SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the Fiscal Year Ended December 31, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

   For  the  transition  period  from   ________________  to  ________________
   Commission File Number:  

                               PS FINANCIAL, INC.
 ------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

          Delaware                                  36-4101473
--------------------------------     -------------------------------------------
(State or Other Jurisdiction           (I.R.S. Employer Identification Number)
of Incorporation or Organization

  4800 South Pulaski Road, Chicago, Illinois                   60632-4195
--------------------------------------------------------------------------------
   (Address of Principal Executive Offices)                    (Zip Code)

       Registrant's telephone number, including area code: (773) 376-3800


           Securities Registered Pursuant to Section 12(b) of the Act:
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
--------------------------------------------------------------------------------
                                (Title of Class)

        Indicate  by check mark  whether  the  Registrant  (1) filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  months (or for such shorter  period that the
Registrant was required to file such reports),  and (2) has been subject to such
requirements for the past 90 days.
        YES [X] NO [ ].

        Indicate by check mark if disclosure of  delinquent  filers  pursuant to
Item 405 of  Regulation  S-K (ss.  229.405  of this  chapter)  is not  contained
herein,  and will not be contained,  to the best of Registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-K. [X]

        State issuers' revenues for its most recent fiscal year: $6.9 million

        As of March 22, 1999,  the  Registrant  had  1,756,384  shares of Common
Stock issued and outstanding.

        The aggregate market value of the voting stock held by non-affiliates of
the Registrant,  computed by reference to the average of the bid and asked price
of such stock as of March 22, 1999, was $17.4 million.  (The exclusion from such
amount of the market value of the shares owned by any person shall not be deemed
an  admission  by  the  Registrant  that  such  person  is an  affiliate  of the
Registrant.)

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part II of Form 10-KSB - Annual Report to Stockholders  for the fiscal year
     ended December 31, 1998.

     Part III of Form  10-KSB -  Portions  of The  Proxy  Statement  for  Annual
     Meeting of Stockholders to be held in 1999.


<PAGE>

PART I
------

Item 1. Description of Business

Forward Looking Statements

        When used in this Form 10-KSB or future  filings by the Company with the
Securities  and Exchange  Commission,  in the Company's  press releases or other
public  or  shareholder  communications,  or in oral  statements  made  with the
approval of an authorized  executive  officer,  the words or phrases "would be",
"will  allow",  "intends to",  "will likely  result",  "are expected to",  "will
continue", "is anticipated",  "estimate",  "project", or similar expressions are
intended  to  identify  "forward-looking  statements"  within the meaning of the
Private Securities Litigation Reform Act of 1995.

        The Company wishes to caution readers not to place undue reliance on any
such  forward-looking  statements,  which speak only as of the date made, and to
advise readers that various factors,  including  regional and national  economic
conditions,  substantial  changes in levels of market interest rates, credit and
other risks of lending and investment  activities and competitive and regulatory
factors,  could affect the Company's  financial  performance and could cause the
Company's  actual  results for future  periods to differ  materially  from those
anticipated or projected.

        The  Company  does  not  undertake,   and  specifically   disclaims  any
obligation,  to update any forward-looking  statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.

General
        PS  Financial,  Inc.  (the  "Company"),  a  Delaware  corporation,   was
organized to act as the holding company for Preferred  Savings Bank  ("Preferred
Savings" or the "Bank") upon  completion  of the Company's  conversion  from the
mutual  to the  stock  form of  organization  (the  "Conversion").  The  Company
received  approval from the Office of Thrift  Supervision (the "OTS") to acquire
all of the Common Stock of the Bank to be  outstanding  upon  completion  of the
Conversion. The Conversion was completed on November 26, 1996. All references to
the Company, unless otherwise indicated, at or before November 26, 1996 refer to
the Company and its subsidiary on a  consolidated  basis.  The Company's  Common
Stock is quoted on the National  Association  of  Securities  Dealers  Automated
Quotation ("Nasdaq") National Market System under the symbol "PSFI."

        At December  31, 1998,  the Company had total assets of $102.8  million,
deposits  of $55.4  million  and  stockholders'  equity  of $21.0  million.  The
executive  offices  of the  Company  are  located at 4800  South  Pulaski  Road,
Chicago,  Illinois  60632,  and its  telephone  number at that  address is (773)
376-3800.

        As a  community-oriented  financial  institution,  PS Financial seeks to
serve the  financial  needs of  communities  in its market area.  PS  Financial,
Inc.'s business involves  attracting  deposits from the general public and using
such  deposits,  together  with other  funds,  to  originate  primarily  one- to
four-family  residential  mortgage loans and, to a lesser extent,  multi-family,
commercial  real estate and consumer  loans in its market area. The Company also
invests  in   mortgage-backed   and  other  securities  and  other   permissible
investments.

        The  Company  offers a variety of  accounts  having a range of  interest
rates and terms.  The Company's  deposits  include  savings  accounts,  checking
accounts,  money market  accounts  and  certificate  accounts  with terms of six
months to five years.  In general,  the Company  solicits  deposits  only in its
primary market area and does not accept brokered deposits. In 1998, in an effort
to increase its deposit base, the Company began  accepting  larger term deposits
from outside its primary market area.

Market Area
        PS Financial  serves  primarily the  southwest  side of Chicago and Cook
County,  Illinois  through  its office  located at 4800  South  Pulaski  Road in
Chicago,  Illinois. PS Financial's market area for loans includes primarily Cook
County,  Illinois and, to a lesser extent, portions of DuPage and Will Counties,
Illinois.  The market area for deposits includes primarily the southwest side of
the City of Chicago  including the Garfield  Ridge,  Archer Heights and Brighton
Park  areas of  Chicago.  The  southwest  side of  Chicago  includes  a  diverse
population  of low- and  moderate-income  neighborhoods.  The  housing  in these
neighborhoods  consists  primarily  of two- to  six-unit  apartments  and single
family residences.

        The Company's  market area also includes small strip  shopping  centers,
small  retail  and  medical  offices,  and small- to  medium-size  manufacturing
facilities as well as the Chicago  Metropolitan  area's second largest  airport,
Midway Airport. Management believes the economic and demographic characteristics
of its market area to be generally stable.

Lending Activities
        General.  The principal  lending  activity of the Company is originating
for its  portfolio  fixed rate  mortgage  loans  secured by one- to  four-family
residences  located  primarily in the  Company's  market area.  To a much lesser
extent,  PS Financial also originates  commercial real estate,  multi-family and
consumer  loans in its market area. At December 31, 1998,  the  Company's  total
loans receivable,  net totaled $56.8 million.  See "- Originations and Purchases
of Loans".

                                       2
<PAGE>


        Loan  Portfolio   Composition.   The  following  table  sets  forth  the
composition of the Company's loan portfolio in dollar amounts and in percentages
as of the dates indicated.
<TABLE>
<CAPTION>

                                                             December 31,
                        ------------------------------------------------------------------------------------------
                              1998             1997             1996              1995              1994
                        ---------------- ----------------- ---------------- ------------------ -----------------
                        Amount   Percent   Amount  Percent  Amount  Percent   Amount   Percent   Amount  Percent
                        ------- -------- --------- ------- -------- ------- --------- -------- -------- --------
                                                          (Dollars in Thousands)
<S>                     <C>       <C>      <C>       <C>     <C>      <C>     <C>       <C>     <C>       <C>   
Real Estate Loans:
  One- to four-family   $44,297   77.10%   $29,129   77.07%  $26,998  73.72%  $25,858   73.44%  $24,711   73.62%
  Multi-Family            8,006   13.93      5,636   14.91     6,088  16.62     6,094   17.31     5,929   17.66  
  Commercial              5,135    8.94      2,953    7.81     3,183   8.69     2,953    8.39     2,904    8.65  
  Construction              ---     ---          67   0.18       336   0.92       286    0.81       ---     ---
                        -------  ------    -------  ------   ------- ------   -------  ------   -------   -----
   Total  real estate    
    loans                57,438   99.97     37,785   99.97    36,605  99.95    35,191   99.95    33,544   99.93
                                                    
Consumer Loans:                                     
  Deposit Account            15    0.03         11    0.03        17   0.05        18    0.05        24    0.07
                        -------  ------    -------  ------   ------- ------   -------  ------   -------   -----
   Total loans           57,453  100.00%    37,796  100.00%   36,622 100.00%   35,209  100.00%   33,568  100.00%
                                 ======             ======           ======            ======            ======
                                                    
Less:                                               
  Deferred fees and
     discounts              373                443               493             548               542
  Allowance for loan
     losses                 258                186               186             136               136
                        -------            -------           -------         -------           -------
   Total loans          $56,822            $37,167           $35,943         $34,525           $32,890
                        =======            =======           =======         =======           =======
receivable, net                                      
</TABLE>
                                                   
                                  
                                                                               3
<PAGE>                            
                                  
        The  following  table  s hows  the  composition  of the  Company's  loan
portfolio by fixed- and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>

                                                                 December 31,
                              ----------------------------------------------------------------------------------
                                    1998             1997            1996            1995             1994
                              -------------- ----------------- ---------------- --------------- ----------------
                              Amount Percent  Amount   Percent  Amount  Percent  Amount Percent  Amount  Percent
                                                             (Dollars in Thousands)
<S>                           <C>      <C>       <C>      <C>       <C>       <C>      <C>       <C>      <C>        <C>   
Fixed Rate Loans:
Real Estate
  One- to four-family          $44,297    77.10%  $29,129    77.07%   $26,998    73.72%  $25,858    73.44%   $24,711    73.62%
  Multi-family                   8,006    13.93     5,636    14.91      6,088    16.62     6,094    17.31      5,929    17.66
  Commercial                     5,135     8.94     2,953     7.81      3,183     8.69     2,953     8.39      2,904     8.65
                               -------   ------   -------   ------    -------   ------   -------   ------    -------   ------
   Total real estate loans      57,438    99.97    37,718    99.79     36,269    99.03    34,905    99.14     33,544    99.93
Consumer loans                      15     0.03        11     0.03         17     0.05        16     0.05         15     0.04
                               -------   ------   -------   ------    -------   ------   -------   ------    -------   ------
   Total fixed-rate loans       57,453   100.00    37,729    99.82     36,286    99.08    34,921    99.19     33,559    99.97
                                                                                                                      
Adjustable-Rate Loans:                                                                                                
  Real estate - construction       ---      ---        67     0.18        336     0.92       286     0.81        ---      ---
  Consumer loans                   ---      ---       ---      ---        ---      ---         2      ---          9     0.03
                               -------   ------   -------   ------    -------   ------   -------   ------    -------   ------
 Total adjustable-rate loans       ---      ---        67     0.18        336     0.92       288     0.81          9     0.03
                               -------   ------   -------   ------    -------   ------   -------   ------    -------   ------
Total loans                     57,453   100.00%   37,796   100.00%    36,622   100.00%  35,209    100.00%   33,568    100.00%
                                         ======             ======              ======             ======              ======
                                                                                                                      
Less:                                                                                                                 
  Deferred fees and discounts      373                443                 493                548                 542  
  Allowance for loan losses        258                186                 186                136                 136  
                                   ---                ---                 ---                ---                 ---  
Total loans receivable, net    $56,822            $37,167             $35,943            $34,525             $32,890  
                               =======            =======             =======            =======             =======  
                                                                                                                
</TABLE>

                                                                               4
                                                       
<PAGE>                                                 
                                                     

        The following schedule  illustrates the interest rate sensitivity of the
Company's loan portfolio at December 31, 1998.  Mortgages  which have adjustable
or renegotiable  interest rates are shown as maturing in the period during which
the  contract  is due.  The  schedule  does not  reflect the effects of possible
prepayments or enforcement of due-on-sale clauses.


                                     Real Estate
                        -------------------------------------
                        One- to Four-Family     Multi-family       Commercial
                        ------------------- ----------------- ------------------
                                 Weighted           Weighted            Weighted
                                 Average            Average             Average
                         Amount   Rate       Amount  Rate       Amount   Rate
                        ------------------- ----------------- ------------------
    Due During                           (Dollars in Thousands)
  Period Ending
   December 31,
---------------------
1999                   $    78    8.60%    $   43    9.78%    $  121     11.00%
2000                       817    8.77         23    8.50        369      9.90
2001 and 2002              838    8.60        155    8.99        319      8.08
2003 to 2007            10,783    7.97      4,182    8.58      2,518       9.2
2008 to 2022            31,781    7.73      3,603    8.29      1,808      8.65
                       -------             ------             ------
                       $44,297    7.83%    $8,006    8.46%    $5,135      9.03%
                       =======             ======             ======


                            
                            
                                   Consumer                Total            
                             ----------------------- -----------------------
         Due During                       Weighted               Weighted   
       Period Ending                      Average                Average    
        December 31,           Amount       Rate      Amount       Rate     
---------------------------- ---------- ------------ ---------- -------------
1999                             $15         6.58%   $   257        9.81%
2000                               -           --      1,209        9.11
2001 and 2002                      -           --      1,312        8.52
2003 to 2007                       -           --     17,483        8.29
2008 to 2022                       -           --     37,192        7.83
                                 ---                 -------
Total                            $15         6.58%   $57,453        8.02%
                                 ===                 =======



        The total  amount  of loans  due after  December  31,  1999  which  have
predetermined  interest rates is $57.2 million,  while the total amount of loans
due after such dates which have floating or adjustable interest rates is $0.

                                       5

<PAGE>


        Under  federal  law,  the  aggregate  amount  of loans  that the Bank is
permitted to make to any one borrower is generally  limited to 15% of unimpaired
capital  and  surplus  (25%  if  the  security  for  such  loan  has a  "readily
ascertainable"  value or 30% for  certain  residential  development  loans).  At
December  31,  1998,  based on the  above,  the Bank's  regulatory  loans-to-one
borrower limit was approximately $2.3 million. On the same date, the Bank had no
borrowers with outstanding balances in excess of this amount. As of December 31,
1998,  the largest  dollar  amount  outstanding  or  committed to be lent to one
borrower, or group of related borrowers, was five loans to one borrower totaling
$761,000  secured  by  multi-family,  commercial  and one- to  four-family  real
estate.  The second  largest  group of loans  outstanding  to a group of related
borrowers was three loans totaling  $712,000 secured by multi-family and one- to
four-family  real  estate.  At December 31,  1998,  these loans,  except for one
$369,000  loan  on a  commercial  property  consisting  of  nine  stores  and 11
apartments  which was one month  delinquent,  were performing in accordance with
their terms.

        All of the  Company's  lending is subject  to its  written  underwriting
standards and to loan origination procedures. Decisions on loan applications are
made on the basis of detailed  applications and property valuations  (consistent
with the  Company's  appraisal  policy).  The  loan  applications  are  designed
primarily to determine the borrower's  ability to repay and the more significant
items on the application are verified  through use of credit reports,  financial
statements,  tax returns or confirmations.  All loans originated by PS Financial
are approved by the full board.

        The Company  requires title  insurance or other evidence of title on its
mortgage  loans,  as well as fire and extended  coverage  casualty  insurance in
amounts  at least  equal to the  principal  amount  of the loan or the  value of
improvements  on the property,  depending on the type of loan.  The Company also
requires flood insurance to protect the property  securing its interest when the
property is located in a flood plain.

        One- to Four-Family  Residential Real Estate Lending. The cornerstone of
the Company's  lending  program is the origination of loans secured by mortgages
on  owner-occupied  one- to four-family  residences.  Historically,  the Company
focused  on  fixed  rate  loans  with 15  year  terms  and 25 year  amortization
schedules.  Substantially  all of the Company's one- to four-family  residential
mortgage  originations are secured by properties located in its market area. All
mortgage loans originated by the Company are retained and serviced by it.

        As of December 31, 1998,  $7.5 million or 17.0% of the Company's one- to
four-family  residential  loan  portfolio was secured by properties  with two or
more units. At that date, the average  outstanding  residential loan balance was
approximately $82,000.

        The Company currently offers  fixed-rate  mortgage loans with maturities
from 15 to 25 years and balloon  loans with terms of up to 15 years with 25 year
amortization  schedules.  Interest  rates and fees  charged on these  fixed-rate
loans are established on a regular basis according to market conditions.  See "-
Originations and Purchases of Loans".

                                       6
<PAGE>


        The  Company  also  originates  a  limited  number of loans  secured  by
condominiums  located  in  its  market  area.  Condominium  loans  are  made  on
substantially the same terms as one- to four-family loans. At December 31, 1998,
the Company had $3.7 million of condominium loans.

        PS  Financial  will  generally  lend  up  to  80%  (or  up to  85%  on a
case-by-case  basis) of the lesser of the sales price or appraised  value of the
security property on owner occupied one- to four-family loans. The loan-to-value
ratio on non-owner  occupied,  one- to four-family loans is generally 80% of the
lesser of the sales price or appraised value of the security property. Non-owner
occupied one- to  four-family  loans may pose a greater risk to the Company than
traditional  owner occupied one- to four-family  loans. In underwriting  one- to
four-family  residential real estate loans, the Company currently evaluates both
the borrower's  ability to make  principal,  interest and escrow  payments,  the
value of the property that will secure the loan and debt to income ratios.

        Residential loans do not currently  include  prepayment  penalties,  are
non-assumable and do not produce negative amortization. Properties securing one-
to four-family  residential real estate loans made by PS Financial are appraised
by independent appraisers.

        Since under its current  policy,  the Company  originates  all  mortgage
loans for its  portfolio,  the Company's  loans are not  underwritten  to permit
their sale in the secondary market.

        The Company's residential mortgage loans customarily include due-on-sale
clauses  giving the Company the right to declare  the loan  immediately  due and
payable in the event that,  among other things,  the borrower sells or otherwise
disposes of the property subject to the mortgage and the loan is not repaid.

        Multi-family  and Commercial Real Estate Lending.  In recognition of the
many small apartment  buildings and businesses in the Company's  market area and
in order  to  increase  the  interest  rate  sensitivity  and  yield of its loan
portfolio and to complement residential lending  opportunities,  the Company has
originated permanent  multi-family and commercial real estate loans. At December
31,  1998,  the  Company  had $5.1  million in  commercial  real  estate  loans,
representing 8.9% of the total loan portfolio,  and $8.0 million in multi-family
loans, or 13.9% of the Company's total loan portfolio.

        The Company's  multi-family  and  commercial  real estate loan portfolio
includes loans secured by small apartment buildings,  office buildings and other
income producing properties located in its market area.

        The Company's  permanent  multi-family  and commercial real estate loans
generally carry a maximum term of 15 years and have fixed rates. These loans are
generally  made in amounts of up to 80% of the lesser of the appraised  value or
the  purchase  price  of  the  property.   Appraisals  on  properties   securing
multi-family  and  commercial  real estate loans are performed by an independent
appraiser designated by the Company at the time the loan is made. All appraisals
on  multi-family  or commercial  real estate loans are reviewed by the Company's
board.

                                       7
<PAGE>


        In addition, the Company's underwriting  procedures require verification
of the  borrower's  credit  history,  income and financial  statements,  banking
relationships,  references and income projections for the property.  The Company
obtains personal guarantees on these loans.

        The table below sets forth, by type of security property, the number and
amount  of the  Company's  multi-family  and  commercial  real  estate  loans at
December 31, 1998. Substantially all of the loans referred to in the table below
are secured by properties located in the Company's market area.

                                                  Outstanding       Amount
                                     Number of     Principal    Non-Performing
                                       Loans        Balance      or of Concern
                                     --------- --------------- ----------------
                                               (Dollars in Thousands)
Commercial Real Estate
  Small business facilities              30         $4,118           $ -
  Office Buildings                        7          1,017             -
Multi-family                             45          8,006             -
                                         --          -----           ---
  Total multi-family and commercial      82        $13,141           $ -
  real estate loans                      ==        =======           ===


        At December 31, 1998, the Company's  largest  commercial  real estate or
multi-family loan outstanding  totaled $369,000 and was secured by a 9 store and
11 unit apartment  complex  located in Berwyn,  Illinois.  At December 31, 1998,
this property was one month delinquent.

        Multi-family and commercial real estate loans may present a higher level
of risk than loans secured by one- to four-family residences.  This greater risk
is due to several factors, including the concentration of principal in a limited
number of loans and  borrowers,  the effects of general  economic  conditions on
income  producing  properties  and the increased  difficulty  of evaluating  and
monitoring   these  types  of  loans.  At  December  31,  1998,  there  were  no
multi-family or commercial real estate loans delinquent 90 days or more.

        Construction Lending. The Company occasionally  purchases  participation
interests in construction  loans to builders or developers for the  construction
of small  residential or commercial  properties.  Such  properties are generally
located in Illinois. At December 31, 1998, the Company had no construction loans
outstanding.

        Consumer Lending. Federally chartered savings institutions may invest up
to 35% of assets in consumer loans (including any investment in investment grade
and commercial  paper and corporate  debt  securities).  The Company  originates
consumer loans secured by deposit accounts. At December 31, 1998, consumer loans
totaled  $15,000,  or 0.03% of the Company's total loan  portfolio.  In order to
increase  the  yield  and  interest  rate  sensitivity  of its  loan  portfolio,
management is also considering offering various types of home equity loans.

                                       8

<PAGE>


Originations and Purchases of Loans

        Real  estate  loans  are  originated  by PS  Financial's  staff  through
referrals from existing  customers or real estate  agents.  In order to increase
the size of the loan portfolio, the Company has utilized the services of an area
mortgage broker who receives a fee for each mortgage originated for the Company.
The broker  serves the same market area as the Company,  and the loans share the
same characteristics of the Company's existing loans. Through December 31, 1998,
the Company originated $17.9 million loans through this broker.

        The  Company's  ability to originate  loans is dependent  upon  customer
demand  for loans in its  market  and to a  limited  extent,  various  marketing
efforts.  Demand is affected by both the local  economy  and the  interest  rate
environment.  See "- Market Area". Under current policy, all loans originated by
PS Financial are retained in the Company's portfolio.

        In the past,  the  Company  has  purchased  participation  interests  in
construction loans originated by a local financial  institution.  All such loans
are secured. At December 31, 1998, the Company had no participation interests in
construction  loans.  The Company  intends to continue to purchase such loans in
the future, subject to market conditions.

        From time to time, in order to supplement loan originations, the Company
has acquired  mortgage-backed and other securities which are held,  depending on
the  investment  intent,  in  the  "held-to-maturity"  or   "available-for-sale"
portfolios. See "- Investment Activities - Mortgage- Backed Securities" and Note
2 to the  Notes  to  Consolidated  Financial  Statements  in the  Annual  Report
included herein as exhibit 13.

        The  following  table  shows the loan  origination,  purchase,  sale and
repayment activities of the Company for the periods indicated.


                                                  Year Ended December 31,
                                            ----------------------------------
                                              1998    1997     1996     1995
                                            ----------------------------------
                                                       (In Thousands)
Originations by type:
 Real estate - one- to four-family          $22,733    8,207   $6,351   $5,162
             - multi-family                   4,314      460    2,678      821
             - commercial                     2,696      955    1,077    1,270
 Passbook                                        12        -       15        9
                                                 --        -       --        -
     Total loans originated                  29,755    9,622   10,121    7,262
                                            -------   ------   ------   ------

Purchases
 Real estate - construction                       0        8      574      551

Repayments
 Principal repayment                         10,098    8,456    9,282    6,172
 (Increase) decrease in other items, net(1)       2     (50)      (5)        6
                                            -------   ------   ------   ------
                                            $19,655   $1,224   $1,418   $1,635
                                            =======   ======   ======   ======

Footnotes 
(1)  Other items  consist  primarily of deferred fees and the allowance for loan
     losses.

                                       9
<PAGE>


Delinquencies and Non-Performing Assets

        Delinquency Procedures. When a borrower fails to make a required payment
on a loan,  the  Company  attempts to cure the  delinquency  by  contacting  the
borrower.  Generally,  Company personnel work with the delinquent  borrower on a
case by case basis to solve the delinquency. Generally, a late notice is sent on
all  delinquent  loans over 20 days  delinquent.  Additional  written and verbal
contacts  may be made with the  borrower  between  30 and 60 days  after the due
date.  If the loan is  contractually  delinquent  for 90 days,  the  Company may
institute  appropriate action to foreclose on the property. If a borrower agrees
to a payment  plan to bring a delinquent  loan  current,  a  designated  lending
officer  monitors  the  loan  for  compliance  with the  payment  agreement.  If
foreclosed,  the  property  is sold at public sale and may be  purchased  by the
Company.

        Real estate  acquired by PS Financial as a result of  foreclosure  or by
deed in lieu of foreclosure is classified as real estate owned until it is sold.
When property is acquired by foreclosure or deed in lieu of  foreclosure,  it is
recorded at the lower of cost or  estimated  fair value less  estimated  selling
costs.  After  acquisition,  all costs incurred in maintaining  the property are
expensed.  Costs relating to the  development  and  improvement of the property,
however, are capitalized. In 1998, one commercial business property was acquired
through foreclosure and subsequently sold.

                                       10
<PAGE>


        The following table sets forth the Company's loan delinquencies by type,
by amount and by percentage of type at December 31, 1998.

<TABLE>
<CAPTION>

                                                           Loans Delinquent For:
                              ---------------------------------------------------------------------------------
                                      30-59 Days                 60-89 Days              90 Days and Over
                              ---------------------------------------------------------------------------------
                                                Percent                    Percent                    Percent
                                                of Loan                    of Loan                    of Loan
                              Number   Amount  Category  Number   Amount  Category  Number   Amount  Category
                              ---------------------------------------------------------------------------------
                                                           (Dollars in Thousands)
Real Estate:
<S>                              <C>   <C>     <C>          <C>   <C>    <C>          <C>  <C>      <C>   
    One- to Four-Family             9     $649    1.47%       3     $367   0.83%        7   $1,149   2.59%
    Multi-family                    -        -      --        -        -     --         -        -     --
    Commercial real estate          1      369    7.19        -        -     --         -        -     --
    Construction or                 -        -      --        -        -     --         -        -     --
development
    Consumer                        -        -      --        -        -     --         -        -     --
    Commercial Business             -        -      --        -        -     --         -        -     --

Consumer                            -        -      --        -        -     --         -        -     --
                                  ---   ------              ---     ----              ---   ------
        Total                      10   $1,018    1.77%       3     $367   0.64%        7   $1,149   2.00%
                                  ===   ======              ===     ====              ===   ======
</TABLE>


                                   Total Delinquent Loans
                                 ----------------------------
                                     Percent
                                     of Loan
                                  Number  Amount   Category
                                 ----------------------------
Real Estate:
    One- to Four-Family                19  $2,165   4.89%
    Multi-family                        -       -     --
    Commercial real estate              1     369   7.19
    Construction or development         -       -     --
    Consumer                            -       -     --
    Commercial Business                 -       -     --

Consumer                                -       -     --
                                      ---  ------
        Total                          20  $2,534   4.41%
                                      ===  ======


                                       11
<PAGE>


        Classification of Assets.  Federal regulations require that each savings
institution  classify  its own  assets  on a  regular  basis.  In  addition,  in
connection  with  examinations of savings  institutions,  OTS and FDIC examiners
have authority to identify  problem assets and, if appropriate,  require them to
be classified.  There are three classifications for problem assets: Substandard,
Doubtful and Loss.  Substandard  assets have one or more defined  weaknesses and
are characterized by the distinct possibility that the Company will sustain some
loss if the deficiencies are not corrected.  Doubtful assets have the weaknesses
of substandard assets, with the additional  characteristics  that the weaknesses
make collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable,  and there is a high possibility of loss. An
asset classified loss is considered  uncollectible and of such little value that
continuance  as an  asset  on  the  balance  sheet  of  the  institution  is not
warranted.  Assets classified as substandard or doubtful require the institution
to establish prudent general  allowances for loan losses. If an asset or portion
thereof is classified as a loss, the institution charges off such amount against
the loan loss  allowance.  If an  institution  does not agree with an examiner's
classification  of an asset,  it may appeal this  determination  to the District
Director of the OTS.

        On the basis of management's review of its assets, at December 31, 1998,
the Company had  classified a total of $823,000 of its loans  consisting of one-
to four-family residential real estate as follows:


                                     December 31, 1998
                                     -----------------
                                       (In Thousands)

     Substandard.....................      $823
     Doubtful........................       ---
     Loss............................       ---
                                          -----
          Total......................      $823
                                          =====


        At December 31, 1998, PS  Financial's  classified  assets consist of the
non-performing  loans. As of the date hereof,  these asset  classifications  are
materially  consistent with those of the OTS and FDIC. When loans are classified
as a "loss," they are charged off against the loan loss allowance.

                                       12
<PAGE>


        Non-Performing  Assets.  The table  below  sets  forth the  amounts  and
categories of  non-performing  assets in the Company's loan  portfolio.  For all
years  presented,  the Company has had no troubled  debt  restructurings  (which
involve  forgiving  a portion of interest  or  principal  on any loans or making
loans at a rate  materially less than that of market rates).  Foreclosed  assets
include assets acquired in settlement of loans.


                                               December 31,
                               --------------------------------------------
                                1998     1997      1996      1995     1994
                                ----     ----      ----      ----     ----
                                         (Dollars in Thousands)
Non-accruing loans over 
90 days delinquent:
    One- to four-family         $777     $264      $268       $775     $334
    Multi-family                   -        -         -          -        -
    Commercial real estate         -        -         -          -        -
    Commercial business            -      207         -          -        -
                                ----     ----      ----       ----     ----
        Total                    777      471       268        775      334
                                ----     ----      ----       ----     ----

Accruing loans delinquent 
more than 90 days
                                  372     378        14          -        -
Foreclosed assets                   -       -         -          -        -
                                    -       -         -          -        -

Total non-performing 
assets                         $1,149    $849      $282       $775     $334
                               ======    ====      ====       ====     ====
Total as a percentage of 
total assets                     1.11%   0.97%     0.37%      1.45%    0.65%
                                 ====    ====      ====       ====     ====

        For the year ended December 31, 1998,  gross interest income which would
have been recorded had the  non-accruing  loans been current in accordance  with
their  original  terms  amounted to $70,000.  The amounts that were  included in
interest income on such loans were $29,000.

        At December 31, 1998, the Company's  non-accruing  loans greater than 90
days  included  three  loans  secured  by  single-family  real  estate  totaling
$768,000.  One loan, secured by a single-family home in Burr Ridge, IL, totaling
$616,000, was resolved in the first quarter of 1999, with no loss of principal.

        Other Assets of Concern.  In addition to the  non-performing  assets set
forth in the table above, as of December 31, 1998,  there were no loans or other
assets  with  respect  to which  known  information  about the  possible  credit
problems of the  borrowers  or the cash flows of the  security  properties  have
caused  management to have concerns as to the ability of the borrowers to comply
with present loan repayment  terms and which may result in the future  inclusion
of such items in the non-performing asset categories.


                                       13
<PAGE>



        The following  table sets forth an analysis of the  Company's  allowance
for loan losses.

<TABLE>
<CAPTION>



                                                                  Year Ended December 31,
                                               --------------------------------------------------------------
                                                1998         1997          1996          1995           1994
                                               --------- ------------- ------------- ------------- ----------
                                                                   (Dollars in Thousands)

<S>                                            <C>           <C>          <C>            <C>           <C>
Balance at beginning of period                   $186          $186         $136           $136          $94
Charge-offs                                       (19)            -            -              -            -
Recoveries                                         11             -            -              -            -
                                                   --             -            -              -            -
Net charge-offs                                    (8)            -            -              -            -
Additions charged to operations                    80             -           50              -           42
                                                 ----          ----         ----           ----         ----
Balance at end of period                          258          $186         $186           $136         $136
                                                 ====          ====         ====           ====         ====

Ratio of net charge-offs during the period to
average loans outstanding during the period      0.00%         0.00%        0.00%          0.00%        0.00%
                                                 ====          ====         ====           ====         ====
                                                                                                  
                                                                                                  
Ratio of net charge-offs during the period                                                        
to average non-performing assets                 0.00%         0.00%        0.00%          0.00%        0.00%
                                                 ====          ====         ====           ====         ====
                                                                                                  
                                                                                                  
Ratio of allowance for loan losses to            0.45%         0.50%        0.51%          0.39%        0.41%
total loans                                      ====          ====         ====           ====         ====
                                                                                                 
</TABLE>
                                                                


                                                                              14
<PAGE>


The  distribution  of the  Company's  allowance  for loan  losses  at the  dates
indicated is summarized as follows:
<TABLE>
<CAPTION>

                                                                  December 31,
                         ---------------------------------------------------------------------------------------------
                                      1998                           1997                          1996
                         -----------------------------  -----------------------------  -------------------------------
                                               Percent                        Percent                        Percent
                                              of Loans                       of Loans                        of Loans
                                      Loan     in Each               Loan     in Each              Loan      in Each
                         Amount of  Amounts   Category  Amount of  Amounts   Category  Amount of  Amounts    Category
                         Loan Loss     by     to Total  Loan Loss     by     to Total  Loan Loss     by      to Total
                         Allowance  Category    Loans   Allowance  Category    Loans   Allowance  Category    Loans
                         --------- ---------- --------  --------- --------- ---------  --------- --------- -----------
                                                               (In Thousands)                               
<S>                           <C>    <C>       <C>        <C>      <C>         <C>        <C>      <C>        <C>   
One- to four-family           $ 44   $44,297   77.10%     $ 30     $29,129     77.07%     $ 27     $26,998    73.72%
Multi-family                    24     8,006   13.93        15       5,636     14.91        15       6,088    16.62
Commercial real estate          12     5,135    8.94         7       2,953      7.81         8       3,183     8.69
Construction                     -         -      --         1          67      0.18         1         336     0.92
Consumer                         -        15    0.03         -          11      0.03         1          17     0.05
Unallocated                    178         -      --       133           -        --        134          -       --
                              ----   -------  ------      ----     -------    ------      ----     -------  -------
    Total                     $258   $57,453  100.00%     $186     $37,796    100.00%     $186     $36,622   100.00%
                              ====   =======  ======      ====     =======    ======      ====     =======  =======
</TABLE>

<TABLE>
<CAPTION>
                                                December 31,
                         ----------------------------------------------------------
                                     1995                         1994
                         --------------------------- ------------------------------
                                             Percent                      Percent
                                            of Loans                      of Loans
                                   Loan      in Each            Loan      in Each
                         Amount of Amounts  Category  Amount of Amounts   Category
                         Loan Loss    by    to Total  Loan Loss    by     to Total
                         Allowance Category   Loans   Allowance Category   Loans
                         --------- -------- -------- ---------- --------- ---------
                                               (In Thousands)
<S>                        <C>      <C>      <C>        <C>      <C>         <C>   
One- to four-family        $ 26     $25,858  73.44%     $ 25     $24,711     73.62%
Multi-family                 15       6,094  17.31        15       5,929     17.66
Commercial real estate        7       2,953   8.39         7       2,904      8.65
Construction                  1         286   0.81         -           -       ---
Consumer                      -          18   0.05         -          24      0.07
Unallocated                  87           -    ---        89           -       ---
                           ----     ------- ------      ----     -------   -------
    Total                  $136     $35,209 100.00%     $136     $33,568    100.00%
                           ====     ======= ======      ====     =======   =======
</TABLE>



                                       15
<PAGE>


        The  allowance  for loan losses is  established  through a provision for
loan losses  charged to earnings  based on  management's  evaluation of the risk
inherent in its entire loan portfolio. Such evaluation,  which includes a review
of all  loans  of  which  full  collectibility  may not be  reasonably  assured,
considers the market value of the underlying collateral,  growth and composition
of the loan portfolio,  delinquency  trends,  adverse situations that may affect
the borrower's ability to repay,  prevailing and projected  economic  conditions
and  other  factors  that  warrant  recognition  in  providing  for an  adequate
allowance  for loan losses.  In  determining  the general  reserves  under these
policies,  historical charge-offs and recoveries,  changes in the mix and levels
of  the  various  types  of  loans,  net  realizable  values,  the  current  and
prospective loan portfolio and current economic conditions are considered.

        While management believes that it uses the best information available to
determine  the  allowance  for  loan  losses,  unforeseen  economic  and  market
conditions could result in adjustments to the allowance for loan losses, and net
earnings could be significantly  affected, if circumstances differ substantially
from the assumptions used in making the final determination.

        Investment Activities

        General.  PS Financial must maintain  minimum levels of investments  and
other assets that qualify as liquid assets under OTS regulations.  Liquidity may
increase or decrease  depending upon the  availability  of funds and comparative
yields on  investments  in  relation  to the return on loans.  Historically,  PS
Financial has maintained liquid assets at levels significantly above the minimum
requirements  imposed by the OTS regulations and above levels believed  adequate
to meet the  requirements  of normal  operations,  including  potential  deposit
outflows.  At December  31,  1998,  the Bank's  liquidity  ratio for  regulatory
purposes was 36.2%.

        Generally, the investment policy of the Company is to invest funds among
categories   of   investments   and   maturities   based   upon  the   Company's
asset/liability  management  policies,  investment  quality,  loan  and  deposit
volume, liquidity needs and performance objectives.  Prior to December 31, 1993,
the Company recorded its investments in its investment  securities  portfolio at
the lower of cost or current  market value if held for sale or at amortized cost
if held for  investment.  Unrealized  declines in the market value of securities
held to  maturity  were not  reflected  in the  financial  statements;  however,
unrealized  losses in the market value of securities held for sale were recorded
as a charge to current  earnings.  Effective  December  31,  1993,  PS Financial
adopted SFAS 115. As required by SFAS 115,  securities are classified into three
categories:  trading,  held-to-maturity and available-for-sale.  Securities that
are bought and held principally for the purpose of selling them in the near term
are  classified  as  trading  securities  and are  reported  at fair  value with
unrealized  gains and losses  included  in  trading  account  activities  in the
statement of operations.  Securities  that PS Financial has the positive  intent
and ability to hold to maturity are classified as held-to-maturity  and reported
at  amortized   cost.  All  other   securities  not  classified  as  trading  or
held-to-maturity are classified as available-for-sale. At December 31, 1998, the
Company had no  securities  which were  classified  as trading and no securities
classified as  held-to-maturity.  Available-for-sale  securities are reported at
fair value with unrealized gains and losses included,  on an after-tax basis, in
a separate component of retained  earnings.  At December 31, 1998, $27.6 million
of securities and $11.4 million of mortgage-backed securities were classified as
available-for-sale.

                                       16
<PAGE>



        Securities.  In order to supplement loan volume, invest excess liquidity
and increase  holdings of short and medium term assets,  the Company  invests in
liquidity investments and in high-quality investments, such as U.S. Treasury and
agency  obligations.  At December 31, 1998 and December 31, 1997,  the Company's
securities portfolio totaled $27.6 million and $33.5 million,  respectively.  At
December 31, 1998, the Company did not own any investment securities of a single
issuer which exceeded 10% of the Company's  retained  earnings,  other than U.S.
government securities and federal agency obligations. See Note 2 of the Notes to
the  Consolidated  Financial  Statements in the Annual Report attached hereto as
Exhibit  13  for  additional  information  regarding  the  Company's  securities
portfolio.

                                       17
<PAGE>


        The  following  table  sets  forth  the  composition  of  the  Company's
securities and other interest-earning assets at the dates indicated.
<TABLE>
<CAPTION>


                                                                December 31,
                                          ----------------------------------------------------------
                                                 1998                1997               1996
                                          ----------------- ------------------- --------------------
                                          Carrying    % of    Carrying   % of    Carrying   % of
                                           Value     Total     Value    Total     Value    Total
                                          --------- ------- ---------- -------- --------- ----------
Securities available-for-sale
<S>                                      <C>                 <C>               <C> 
    U.S. government securities             $     -    0.00%    $2,999    8.96%   $13,993   58.11%
    Federal agency obligations              14,951   54.18     30,460   91.04     10,087   41.89
    Equity Securities                        9,367   33.94          -       0          -       0
    Municipal securities                     3,278   11.88          -       0          -       0
                                           -------  ------     ------  ------    -------  ------
        Total securities                   $27,596  100.00%    33,459  100.00%   $24,080  100.00%
                                           =======  ======     ======  ======    ======= =======

Average remaining life of securities           13.12 yrs.          6.53 yrs.          3.19 yrs.

Other interest-earning assets:
    Interest-bearing deposits with other    $3,948   74.96%    6,059~   89.64%    $8,427   95.88%
banks
    Federal Home Loan Bank Stock             1,319   25.04        700   10.36          0    4.12
                                           -------  ------     ------  ------    -------  ------
        Total                               $5,267  100.00%    $6,759  100.00%    $8,789  100.00%
                                           =======  ======     ======  ======    =======  ======
</TABLE>





                                       18
<PAGE>


        The  composition and maturities of the securities  portfolio,  excluding
FHLB stock, are indicated in the following table.
<TABLE>
<CAPTION>


                                                          December 31, 1998
                         ------------------------------------------------------------------------------------
                          Less Than     1 to 5          5 to 10        Over
                            1 Year       Years           Years       10 Years        Total Securities
                         ----------- -------------- -------------- ------------- ----------------------------
                           Carrying    Carrying         Carrying      Carrying      Carrying    Fair Value
                             Value       Value            Value         Value        Value
                         ----------- -------------- -------------- ------------- ------------- --------------
                                                        (Dollars in Thousands)
<S>                         <C>            <C>         <C>            <C>          <C>             <C>    
U.S. government               $  -           $  -        $     -        $    -       $     -         $     -
securities
Federal agency                   -              -         14,951             -        14,951          14,951
securities
Municipal securities             -              -          2,188         7,179         9,367           9,367
Equity securities                -              -              -             -         3,278           3,278
                              ----           ----        -------        ------       -------         -------
Total investment              
securities                    $  -           $  -        $17,139        $7,179       $27,596         $27,596
                              ====           ====        =======        ======       =======         =======
Weighted average yield           -%             -%          6.82%         6.72%         6.90%

</TABLE>

        See Note 2 of the Notes to the Consolidated  Financial Statements in the
Annual  Report  attached  hereto as Exhibit 13 for a discussion of the Company's
securities portfolio.

     Mortgage-Backed  Securities.  In order to  supplement  loan and  investment
activities, the Company invests in mortgage-backed securities.

        Consistent with its asset/liability management strategy, at December 31,
1998, $9.0 million,  or 79.6% of the Company's  mortgage-backed  securities have
adjustable   interest   rates.   For   information   regarding   the   Company's
mortgage-backed   securities  portfolio,   see  Note  2  of  the  Notes  to  the
Consolidated  Financial  Statements  in the  Annual  Report  attached  hereto as
Exhibit 13.

        As of December 31, 1998, all of the mortgage-backed  securities owned by
the Company were issued,  insured or guaranteed either directly or indirectly by
a federal  agency.  As a result,  the Company  did not have any  mortgage-backed
securities  in excess of 10% of  retained  earnings  except for  federal  agency
obligations.

        To  assess  price  volatility,   the  Federal   Financial   Institutions
Examination  Council ("FFIEC") adopted a policy in 1992 which requires an annual
"stress" test of mortgage  derivative  securities.  This policy,  which has been
adopted by the OTS,  requires  the Company to  annually  test its CMOs and other
mortgage-related   securities  to  determine   whether  they  are  high-risk  or
nonhigh-risk  securities.  Mortgage  derivative products with an average life or
price volatility in excess of a benchmark 30-year, mortgage-backed, pass-through
security are considered high-risk mortgage securities. Under the policy, savings
institutions may generally only invest in high-risk mortgage securities in order
to reduce  interest rate risk. In addition,  all high-risk  mortgage  securities
acquired after February 9, 1992 which are classified as high risk at the time of
purchase must be carried in the institution's  trading account or as assets held
for sale. At December 31, 1998, none of the Company's mortgage-backed securities
were classified as "high-risk."

                                       19
<PAGE>


        The  following  table  sets  forth  the  composition  of  the  Company's
mortgage-backed securities at the dates indicated.


                                                December 31,
                              --------------------------------------------------
                                   1998             1997             1996
                              --------------- ----------------  ----------------
Mortgage-backed securities    Carrying  % of   Carrying   % of  Carrying   % of
available for sale:           Value    Total   Value    Total   Value    Total
--------------------------    -------- ------ --------- ------  --------- ------
                                         (Dollars in Thousands)

GNMA                            3,053   26.89      566    6.99      662   14.08
FNMA                            4,757   41.90    3,704   45.76    1,736   36.92
FHLMC                           3,544   31.21    3,825   47.24    2,304   49.00
                              -------  ------   ------  ------   ------  ------
Total mortgage-backed 
securities                    $11,354  100.00%  $8,095  100.00%  $4,702  100.00%
                              =======  ======   ======  ======   ======  ======


                                       20
<PAGE>


        The  following  table  sets  forth  the  contractual  maturities  of the
Company's mortgage-backed securities at December 31, 1998.

<TABLE>
<CAPTION>
                                                                                                 
                                                              Due In                December 31,
                                          -----------------------------------------    1998    
                                          Less Than   1 to     5 to 10       Over    Amortized  
                                            1 Year   5 Years    Years      10 Years    Cost    
                                          ---------- -------- ---------- ---------- ------------
                                                             (In Thousands)
<S>                                        <C>      <C>        <C>       <C>        <C>    
Federal Home Loan Mortgage Corporation      $   -    $   -      $767      $ 2,746    $ 3,513
Federal National Mortgage Association           -      497         -        4,259      4,756
Government National Mortgage Association        -        -         -        3,054      3,054
                                            -----     ----      ----      -------    -------
        Total                               $   -     $497      $767      $10,059    $11,323
                                            =====     ====      ====      =======    =======
</TABLE>

        At  December  31,  1998,  the  dollar  amount  of  all   mortgage-backed
securities  due after  December 31,  1998,  which had fixed  interest  rates and
floating  or   adjustable   rates   totaled  $2.3  million  and  $9.0   million,
respectively.

        The  market  values  of  a  portion  of  the  Company's  mortgage-backed
securities  held-to-maturity  have  been  from  time to time  lower  than  their
carrying values.  However,  for financial reporting  purposes,  such declines in
value are  considered  to be  temporary  in nature  since  they have been due to
changes in interest rates rather than credit  concerns.  See Note 2 of the Notes
to the Consolidated Financial Statements.

        The following table shows mortgage-backed  securities purchase, sale and
repayment activities of the Company for the periods indicated.

                                       Year Ended December 31,
                                 -------------------------------------
                                 1998            1997            1996
                                 ----            ----            ----
                                           (In Thousands)
Purchases:
Adjustable-rate (1)              $7,215          $2,982          $   -
Fixed-rate (1)                        -           3,198          2,458
                                      -           -----          -----
Total purchases                   7,215           6,180          2,458

Sales:
Adjustable-rate (1)                   -           1,671          1,283
Fixed-rate (1)                    1,083               -              -
                                  -----               -              -
Total sales                       1,083           1,671          1,283

Repayments:
Principal repayments              2,787           1,186            673
Other increase (decrease)          (86)              70           (20)
                                   ----              --           ----
Net increase (decrease)          $3,259          $3,393           $482
                                 ======          ======           ====

Footnotes 
(1)  Consists of pass-through securities.

                                       21
<PAGE>


Sources of Funds

        General.  The Company's primary sources of funds are deposits,  payments
(including  prepayments)  of  loan  principal,  interest  earned  on  loans  and
securities,  repayments  of  securities,  borrowings  and  funds  provided  from
operations.

        Deposits.  PS Financial  offers deposit  accounts having a wide range of
interest  rates and terms.  The  Company's  deposits  consist of savings,  money
market,  non-interest bearing checking,  and various certificate  accounts.  The
Company  solicits  deposits in its market area and, in an effort to increase its
deposit base, the Company began  accepting time deposits from outside its market
area in 1998.

        The variety of deposit accounts offered by the Company has allowed it to
be competitive in obtaining funds and to respond with  flexibility to changes in
consumer  demand.  As a result,  as  customers  have become more  interest  rate
conscious, the Company has become more susceptible to short-term fluctuations in
deposit flows.

        Management  believes that the "core"  portion of the  Company's  regular
savings and money market accounts can have a lower cost and be more resistant to
interest  rate  changes  than  certificate  accounts.  The Company  continues to
utilize customer service and marketing  initiatives in an effort to maintain and
increase  the volume of such  deposits.  However,  the ability of the Company to
attract and maintain these  accounts (as well as certificate  accounts) has been
and will be affected by market conditions.

                                       22
<PAGE>


        The following  table sets forth the savings flows at the Company  during
the periods indicated.



                                               Year Ended December 31,
                                  ----------------------------------------------
                                       1998            1997            1996
                                       ----            ----            ----
                                              (Dollars in Thousands)

Opening balance                        $41,275         $42,203        $41,047
Deposits                                45,699          33,220         51,120
Withdrawals                           (33,662)        (35,634)       (51,599)
Interest Credited                        2,117           1,486          1,635
                                         -----           -----          -----
Ending balance                         $55,429         $41,275        $42,203
                                       =======         =======        =======
Net increase (decrease)                $14,154          ($928)         $1,156
                                       =======          ======         ======
Percent increase (decrease)              34.29 %        (2.20) %         2.82 %
                                         -----          ------           ----




                                       23
<PAGE>


        The following table sets forth the dollar amount of savings deposits and
the  various  types of deposit  programs  offered by the Company as of the dates
indicated.
<TABLE>
<CAPTION>


                                                         December 31,
                                  ---------------------------------------------------------
                                         1998                1997                1996
                                  ----------------- -------------------- ------------------
                                            Percent             Percent             Percent
                                  Amount   of Total   Amount   of Total    Amount  of Total
                                  ------- --------- ---------- --------- -------- ---------
                                                    (Dollars in Thousands)
<S>                              <C>       <C>       <C>        <C>       <C>      <C>   
Transactions and Savings Deposits
Savings Accounts - 3.00% (1)      $19,577   35.33%    $18,799    45.55%    $20,492  48.56%
Transaction Accounts  - 0.00% (1)     156    0.28          24     0.05           -      -
Money Market Accounts - 3.25% (1)   1,477    2.66       1,575     3.82       1,495   3.54
                                    -----    ----       -----     ----       -----   ----
Total Non-Certificates             21,210   38.27      20,398    49.42      21,987  52.10
                                   ------   -----      ------    -----      ------  -----

Certificates
    4.00 - 5.99%                   33,708   60.81      19,856    48.11      19,231  45.57
    6.00 - 7.99%                      511    0.92       1,021     2.47         985   2.33
                                      ---    ----       -----     ----         ---   ----
Total Certificates                 34,219   61.73      20,877    50.58      20,216  47.90
                                   ------   -----      ------    -----      ------  -----
Total Deposits                    $55,429  100.00%    $41,275   100.00%    $42,203 100.00%
                                  ======= =======     ======= = ======     ======= ======
                                                                                   
</TABLE>

Footnotes 
(1)  At December 31, 1998.

                                       24
<PAGE>


        The  following  table  shows  rate  and  maturity  information  for  the
Company's certificates of deposit as of December 31, 1998.



                  Less Than    1 to 2     2 to 3     3 to 4    4 to 5
                    1 Year      Years     Years      Years      Years    Total
                 ---------------------------------------------------------------
                                       (Dollars in Thousands)
4.00 - 4.99%      $ 7,007      $  264    $   40       $  -      $ 13     $ 7,324
5.00 - 5.99%       19,733       4,354     1,704        173       420      26,384
6.00 - 6.99%           68         165       156         28         -         417
7.00 - 7.99%            -          94         -          -         -          94
                        -          --         -          -         -          --
                  $26,808      $4,877    $1,900       $201      $433     $34,219
                  =======      ======    ======       ====      ====     =======
                           


        The following table  indicates the amount of the Company's  certificates
of deposit and other  deposits by time  remaining  until maturity as of December
31, 1998.


                                                    Maturity
                                ----------------------------------------------
                                            Over      Over
                                 3 Months  3 to 6    6 to 12   Over
                                 or Less   Months    Months  12 Months  Total
                                --------- -------- --------- --------- -------
Certificates of deposit of
less than $100,000               $8,503    $6,647   $9,208    $6,600   $30,958
Certificates of deposit of 
$100,000 or more                    704       640    1,106       811     3,261
                                    ---       ---    -----       ---     -----
Total certificates of deposit    $9,207    $7,287  $10,314    $7,411   $34,219
                                 ======    ======  =======    ======   =======

        For additional  information  regarding the  composition of the Company's
deposits,  see Note 6 of the Notes to the Consolidated  Financial  Statements in
the Annual Report attached hereto as Exhibit 13.

                                       25
<PAGE>


        Borrowings.  PS Financial's  available sources of funds include advances
from the FHLB of Chicago and other borrowings.  The Bank's FHLB advances to date
have primarily consisted of borrowings to fund security  purchases.  As a member
of the FHLB of Chicago, the Company is required to own capital stock in the FHLB
of Chicago and is  authorized  to apply for  advances  from the FHLB of Chicago.
Each  FHLB  credit  program  has its own  interest  rate,  which may be fixed or
variable,  and  range of  maturities.  The FHLB of  Chicago  may  prescribe  the
acceptable  uses for these  advances,  as well as limitations on the size of the
advances  and  repayment  provisions.  See Note 7 of the  Notes to  Consolidated
Financial Statements.

        The following table set forth the maximum  month-end balance and average
balance of FHLB advances as of the dates indicated.

                                             December 31,
                    ------------------------------------------------------------
                       1998          1997         1996        1995         1994
                    ------------------------------------------------------------
                                      (Dollars in Thousands)
Maximum Balance
  FHLB Advances      $23,764       $13,750          -           -            -
Average Balance:
  FHLB Advances      $20,154        $5,673          -           -            -
Weighted average 
interest rate of
  FHLB Advances        5.48%         6.05%          - %         - %          - %


                                       26
<PAGE>


Subsidiary Activities

        As a federally  chartered savings bank, PS Financial is permitted by OTS
regulations  to  invest  up to 2% of its  assets  in the  stock of, or loans to,
service corporation subsidiaries,  and may invest an additional 1% of its assets
in service  corporations  where such additional funds are used for inner-city or
community   development   purposes.   In  addition  to  investments  in  service
corporations,  federal  institutions are permitted to invest an unlimited amount
in operating  subsidiaries  engaged solely in activities which a federal savings
association may engage in directly.

        At  December  31,  1998,  PS  Financial  had one  wholly  owned  service
corporation,  Preferred Service Corporation (the "Subsidiary").  The Subsidiary,
an Illinois corporation, was incorporated in 1969 and sells casualty, disability
and credit life insurance on an agency basis.

        The  Subsidiary  had nominal net income for the year ended  December 31,
1998. At December 31, 1998, PS Financial's  investment in the Subsidiary totaled
$5,129.

Competition

        PS Financial faces strong  competition  both in originating  real estate
loans  and in  attracting  deposits.  Competition  in  originating  loans  comes
primarily  from  commercial  banks,  credit  unions  mortgage  bankers and other
savings  institutions,  which also make loans secured by real estate  located in
Cook County,  Illinois. PS Financial competes for loans principally on the basis
of the interest rates and loan fees it charges, the types of loans it originates
and the quality of services it provides to borrowers.

        Competition  for those deposits is principally  from  commercial  banks,
credit unions,  mutual funds,  securities  firms and other savings  institutions
located  in the same  communities.  The  ability of the  Company to attract  and
retain deposits depends on its ability to provide an investment opportunity that
satisfies the requirements of investors as to rate of return,  liquidity,  risk,
convenient  locations and other factors. The Company competes for these deposits
by offering competitive rates, convenient business hours and a customer oriented
staff.

Employees

        At December 31, 1998, the Company had a total of 15 full-time employees.
None of the Company's  employees are  represented by any  collective  bargaining
agreement. Management considers its employee relations to be good.

                                       27
<PAGE>


                                   REGULATION

General

        PS  Financial is a federally  chartered  savings  bank,  the deposits of
which are  federally  insured  and  backed by the full  faith and  credit of the
United States Government.  Accordingly, PS Financial is subject to broad federal
regulation  and  oversight  extending to all its  operations.  PS Financial is a
member of the FHLB of Chicago and is subject to certain  limited  regulation  by
the Board of Governors of the Federal Reserve System ("Federal  Reserve Board").
Prior to August,  1996, the Company was a state  chartered  savings bank and was
subject  to the  regulation  of the State of  Illinois  Office of Banks and Real
Estate (the "Illinois Office of Banks"). As the savings and loan holding company
of Preferred Savings,  the Holding Company also is subject to federal regulation
and oversight.  The purpose of the  regulation of the Holding  Company and other
holding companies is to protect subsidiary savings associations. PS Financial is
a member of the Savings Association  Insurance Fund ("SAIF") and the deposits of
PS  Financial  are  insured  by the  FDIC.  As a  result,  the FDIC has  certain
regulatory and examination authority over PS Financial.

        Certain of these regulatory  requirements and restrictions are discussed
below or elsewhere in this document.

Federal Regulation of Savings Associations

        The  OTS  has  extensive   authority  over  the  operations  of  savings
associations.  As part of this  authority,  PS  Financial  is  required  to file
periodic reports with the OTS and is subject to periodic examinations by the OTS
and the FDIC.  Prior to its conversion to a federal  charter in August 1996, the
Company was examined  and filed  periodic  reports  with the Illinois  Office of
Banks. The last regular  Illinois Office of Banks, OTS and FDIC  examinations of
Ps financial  were as of May 1994,  November  1998,  August 1995,  respectively.
Under agency scheduling  guidelines,  it is likely that another examination will
be initiated in the near future.  When these  examinations  are conducted by the
OTS and the FDIC,  the  examiners may require Ps financial to provide for higher
general or specific loan loss reserves.  All savings associations are subject to
a semi-annual assessment,  based upon the savings association's total assets, to
fund the operations of the OTS.

        The OTS also  has  extensive  enforcement  authority  over  all  savings
institutions and their holding  companies,  including  Preferred Savings and the
Holding Company.  This enforcement  authority includes,  among other things, the
ability to assess civil money penalties,  to issue  cease-and-desist  or removal
orders and to initiate injunctive actions. In general, these enforcement actions
may be initiated for  violations of laws and  regulations  and unsafe or unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

                                       28
<PAGE>


In addition, the investment,  lending and branching authority of PS Financial is
prescribed by federal laws and it is prohibited  from engaging in any activities
not permitted by such laws. For instance,  no savings  institution may invest in
non-investment  grade corporate debt  securities.  In addition,  the permissible
level of investment by federal  associations in loans secured by non-residential
real property may not exceed 400% of total capital,  except with approval of the
OTS.  Federal  savings  associations  are also  generally  authorized  to branch
nationwide. PS Financial is in compliance with the noted restrictions.

        The Bank's general permissible  lending limit for  loans-to-one-borrower
is equal to the  greater of $500,000  or 15% of  unimpaired  capital and surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of unimpaired capital and surplus). At
December 31, 1998,  the Bank's  lending  limit under this  restriction  was $2.3
million. The Bank is in compliance with the loans-to-one-borrower limitation.

        The OTS,  as well as the other  federal  banking  agencies,  has adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  internal controls and audit systems,  interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply with these  standards  must submit a  compliance  plan.  A
failure to submit a plan or to comply  with an  approved  plan will  subject the
institution to further enforcement action. The OTS and the other federal banking
agencies have also proposed additional  guidelines on asset quality and earnings
standards.  No assurance can be given as to whether or in what form the proposed
regulations will be adopted.

Insurance of Accounts and Regulation by the FDIC

        PS Financial is a member of the SAIF, which is administered by the FDIC.
Deposits are insured up to applicable  limits by the FDIC and such  insurance is
backed by the full faith and credit of the United States Government. As insurer,
the FDIC  imposes  deposit  insurance  premiums  and is  authorized  to  conduct
examinations of and to require reporting by FDIC-insured  institutions.  It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by  regulation or order to pose a serious risk to the FDIC.  The FDIC
also  has  the  authority  to  initiate   enforcement  actions  against  savings
associations,  after giving the OTS an opportunity to take such action,  and may
terminate  the deposit  insurance  if it  determines  that the  institution  has
engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

        The FDIC's deposit insurance  premiums are assessed through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions will be made by the FDIC for each semi-annual assessment period.

        The FDIC is authorized  to increase  assessment  rates,  on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated  reserve ratio of 1.25% of  SAIF-insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

        As is the case  with the SAIF,  the FDIC is  authorized  to  adjust  the
insurance  premium  rates for banks  that are  insured by the BIF of the FDIC in
order to maintain the reserve ratio of the BIF at 1.25% of BIF-insured deposits.
As a result of the BIF reaching its statutory reserve ratio the FDIC revised the
premium schedule for BIF-insured institutions to provide a range of .04% to .31%
of deposits.  The  revisions  became  effective in the third quarter of 1995. In

                                       29
<PAGE>


addition, the BIF rates were further revised, effective January 1996, to provide
a range of 0% to .27%. The SAIF rates,  however,  were not adjusted. At the time
the FDIC revised the BIF premium  schedule,  it noted that,  absent  legislative
action (as discussed  below),  the SAIF would not attain its designated  reserve
ratio until the year 2002. As a result of these revisions,  SAIF insured members
would continue to be generally subject to higher deposit insurance premiums than
BIF insured  institutions  until,  all things being equal,  the SAIF attains its
required reserve ratio.

        In  order  to  help  eliminate   this  disparity  and  any   competitive
disadvantage due to disparate deposit insurance premium  schedules,  legislation
to recapitalize the SAIF was enacted in September 1996. The legislation provided
for a one-time  assessment  to be imposed on all  deposits  assessed at the SAIF
rates, as of March 31, 1995, in order to recapitalize the SAIF. It also provides
for the merger of the BIF and the SAIF on January  1, 1999  provided  no savings
associations then exist. The special assessment rate was established at .657% of
deposits  and the  assessment  was paid in  November  1996.  Based on  Preferred
Savings' level of SAIF deposits at March 31, 1995, Preferred Savings' assessment
was  approximately   $245,000  on  a  pre-tax  basis.  This  special  assessment
significantly increased noninterest expense and adversely affected the Company's
results of operations for the year ended December 31, 1997.

        Prior  to the  enactment  of the  legislation,  a  portion  of the  SAIF
assessment imposed on savings  associations was used to repay obligations issued
by a federally chartered corporation to provide financing ("FICO") for resolving
the thrift  crisis in the 1980s.  Although the FDIC has  proposed  that the SAIF
assessment be equalized with the BIF assessment  schedule,  effective October 1,
1996, SAIF-insured institutions will continue to be subject to a FICO assessment
as a result of this continuing  obligation.  Although the  legislation  also now
requires  assessments  to be made on  BIF-assessable  deposits for this purpose,
effective  January 1, 1997,  that  assessment will be limited to 20% of the rate
imposed on SAIF  assessable  deposits  until the earlier of December 31, 1999 or
when no  savings  association  continues  to exist,  thereby  imposing a greater
burden on SAIF member  institutions such as Ps financial.  Thereafter,  however,
assessments  on  BIF-member  institutions  will  be made on the  same  basis  as
SAIF-member  institutions.  The rates  established by the FDIC to implement this
requirement for all FDIC-insured  institutions are a 6.5 basis points assessment
on SAIF  deposits  and 1.5  basis  points  on BIF  deposits  until  BIF  insured
institutions participate fully in the assessment.

Regulatory Capital Requirements

        Federally insured savings  associations,  such as the Bank, are required
to  maintain a minimum  level of  regulatory  capital.  The OTS has  established
capital standards,  including a tangible capital  requirement,  a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable to
such  savings  associations.  These  capital  requirements  must be generally as
stringent as the comparable capital  requirements for national banks. The OTS is
also  authorized to impose capital  requirements in excess of these standards on
individual associations on a case-by-case basis.

        The capital  regulations  require  tangible  capital of at least 1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the  requirement.  At December  31, 1998,  the Bank did not have any  intangible
assets recorded as assets on its financial statements.

        The OTS regulations  establish special  capitalization  requirements for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from assets and capital.

        At December 31, 1998, the Bank had tangible capital of $15.2 million, or
15.4% of adjusted total assets,  which is approximately  $13.7 million above the
minimum requirement of 1.5% of adjusted total assets in effect on that date.


                                       30
<PAGE>

        The capital  standards also require core capital equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
relationships.  As a result of the prompt corrective action provisions discussed
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition is such to allow it to maintain a 3% ratio.  At December 31, 1998, the
Bank had no intangibles which were subject to these tests.

        At December 31, 1998,  the Bank had core capital equal to $15.2 million,
or 15.4% of adjusted  total  assets,  which is $11.2  million  above the minimum
leverage ratio requirement of 3% as in effect on that date.

        The OTS risk-based  requirement  requires  savings  associations to have
total capital of at least 8% of risk-weighted  assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based  requirement  only to the extent of core capital.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of non-traditional  activities.  At December 31, 1998, the Bank had
$258,000 of general loss reserves that qualify as supplementary  capital,  which
was less than 1.25% of risk-weighted assets.

                                       31
<PAGE>


Certain  exclusions  from  capital  and assets are  required  to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal holdings of qualifying capital instruments.  PS Financial had no such
exclusions from capital and assets at December 31, 1998.

        In determining the amount of risk-weighted assets, all assets, including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%,  based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently  underwritten  permanent
one- to four-family  first lien mortgage loans not more than 90 days  delinquent
and  having a loan to value  ratio of not more  than 80% at  origination  unless
insured to such ratio by an insurer approved by the FNMA or FHLMC.

        The OTS has adopted a final rule that requires every savings association
with more than  normal  interest  rate risk  exposure  to deduct  from its total
capital, for purposes of determining compliance with such requirement, an amount
equal to 50% of its interest-rate risk exposure  multiplied by the present value
of its assets.  This exposure is a measure of the  potential  decline in the net
portfolio value of a savings  association,  greater than 2% of the present value
of its assets, based upon a hypothetical 200 basis point increase or decrease in
interest rates (whichever results in a greater decline).  Net portfolio value is
the  present  value  of  expected  cash  flows  from  assets,   liabilities  and
off-balance  sheet  contracts.  The rule  provides for a two quarter lag between
calculating  interest rate risk and recognizing any deduction from capital.  The
rule will not become  effective  until the OTS  evaluates  the  process by which
savings  associations may appeal an interest rate risk deduction  determination.
It is  uncertain  as to when  this  evaluation  may be  completed.  Any  savings
association  with less than $300 million in assets and a total  capital ratio in
excess  of 12% is  exempt  from  this  requirement  unless  the  OTS  determines
otherwise. Based upon its capital level and assets size at December 31, 1998, PS
Financial would qualify for an exemption from the requirement.

        On  December  31,  1998,  the Bank had total  capital  of $15.4  million
(including   $15.2   million  in  core  capital  and   $258,000  in   qualifying
supplementary  capital)  and  risk-weighted  assets of $49.1  million;  or total
capital of 31.4% of  risk-weighted  assets.  This amount was $11.5 million above
the 8% requirement in effect on that date.

        The OTS and the FDIC are  authorized  and,  under certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

                                       32
<PAGE>


        As a condition  to the  approval of the capital  restoration  plan,  any
company  controlling  an  undercapitalized  association  must agree that it will
enter  into  a  limited  capital  maintenance  guarantee  with  respect  to  the
institution's achievement of its capital requirements.

        Any savings association that fails to comply with its capital plan or is
"significantly undercapitalized" (i.e., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically  undercapitalized.  Any undercapitalized  association is also
subject to the general enforcement  authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.

        The OTS is also generally authorized to reclassify an association into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

        The  imposition  by the OTS or the FDIC of any of these  measures on the
Bank  may  have a  substantial  adverse  effect  on the  Bank's  operations  and
profitability  and the value of the Common Stock  purchased  in the  Conversion.
Holding Company  stockholders do not have preemptive rights,  and therefore,  if
the  Holding  Company  is  directed  by the OTS or the FDIC to issue  additional
shares of  Common  Stock,  such  issuance  may  result  in the  dilution  in the
percentage  of  ownership  of the Holding  Company of those  persons  purchasing
shares in the Conversion.

Limitations on Dividends and Other Capital Distributions

        OTS regulations impose various restrictions on savings associations with
respect  to their  ability  to make  distributions  of  capital,  which  include
dividends,  stock  redemptions  or  repurchases,   cash-out  mergers  and  other
transactions  charged to the capital  account.  OTS regulations  also prohibit a
savings  association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result,  the  regulatory  capital  of the  association
would be reduced below the amount  required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.  See "The
Conversion--Effects  of Conversion to Stock Form on Depositors  and Borrowers of
the Bank" and "-Restrictions on Repurchase of Stock."

        Generally, savings associations, such as the Bank, that before and after
the proposed  distribution  meet their  capital  requirements,  may make capital
distributions  during  any  calendar  year  equal to the  greater of 100% of net
income  for the  year-to-date  plus 50% of the amount by which the lesser of the
association's   tangible,   core  or  risk-based  capital  exceeds  its  capital
requirement  for such  capital  component,  as measured at the  beginning of the
calendar year, or 75% of its net income for the most recent four quarter period.
However,  an association deemed to be in need of more than normal supervision by
the OTS may have its dividend authority  restricted by the OTS. The Bank may pay
dividends in accordance with this general authority.

        Savings  associations  proposing to make any capital  distribution  need
only  submit  written  notice  to the OTS 30 days  prior  to such  distribution.
Savings  associations  that do not,  or would  not meet  their  current  minimum
capital requirements  following a proposed capital  distribution,  however, must
obtain OTS approval prior to making such distribution. The OTS may object to the
distribution  during  the 30-day  period  notice  based on safety and  soundness
concerns. See "-Regulatory Capital Requirements."

        The OTS has proposed  regulations  that would revise the current capital
distribution  restrictions.  Under the proposal a savings  association that is a
subsidiary of a holding company may make a capital  distribution  with notice to
the  OTS  provided  that it has a CAMEL  1 or 2  rating,  is not of  supervisory
concern,  and would remain adequately  capitalized (as defined in the OTS prompt
corrective  action  regulations)  following the proposed  distribution.  Savings

                                       33
<PAGE>

associations  that would remain  adequately  capitalized  following the proposed
distribution but do not meet the other noted requirements must notify the OTS 30
days prior to declaring a capital distribution. The OTS stated it will generally
regard as permissible  that amount of capital  distributions  that do not exceed
50% of the  institution's  excess  regulatory  capital  plus net  income to date
during  the  calendar  year.  A  savings  association  may  not  make a  capital
distribution  without  prior  approval  of  the  OTS  and  the  FDIC  if  it  is
undercapitalized  before,  or as a result of, such a distribution.  As under the
current  rule,  the  OTS  may  object  to a  capital  distribution  if it  would
constitute  an unsafe  or  unsound  practice.  No  assurance  may be given as to
whether or in what form the regulations may be adopted.

Liquidity

        All savings  associations,  including the Bank, are required to maintain
an average daily  balance of liquid assets equal to a certain  percentage of the
sum of its  average  daily  balance of net  withdrawable  deposit  accounts  and
borrowings  payable  in one  year or  less.  For a  discussion  of what the Bank
includes  in  liquid  assets,  see  "Management's  Discussion  and  Analysis  of
Financial   Condition   and  Results  of  Operations  -  Liquidity  and  Capital
Resources".  This  liquid  asset  ratio  requirement  may vary from time to time
(between 4% and 10%) depending upon economic conditions and savings flows of all
savings associations. At the present time, the minimum liquid asset ratio is 4%.

        In  addition,   short-term  liquid  assets  (e.g.,  cash,  certain  time
deposits,  certain  bankers  acceptances  and short-term  United States Treasury
obligations)  currently must constitute at least 1% of the association's average
daily  balance of net  withdrawable  deposit  accounts  and current  borrowings.
Penalties may be imposed upon associations for violations of either liquid asset
ratio  requirement.  At December 31, 1998, the Bank was in compliance  with both
requirements,  with an  overall  liquid  asset  ratio of 36.2% and a  short-term
liquid assets ratio of 35.8%.

Accounting

        An OTS policy statement applicable to all savings associations clarifies
and re-emphasizes that the investment  activities of a savings  association must
be  in  compliance  with  approved  and  documented   investment   policies  and
strategies,  and must be accounted for in accordance with GAAP. Under the policy
statement,  management  must support its  classification  of and  accounting for
loans and securities  (i.e.,  whether  held-to-maturity,  available-for-sale  or
trading) with  appropriate  documentation.  PS Financial is in  compliance  with
these amended rules.

        The OTS has adopted an amendment to its  accounting  regulations,  which
may be made more stringent than GAAP by the OTS, to require that transactions be
reported in a manner that best reflects their underlying  economic substance and
inherent risk and that financial  reports must  incorporate any other accounting
regulations or orders prescribed by the OTS.

Qualified Thrift Lender Test

        All savings associations, including PS Financial, are required to meet a
qualified  thrift  lender  ("QTL") test to avoid certain  restrictions  on their
operations. This test requires a savings association to have at least 65% of its
portfolio assets (as defined by regulation) in qualified thrift investments on a
monthly average for nine out of every 12 months on a rolling basis.  Such assets
primarily  consist of  residential  housing  related loans and  investments.  At
December 31, 1998,  the Bank met the test with 89.2% of its portfolio  assets in
qualified   thrift   investments   and  has   always  met  the  test  since  its
effectiveness.

        Any savings  association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is

                                       34
<PAGE>


limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "- Holding Company Regulation."


                                       35
<PAGE>


Community Reinvestment Act

        Under  the  Community  Reinvestment  Act  ("CRA"),  every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA  requires the OTS, in  connection  with the  examination  of Ps
financial, to assess the institution's record of meeting the credit needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications,  such  as a  merger  or  the  establishment  of a  branch,  by  Ps
financial.  An unsatisfactory  rating may be used as the basis for the denial of
an application by the OTS.

        The federal banking  agencies,  including the OTS, have recently revised
the CRA  regulations  and  the  methodology  for  determining  an  institution's
compliance with the CRA. Due to the heightened  attention being given to the CRA
in the past few years, PS Financial may be required to devote  additional  funds
for investment and lending in its local community. PS Financial was examined for
CRA compliance in July 1997 and received a rating of satisfactory.

Transactions with Affiliates

        Generally,   transactions   between   a  savings   association   or  its
subsidiaries  and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates.  In addition,  certain of these
transactions,  such as loans to an affiliate,  are restricted to a percentage of
the  association's  capital.  Affiliates  of PS  Financial  include  the Holding
Company and any company  which is under  common  control with PS  Financial.  In
addition,  a  savings  association  may not  lend to any  affiliate  engaged  in
activities not  permissible for a bank holding company or acquire the securities
of most  affiliates.  PS  Financial's  subsidiary  is not  deemed an  affiliate,
however;   the  OTS  has  the  discretion  to  treat  a  subsidiary  of  savings
associations as an affiliate on a case-by-case basis.

        Certain transactions with directors, officers or controlling persons are
also  subject to  conflict of interest  regulations  enforced by the OTS.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

Holding Company Regulation

        The  Holding  Company  is a unitary  savings  and loan  holding  company
subject to  regulatory  oversight  by the OTS. As such,  the Holding  Company is
required to register and file reports with the OTS and is subject to  regulation
and examination by the OTS. In addition,  the OTS has enforcement authority over
the Holding  Company and its  non-savings  association  subsidiaries  which also
permits the OTS to restrict or prohibit  activities  that are determined to be a
serious risk to the subsidiary savings association.

                                       36
<PAGE>



        As a unitary  savings and loan  holding  company,  the  Holding  Company
generally  is not  subject to  activity  restrictions.  If the  Holding  Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the Holding Company and any of its subsidiaries  (other than Ps financial or any
other   SAIF-insured   savings   association)   would  become  subject  to  such
restrictions  unless  such  other  associations  each  qualify as a QTL and were
acquired in a supervisory acquisition.

        If PS Financial  fails the QTL test, the Holding Company must obtain the
approval of the OTS prior to continuing after such failure,  directly or through
its other  subsidiaries,  any business  activity  other than those  approved for
multiple savings and loan holding companies or their subsidiaries.  In addition,
within one year of such failure the Holding  Company must  register as, and will
become subject to, the restrictions  applicable to bank holding  companies.  The
activities  authorized for a bank holding  company are more limited than are the
activities  authorized  for a  unitary  or  multiple  savings  and loan  holding
company. See "Qualified Thrift Lender Test."

        The Holding Company must obtain  approval from the OTS before  acquiring
control of any other SAIF-insured  association.  Such acquisitions are generally
prohibited  if they  result  in a  multiple  savings  and loan  holding  company
controlling  savings  associations  in  more  than  one  state.   However,  such
interstate  acquisitions are permitted based on specific state  authorization or
in a supervisory acquisition of a failing savings association.

Federal Securities Law

        The stock of the Holding  Company is  registered  with the SEC under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act").  The Holding
Company is subject  to the  information,  proxy  solicitation,  insider  trading
restrictions and other requirements of the SEC under the Exchange Act.

        Holding  Company  stock held by persons  who are  affiliates  (generally
officers,  directors and principal  stockholders) of the Holding Company may not
be resold without  registration or unless sold in accordance with certain resale
restrictions.  If the Holding Company meets specified current public information
requirements,  each  affiliate  of the  Holding  Company  is able to sell in the
public  market,  without  registration,  a  limited  number  of  shares  in  any
three-month period.

                                       37
<PAGE>


Federal Reserve System

        The Federal  Reserve  Board  requires  all  depository  institutions  to
maintain  non-interest  bearing  reserves  at  specified  levels  against  their
transaction accounts (primarily checking,  NOW and Super NOW checking accounts).
At  December  31,  1998,  PS  Financial  was in  compliance  with these  reserve
requirements.  The balances maintained to meet the reserve  requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity  requirements that
may be imposed by the OTS. See "-Liquidity."

        Savings  associations  are authorized to borrow from the Federal Reserve
Bank  "discount   window,"  but  Federal  Reserve  Board   regulations   require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

        PS  Financial  is a member  of the FHLB of  Chicago,  which is one of 12
regional FHLBs,  that  administers the home financing credit function of savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal  Housing  Finance  Board.  All advances from the FHLB are required to be
fully secured by  sufficient  collateral as determined by the FHLB. In addition,
all  long-term  advances  are  required to provide  funds for  residential  home
financing. The aggregate amount of advances cannot exceed 20 times the amount of
FHLB stock held by the institutions.

        As a member,  PS Financial is required to purchase and maintain stock in
the FHLB of Chicago. At December 31, 1998, PS Financial had $1.3 million in FHLB
stock,  which  was in  compliance  with  this  requirement.  In past  years,  PS
Financial has received  substantial  dividends on its FHLB stock.  Over the past
five  calendar  years  such  dividends  have  averaged  6.56% and were 6.64% for
calendar year 1998. As a result of their  holdings,  the Company could borrow up
to $26.4 million from the FHLB.

        Under  federal  law the  FHLBs are  required  to  provide  funds for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction  in  value  of  Preferred   Savings'   FHLB  stock  may  result  in  a
corresponding reduction in PS Financial's capital.

                                       38
<PAGE>


        For the year ended  December  31,  1998,  dividends  paid by the FHLB of
Chicago to Ps financial  totaled  $71,318,  which  constitute a $40,855 increase
from the amount of dividends received in calendar year 1996.

Federal and State Taxation

        Savings  associations  such as PS Financial  are  permitted to establish
reserves for bad debts using an experience  method and to make annual  additions
thereto which may, within specified  formula limits,  be taken as a deduction in
computing  taxable income for federal income tax purposes.  Under the experience
method,  the bad debt reserve  deduction is an amount determined under a formula
based generally upon the bad debts actually sustained by the savings association
over a period of years.

        In August 1996, federal  legislation was enacted that changed the manner
in which the bad debt deduction is calculated by thrift institutions,  including
the Company.  Formerly the Company had been allowed to calculate  its  deduction
under the  experience  or  percentage  of taxable  income  method and deduct the
higher amount.  The  percentage of taxable income method was repealed  effective
for the 1996 tax year. The legislation  effectively  required thrifts to account
for bad debts for federal  income tax  purposes on the same basis as  commercial
banks for tax years beginning after December 31, 1995.

        In addition to the regular income tax,  corporations,  including savings
associations  such as the  Company,  generally  are subject to a minimum tax. An
alternative  minimum tax is imposed at a minimum tax rate of 20% on  alternative
minimum  taxable  income,  which is the sum of a  corporation's  regular taxable
income (with certain  adjustments) and tax preference  items, less any available
exemption.  The alternative  minimum tax is imposed to the extent it exceeds the
corporation's  regular  income tax and net  operating  losses can offset no more
than 90% of alternative  minimum taxable income.  The Company does not expect to
be subject to the alternative minimum tax.


                                       39
<PAGE>


        To the extent earnings  appropriated to a savings association's bad debt
reserves for federal  income tax purposes  exceed the  allowable  amount of such
reserves computed under the experience method  ("Excess"),  such Excess may not,
without adverse tax consequences,  be utilized for the payment of cash dividends
or other distributions to a shareholder (including  distributions on redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses). As of December 31, 1995, PS Financial's Excess for tax purposes totaled
approximately $1.5 million.

        PS Financial and its  subsidiary  file  consolidated  federal income tax
returns on a fiscal year basis using the accrual method of accounting.

                                       40
<PAGE>


        PS Financial and its  consolidated  subsidiary  have not been audited by
the IRS with respect to consolidated federal income tax returns in the past five
years.  With respect to years examined by the IRS, either all deficiencies  have
been satisfied or sufficient  reserves have been established to satisfy asserted
deficiencies.  In the  opinion  of  management,  any  examination  of still open
returns (including returns of subsidiary and predecessors of, or entities merged
into, PS Financial) would not result in a deficiency which could have a material
adverse effect on the financial  condition of PS Financial and its  consolidated
subsidiary.

        Illinois  Taxation.  For Illinois  income tax  purposes,  the Company is
taxed at an effective rate equal to 7.18% of Illinois taxable income.  For these
purposes,  "Illinois  Taxable  Income"  generally  means federal taxable income,
subject to certain  adjustments  (including  the addition of interest  income on
state and municipal  obligations  and the exclusion of interest income on United
States Treasury obligations).

        Delaware Taxation. As a Delaware holding company, the Holding Company is
exempted  from Delaware  corporate  income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware.  The Holding Company
is also subject to an annual franchise tax imposed by the State of Delaware.

Executive Officers of the Holding Company and the Bank Who Are Not Directors

        Jeffrey  Przybyl,  age 33.  Mr.  Przybyl is  currently  serving as Chief
Financial  Officer of the  Company  and the Bank,  a position  he has held since
1993. As Chief Financial Officer,  Mr. Przybyl is responsible for overseeing the
accounting and financial reporting functions of the Company and the Bank.



                                       41
<PAGE>



Item 2. Properties

        PS Financial  conducts its business at its stand-alone office located at
4800 South  Pulaski Road,  Chicago,  Illinois.  The Company's  5,000 square foot
office was acquired in 1980 and had a net book value of $288,000 at December 31,
1998. At December 31, 1998, the total net book value of PS Financial's  premises
and  equipment  (including  land,  building  and  leasehold  improvements,   and
furniture,  fixtures and  equipment)  was  approximately  $425,000.  The Company
believes  that its  current  facilities  are  adequate  to meet the  present and
foreseeable future needs of the Bank and the Company.

        The Company's depositor and borrower customer files are maintained by an
independent data processing  company.  The net book value of the data processing
and  computer  equipment  utilized  by the  Company  at  December  31,  1998 was
approximately $20,000.

Item 3. Legal Proceedings


        From time to time, PS Financial is involved as plaintiff or defendant in
various legal  proceedings  arising in the normal course of its business.  While
the ultimate outcome of these various legal proceedings cannot be predicted with
certainty,  it is the opinion of management  that the  resolution of these legal
actions should not have a material effect on the Holding Company's and Preferred
Savings' financial position or results of operations.


Item 4. Submissions of Matters to a Vote of Securities Holders

        No matter was  submitted  to a vote of  Security  holders,  through  the
solicitation of proxies or otherwise during the quarter ended December 31, 1998.

                                       42
<PAGE>

PART II
-------

Item 5. Market for Common Equity and Related Stockholder Matters

        Page 45 of the  Company's  1998 Annual Report to  stockholders  attached
hereto as Exhibit 13 is herein incorporated by reference.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

        Pages 5 through 19 of the Company's  1998 Annual Report to  stockholders
attached hereto as Exhibit 13 is herein incorporated by reference.

Item 7. Financial Statements

        The following  information  appearing in the Company's  Annual Report to
Stockholders  for the year ended December 31, 1998, is incorporated by reference
in this Annual Report on Form 10-KSB as Exhibit 13.

                                                                    Pages in
Annual Report Section                                            Annual Report
Selected Consolidated Financial Information                           2-3
Management's Discussion and Analysis of Financial                     5-20
  Condition and Results of Operations
Report of Independent Auditors                                         21
Consolidated Statements of Financial Condition as of December 31,      22
  1998 and 1997
Consolidated Statements of Income for the Years                        23
  Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Stockholders'                             24-25
  Equity for the Years Ended December 31, 1998,
  1997 and 1996
Consolidated Statements of Cash Flows for the                        26-27
  Years Ended December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements                           28-48


        With the  exception of the  aforementioned  information,  the  Company's
Annual  Report to  Stockholders  for the year ended  December 31,  1998,  is not
deemed filed as part of this Annual Report on Form 10-KSB.

Item 8. Changes  in and  Disagreements  with  Accountants  on  Accounting  and
        Financial Disclosure

        There has been no  current  report  on Form 8-K  filed  within 24 months
prior to the date of the most recent financial  statements reporting a change in
accountants and/or reporting disagreements on any matter of accounting principle
or financial  statement  disclosure  nor has there been a change of  accountants
within the past 24 months.

                                       43
<PAGE>


PART III
--------

Item 9. Directors,  Promoters and Control Persons; Compliance with Section 16(a)
        of the Exchange Act

Directors

        Information  concerning  directors of the Company is incorporated herein
by  reference  from the  Company's  definitive  Proxy  Statement  for the Annual
Meeting of  Stockholders  for the fiscal year ended December 31, 1998, a copy of
which will be filed not later than 120 days after the close of the fiscal year.

Executive Officers

        Information  regarding the business experience of the executive officers
of the Company and the Bank  contained in Part I of this 10-KSB is  incorporated
herein by reference.

Item 10. Executive Compensation

        Information  concerning executive compensation is incorporated herein by
reference  from the  Company's  definitive  Proxy  Statement for the fiscal year
ended  December  31, 1998, a copy of which will be filed not later than 120 days
after the close of the fiscal year.

Item 11. Security Ownership of Certain Beneficial Owners and Management

        Information  concerning  security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy  Statement  for the fiscal year ended  December  31, 1998, a copy of which
will be filed not later than 120 days after the close of the fiscal year.

Item 12. Certain Relationships and Related Transactions

        Information concerning certain relationships and related transactions is
incorporated  herein by reference from the Company's  definitive Proxy Statement
for the Annual  Meeting of  Stockholders  for the fiscal year ended December 31,
1998,  a copy of which  will be filed not later than 120 days after the close of
the fiscal year.

                                       44
<PAGE>



PART IV
-------

Item 14. Exhibits and Reports on Form 8-K

(a)      Exhibits
                                                               Reference to
 Regulation                                                  Prior Filing or
S-K Exhibit                                                   Exhibit Number
   Number           Document                                 Attached Hereto
--------------------------------------------------------------------------------
  2   Plan of acquisition, reorganization, arrangement,                   None
      liquidation or succession
3 (a) Articles of Incorporation                                            *
3 (b) By-Laws                                                              *
  4   Instruments defining the rights of security holders,                 *
      including debentures
  9   Voting Trust Agreement                                              None
 10   Material contracts                                                  None
10.1  Employment agreement with Kimberly P. Rooney                         *
10.2  Change-in-control severance agreements with certain executive        *
      officers
10.3  Stock Option and Incentive Plan                                      *
10.4  Recognition and Retention Plan                                       *
 11   Statement regarding computation of per share                        None
      earnings
 13   Annual Report to Security Holders                                    13
 16   Letter regarding change in certifying accountants                   None
 18   Letter regarding change in accounting principles                    None
 21   Subsidiaries of Registrant                                           21
 22   Published report regarding matters submitted to vote                None
      of security holders
 23   Consents of Experts and Counsel                                     None
 24   Power of Attorney                                                   None
 27   Financial Data Schedule                                              27
 28   Information from reports  furnished to state insurance  regulatory  None
      authorities
 99   Additional Exhibits                                                 None

Footnotes 

*       Filed as exhibits to the Company's S-1  registration  statement filed on
        August  30,  1996  (file No.  333-11211)  pursuant  to  Section 5 of the
        Securities  Act of 1933.  All of such  previously  filed  documents  are
        hereby  incorporated  herein by reference in accordance with item 601 of
        regulation S-B,


                                       45

<PAGE>




                                   SIGNATURES

        Pursuant to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                          PS FINANCIAL, INC.

Date:   March 31, 1998                    By: Kimberly P. Rooney
        ------------------                    ----------------------------------
                                              Kimberly P. Rooney (Duly
                                              Authorized Representative)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.


By:   /s/ Kimberly P. Rooney                By: /s/ S. J. Ptak
      ---------------------------------        ---------------------------------
      Kimberly P. Rooney, President,           S. J. Ptak, Chairman of the Board
        Chief Executive Officer and
        Director (Principal Executive
        and Operating Officer)
Date: March 31, 1998                     Date: March 31, 1998
      --------------------                     --------------------

By:   /s/ Edward Wolak                      By: /s/ L. G. Ptak
      ---------------------------------        ---------------------------------
      Edward Wolak, Director                   L.G. Ptak, Director and Secretary
Date: March 31, 1998                     Date: March 31, 1998
      --------------------                     --------------------

By:   /s/ Rocco Di Iorio                   By: /s/ Jeanine M. McInerney
      ---------------------------------        ---------------------------------
      Rocco Di Iorio Director                  Jeanine M. McInerney, Director
Date: March 31, 1998                     Date: March 31, 1998
      --------------------                     --------------------

By:   /s/ Jeffrey Przybyl
      ---------------------------------
      Jeffrey Przybyl, Treasurer and
        Chief Financial Officer
        (Principal Financial and 
        Accounting Officer)
Date: March 31, 1998
      --------------------