     1999      2000      1999
                                           ------   ------    ------    ------
Interest income
  Loans                                    $2,886   $2,377    $1,417    $1,228
  Securities                                1,115      837       558       491
  Mortgage-backed securities                  177      311        86       149
  Dividend income on equity securities         55      133        26        66
  Other interest earning assets               179       99        69        45
                                           ------   ------    ------    ------
    Total interest income                   4,412    3,757     2,156     1,979

Interest expense
  Deposits                                  1,505    1,162       747       588
  Federal Home Loan Bank advances           1,042      728       543       402
                                           ------   ------    ------    ------
    Total interest expense                  2,547    1,890     1,290       990
                                           ------   ------    ------    ------

Net interest income                         1,865    1,867       866       989

Provision for loan losses                      15        0         8         0
                                           ------   ------    ------    ------
Net interest income after provision
  for loan losses                           1,850    1,867       858       989

Noninterest income
  Net gain (loss)  on sale of securities     (103)      18       (45)       18
  Other operating income                       71       42        34        22
                                           ------   ------    ------    ------
    Total noninterest income                  (32)      60       (11)       40

Noninterest expense
  Compensation and benefits                   498      461       249       240
  Occupancy and equipment expense              74       65        36        34
  Data processing services                     45       92        23        14
  Federal deposit insurance premiums            7       16         4         8
  Professional fees                           155       49        95        36
  Other operating expenses                    145      136        81        75
                                           ------   ------    ------    ------
    Total noninterest expense                 924      819       488       407
                                           ------   ------    ------    ------

Income before income tax expense              894    1,108       359       622
Income tax expense                            256      306       107       179
                                           ------   ------    ------    ------

Net income                                 $  638   $  802    $  252    $  443
                                           ======   ======    ======    ======
  Basic earnings per share                 $ 0.47   $ 0.48    $ 0.21    $ 0.27
                                           ======   ======    ======    ======
  Diluted earnings per share               $ 0.47   $ 0.48    $ 0.21    $ 0.27
                                           ======   ======    ======    ======

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>


                               8PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  (Dollars in thousands, except per share data)
--------------------------------------------------------------------------------

Six Months Ended June 30                                     2000        1999
                                                           --------    -------
Common Stock
Balance at beginning of year                               $     22    $    22
                                                           --------    -------
Balance at June 30                                         $     22    $    22
                                                           ========    =======
Additional Paid-In Capital
Balance at beginning of year                               $ 21,644    $21,638
ESOP shares released                                              8          0
                                                           --------    -------
Balance at June 30                                         $ 21,652    $21,638
                                                           ========    =======
Retained Earnings, Substantially Restricted
Balance at beginning of year                               $  6,862    $ 6,141
Net income for the period                                       638        802
Dividends declared, $0.29 $0.26 per share, respectively        (401)      (432)
                                                           --------    -------
Balance at June 30                                         $  7,099    $ 6,511
                                                           ========    =======
Unearned ESOP Shares
Balance at beginning of year                               $   (981)   $(1,077)
ESOP shares released                                             49         48
                                                           --------    -------
Balance at June 30                                         $   (932)   $(1,029)
                                                           ========    =======
Unearned Stock Awards
Balance at beginning of year                               $   (767)   $  (941)
Stock awards earned                                              88         86
                                                           --------    -------
Balance at June 30                                         $   (679)   $  (855)
                                                           ========    =======
Treasury Stock
Balance at beginning of year                                 (6,425)    (4,759)
Purchases of treasury stock                                  (4,523)      (653)
                                                           --------    -------
Balance at June 30                                         $(10,948)   $(5,412)
                                                           ========    =======
Accumulated Other Comprehensive Income
Balance at beginning of year                               $ (1,483)   $     2
Change in unrealized loss on securities
     available-for-sale net of tax                             (449)      (874)
                                                           --------    -------
Balance at June 30                                         $ (1,932)   $  (872)
                                                           ========    =======
Total Stockholders' Equity                                 $ 14,282    $20,003
                                                           ========    =======

     See accompanying notes to condensed consolidated financial statements.

                                       5

<PAGE>

                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
        FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
                             (Dollars in thousands)
--------------------------------------------------------------------------------

                                       Six Months Ended   Three Months ended
                                            June 30,           June 30,
                                        ---------------    ----------------
                                         2000     1999      2000      1999
                                        -----   -------    -----    -------

Net income                              $ 638   $   802    $ 252    $   443
Other Comprehensive oncome:
  Unrealized losses on available
     -for-sale securities                (593)   (1,393)    (237)    (1,081)
  Less reclassification adjustments
      for losses (gains)
      recorded in income                  103       (18)      45        (18)
  Tax effect                               41       537       64        419
                                        -----   -------    -----    -------
    Other comprehensive loss             (449)     (874)    (128)      (680)
                                        -----   -------    -----    -------
Total comprehensive income (loss)       $ 189   $   (72)   $ 124    $  (237)
                                        =====   =======    =====    =======



     See accompanying notes to condensed consolidated financial statements.


                                       6

<PAGE>


                               PS FINANCIAL, INC.
                                CHICAGO, ILLINOIS
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
--------------------------------------------------------------------------------

                                                        Six months ended
                                                            June 30,
                                                      ------------------
                                                        2000       1999
                                                      -------    -------
Cash flows from operating activities
  Net income                                           $  638     $  802
  Adjustments to reconcile net income to
      net cash from operating activities
    Provision for loan losses                              15          -
    Depreciation                                           40         28
    Amortization of premiums and discounts
      on  investment and mortgage-backed
      securities, net                                     (40)        (7)
    Net (gain) loss on sales of securities
      available-for-sale                                  103        (18)
    RRP expense                                            88         86
    ESOP expense                                           56         48
    Change in
      Deferred loan origination fees                      (25)       (47)
      Accrued interest receivable and other assets        (97)      (852)
      Other liabilities and deferred income taxes         405       (640)
                                                      -------    -------
        Net cash provided by (used in) operating
           activities                                   1,183       (600)

Cash flows from investing activities
  Proceeds from repayment of securities
     available-for-sale                                   548      2,097
  Calls on equity securities available-for-sale           910          -
  Proceeds from sale of equity securities
     available-for-sale                                     -         92
  Purchase of securities available-for-sale                 -    (13,961)
  Proceeds from sale of mortgage-backed securities
     available-for-sale
                                                            -      2,028
  Purchase of Federal Home Loan Bank Stock                (34)      (267)
  Proceeds from maturities of securities
     available-for-sale                                     -      3,500
  Net decrease in interest-bearing term deposits
     in other financial institutions                        6          -
  Net change in loans                                   2,506     (5,241)
  Capital expenditures, net                               (76)       (76)
                                                      -------    -------
    Net cash provide by (used in) investing
     activities                                         3,860    (11,828)

Cash flows from financing activities
  Net increase (decrease) in deposits                  (1,339)     2,097
  Dividends paid                                         (401)      (432)
  Proceeds from FHLB and other borrowings              18,374      9,630
  Repayment of FHLB and other borrowings              (18,533)    (1,767)
  Purchase of treasury stock                           (4,523)      (653)
  Net increase (decrease) in advance payments
     by borrowers for insurance and taxes                  (9)       117
                                                      -------    -------
    Net cash provided by (used in)
     financing activities                              (6,431)     8,992
                                                      -------    -------
Decrease in cash and cash equivalents                  (1,388)    (3,436)

Cash and cash equivalents at beginning of period        3,305      4,237
                                                      -------    -------
Cash and cash equivalents at end of period            $ 1,917    $   801
                                                      =======    =======

                                       7

<PAGE>





Supplemental disclosure of cash flow information
  Cash paid during the period for
    Interest                                              $ 2,605    $ 1,848
    Income taxes                                              285          -

Supplemental disclosure of noncash investing  activity
    Amount due broker at June 30 for purchase of
    securities available-for-sale                         $     -    $ 1,200


     See accompanying notes to condensed consolidated financial statements.



                                       8

<PAGE>


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

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 June 30, 2000 and the results of its  operations  for the
three month and six month periods then ended June 30, 2000 and 1999. The results
for the interim  periods  are not  necessarily  indicative  of the results to be
expected for the entire fiscal year.

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 and six months ended June 30, 2000 and
1999 is presented below.
<TABLE>
<CAPTION>

                                                  Six Months Ended    Three Months Ended
                                                      June 30,              June 30,
                                                 ------------------- -------------------
                                                    2000     1999       2000      1999
                                                 --------- --------- --------- ---------
<S>                                              <C>       <C>       <C>       <C>
Basic Earnings Per Share
 Net income                                      $ 638,143 $ 801,984 $ 251,725 $ 443,007
                                                 ========= ========= ========= =========
 Weighted average common shares outstanding      1,358,579 1,661,724 1,182,753 1,652,596
                                                 ========= ========= ========= =========
   Basic Earnings Per Share                      $    0.47 $    0.48 $    0.21 $    0.27
                                                 ========= ========= ========= =========
Earnings Per Share Assuming Dilution
 Net income                                      $ 638,143 $ 801,984 $ 251,725 $ 443,007
                                                 ========= ========= ========= =========
 Weighted average common shares outstanding      1,358,579 1,661,724 1,182,753 1,652,596
 Add dilutive effect of assumed exercises
   Incentive stock options                           7,132         -     5,095         -
   Stock awards                                          -         -         -         -
                                                 --------- --------- --------- ---------
 Weighted average common and dilutive potential
   common shares outstanding                     1,365,711 1,661,724 1,187,848 1,652,596
                                                 ========= ========= ========= =========
   Diluted Earnings Per Share                    $    0.47 $    0.48 $    0.21 $    0.27
                                                 ========= ========= ========= =========
</TABLE>


All of the  outstanding  options  at June 30,  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 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>

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 auction 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 - OTHER MATTERS

At the  2000  annual  meeting  held  on May 3,  2000,  shareholders  approved  a
stockholder  proposal  relating to the  engagement  of an  investment  banker to
explore  the  Company's  strategic  options,  including  a sale of the  Company,
details  of which  are  disclosed  in the  proxy  statement  to the 2000  annual
meeting.




                                       10

<PAGE>

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

Comparison of Financial Condition at June 30, 2000 and December 31, 1999

Total  assets  decreased  $5.8  million to $115.6  million at June 30, 2000 from
$121.4  million at December 31,  1999,  due mainly to decreases in cash and cash
equivalents of $1.4 million, net loans receivable of $2.5 million and securities
available-for-sale of $2.0 million.

The Company's net loans receivable decreased by $2.5 million to $69.7 million at
June 30,  2000 from $72.2  million  at  December  31,  1999 as a result of lower
demand due to rising mortgage rates. Securities  available-for-sale decreased by
$2.0  million to $39.2  million at June 30, 2000 from $41.2  million at December
31, 1999, as  maturities of equity  securities  and  principal  repayments  from
mortgage backed  securities were used to pay for treasury shares tendered in the
dutch auction tender offer. Cash and cash equivalents  decreased by $1.4 million
to $1.9 million at June 30, 2000 from $3.3 million at December 31, 1999.

Total  liabilities  at June 30,  2000 were  $101.3  million  compared  to $102.5
million at December  31, 1999,  a decrease of $1.2  million.  During the period,
deposits  decreased  $1.4  million to $62.6  million at June 30, 2000 from $64.0
million at December 31, 1999 as a result of interest  sensitive deposits seeking
higher yields.

Stockholders'  equity  at June 30,  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 purchase of $4.4 million of treasury stock in the dutch auction
tender  offer,  a  $449,000  increase  in  the  unrealized  loss  on  securities
available-for-sale,   and  payment  of  regular  dividends   totaling  $401,000,
partially  offset by net income of $638,000.

Comparison  of  Operating  Results for the Three  Months Ended June 30, 2000 and
June 30, 1999.

General
Net earnings for the three months ended June 30, 2000 were $252,000,  a decrease
of $191,000,  or 43.1%, from net earnings of $443,000 for the three months ended
June 30, 1999.  The  decrease in net earnings is primarily  due to a decrease in
the ratio of  average  interest  earning  assets  to  average  interest  bearing
liabilities  as a result  of the  completion  of the  Company's  modified  dutch
auction tender offer in which interest  earning assets and additional  debt were
used to fund the purchase. Also contributing to the decrease in earnings was the
loss on sale of securities,  as issuers  exercised call options before  maturity
and an  increase  in  professional  fees due to the proxy  contest at the annual
meeting.

Interest Income
Interest  income  for the three  months  ended  June 30,  2000 was $2.2  million
compared to $2.0 million for the three  months ended June 30, 1999,  an increase
of  $177,000,  or 8.9%.  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 loans receivable.

Interest Expense
Interest  expense  for the three  months  ended June 30,  2000 was $1.3  million
compared to $990,000 for the three  months  ended June 30, 1999,  an increase of
$300,000,  or 30.3%.  The increase in interest  expense was primarily due to the
increased  average  balance  of  interest-bearing  liabilities  during the three
months ended June 30, 2000  compared to the three months ended June 30, 1999, as
well as an increase in the  Company's  cost of funds due to an increase in short
term deposit rates.

                                       11
<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 $8,000 for the three months ended June
30, 2000  compared to zero for the three months ended June 30, 1999. At June 30,
2000, the Bank's  allowance for loan losses totaled  $281,000,  or 0.4% of total
loans.  The  amount  of the  provision  and  allowance  for  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 June 30, 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-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,  delinquent  greater  than 30  days,  at June 30,  2000
remained  the same at $4.1  million  compared to $4.1  million at June 30, 1999.
Included in the past due loan balances are  non-accruing  loans at June 30, 2000
which totaled $532,000 compared to $258,000 at June 30, 1999.

Noninterest Income
Noninterest  income  for the  three  months  ended  June 30,  2000 was a loss of
$11,000  compared to income of $40,000 for the three months ended June 30, 1999.
The decrease was  primarily  due to a net $45,000 loss on the sale of securities
in 2000,  partially  offset by a $12,000 increase in other  noninterest  income,
including $9,000 from the gain on sale of foreclosed assets.

Noninterest Expense
Noninterest  expense  was  $488,000  for the three  months  ended June 30,  2000
compared to $407,000 for the three  months  ended June 30, 1999,  an increase of
$81,000.  The  increase  was  primarily  a  result  of  a  $59,000  increase  in
professional fees related to the proxy contest at the annual meeting.

Income Taxes
Income taxes were  $107,000 for the three months ended June 30, 2000 compared to
$179,000 for the three  months  ended June 30,  1999, a decrease of $72,000,  or
40.2%.  The decrease was primarily  the result of a $263,000  decrease in pretax
earnings.

Comparison of Operating  Results for the Six Months Ended June 30, 2000 and June
30, 1999.

General
Net earnings for the six months ended June 30, 2000 were $638,000, a decrease of
$164,000,  or 20.4%, from net earnings of $802,000 for the six months ended June
30, 1999.  The decrease in net earnings is primarily due to a $106,000  increase
in  professional  fees  and a  $103,000  net  loss on the  sale  of  securities,
partially offset by a $47,000 decrease in data processing fees.

Interest Income
Interest income for the six months ended June 30, 2000 was $4.4 million compared
to $3.8 million for the six months ended June 30, 1999, an increase of $655,000,
or 17.4%.  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 loans receivable.

                                       12

<PAGE>

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

Interest Expense
Interest  expense  for the six  months  ended  June 30,  2000  was $2.5  million
compared to $1.9 million for the six months ended June 30, 1999,  an increase of
$657,000,  or 34.8%.  The increase in interest  expense was primarily due to the
increased average balance of interest-bearing  liabilities during the six months
ended June 30, 2000  compared to the six months ended June 30, 1999,  as well as
an  increase  in the  Company's  cost of funds due to an  increase in short term
deposit rates.

Provision for Loan Losses
The Bank's  provision  for loan losses was $15,000 for the six months ended June
30, 2000  compared to zero for the six months ended June 30,  1999.  At June 30,
2000, the Bank's  allowance for loan losses totaled  $281,000,  or 0.4% of total
loans.  The  amount  of the  provision  and  allowance  for  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 June 30, 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-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 six months ended June 30, 2000 was a loss of $32,000
compared  to income of $60,000  for the six  months  ended  June 30,  1999.  The
decrease was primarily due to a $103,000 loss on the sale of securities in 2000,
partially offset by a $29,000 increase in other income,  including  $18,000 from
the gain on sale of foreclosed assets.

Noninterest Expense
Noninterest expense was $924,000 for the six months ended June 30, 2000 compared
to $819,000 for the six months ended June 30, 1999, an increase of $105,000. The
increase was primarily a result of a $37,000  increase in  compensation  expense
and a $106,000  increase in  professional  fees,  partially  offset by a $47,000
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  $256,000  for the six months ended June 30, 2000  compared to
$306,000  for the six months  ended June 30,  1999,  a decrease of  $50,000,  or
16.3%. The decrease was primarily a result of a decrease 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.

                                       13

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

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 March
31, 2000 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
June 30, 2000,  $52.4  million,  or 94.9% 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 June 30, 2000, adjustable rate mortgage-backed  securities
totaled $5.0 million which represented 4.3% 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.




                                       14
<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
March 31, 2000, 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
         ------------------ ---------  -------------  ---------  --------
                +300          6,361         5.9       (11,041)     (63)
                +200          9,866         8.9        (7,537)     (43)
                +100         13,569        11.7        (3,833)     (22)
                 ---         17,405        14.4           ---      ---
                -100         21,149        16.9         3,746       22
                -200         24,669        19.1         7,267       42
                -300         28,903        21.5        11,501       66

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 Bank'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.

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

                                       15

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

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.





                                       16
<PAGE>

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

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings
         None

Item 2.  Changes in Securities and use of Proceeds
         None

Item 3.  Defaults Upon Senior Securities
         None

Item 4.  Submission of Matters to a Vote of Security Holders

         The Company's  annual meeting of stockholders was held on May
         3, 2000. At the meeting, Jeannine McInerney and Paul J Duggan
         were elected for terms to expire in 2003.  The votes cast for
         and withheld from each such director were as follows:

         Director                         For                 Withheld/Abstain
         Jeannine McInerney            1,428,115                    2,140
         Paul J Duggan                  831,188                       0
         Rocco DiIorio                  596,677                     2,390

         Also  at  the  annual  meeting,  a  proposal  to  ratify  the
         appointment  of Crowe,  Chizek and Company LLP as independent
         auditors  for the fiscal  year ending  December  31, 2000 was
         approved.  The votes cast for and against this proposal,  and
         the number of abstentions  and broker  non-votes with respect
         to the proposal, was as follows

                   For          Against      Abstentions    Broker Non-Votes
                1,370,271       26,912          39,640             0

         Also at the  meeting,  a  stockholder  proposal to proceed to
         effect  a  sale  or a  merger  by  (i)  retaining  a  leading
         qualified  investment  banking firm and (ii)  establishing  a
         committee  to  consider  and  recommend  to the full Board of
         Directors the best available  offer to acquire the Company by
         sale or merger.

                    For          Against      Abstentions    Broker Non-Votes
                  905,716        485,671          7,450             0

Item 5.  Other information
         None

Item 6.  Exhibits and Reports on Form 8-K
         a.  None
         b.  None


                                       17
<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: August 14, 2000         By: /s/Kimberly Rooney
                                  ----------------------------------------------
                                  Kimberly Rooney
                                  Chief Executive Officer
                                  (Principal Executive Officer)

Date: August 14, 2000         By: /s/Jeffrey Przybyl
                                  ----------------------------------------------
                                  Jeffrey Przybyl
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)






                                       18