WSB Financial (WSFGQ) 8-K WSB Financial Posts Preliminary Third Quarter 2007 Earnings

EXHIBIT 99.1

Contact:  David K. Johnson
Chief Executive Officer
360-475-9374

WSB Financial Posts Preliminary Third Quarter 2007 Earnings

Bremerton, WA — October 23, 2007 — WSB Financial Group (NASDAQ: WSFG), the parent company of Westsound Bank, today reported preliminary third quarter 2007 earnings of $1.3 million, compared to $1.1 million in the third quarter a year ago, and year-to-date net income grew to $3.8 million, compared to $3.1 million a year ago. Earnings per diluted share totaled $0.21 per diluted share, compared to the pre-IPO EPS of $0.36 per diluted share, a year ago. Year-to-date, EPS was $0.64 per diluted share, compared to $0.99 per diluted share in the first nine months of 2006. WSB Financial issued 2.6 million shares in its initial public offering in August 2006.

“Inadvertently, our preliminary financial results for the bank were filed with the FDIC and became publicly available this week. As a result, we are providing preliminary financial results for the company.. While the results discussed in this release are accurate as of last Friday, they may change prior to the filing of our 10-Q in November,” said David K. Johnson, President and CEO. “In fact, due to the recommendations of our bank regulators, it is likely that we will be adding to our reserves.

“In addition, I am saddened to report that Mark Freeman, our Chief Financial Officer, has requested and been granted a leave of absence due to health concerns. Mark is a valued member of our management team, and we wish him a speedy recovery,” said Johnson. “In the meantime, we are seeking an interim Chief Financial Officer.”

Third quarter preliminary results show that 38% loan growth and 30% deposit growth fueled a 24% increase in net interest income before provision for loan losses and a 15% increase in revenues compared to a year ago. Net interest margin, while still healthy, fell to 4.83% in the third quarter compared to 5.06% in the second quarter and 5.71% a year ago. Year-to-date net interest margin dropped 82 basis points to 4.98% from 5.80% a year ago. Asset quality declined during the quarter with non-performing loans growing to 0.63% of total loans and non-performing assets increasing to 0.94% of total assets at September 30, 2007.

“In coordination with our regulatory review, we have initiated a thorough review of our loan portfolio and decided to downsize our mortgage operation,” Johnson said. “In the course of these reviews, certain deficiencies in our

origination, administration and servicing of certain lending products were identified. We expect the regulators to follow up with further regulatory actions. Until the finalization of the regulatory exam, however, we are not able to quantify the requirements they may have.

We have also identified a number of loans that fall into the 30 to 89 day past due category, and placed some of these loans on nonaccrual status and boosted our reserves for loan losses. Based on the preliminary results, the allowance for loan losses grew 34% to $5.0 million at September 30, 2007, from $3.7 million a year ago. The allowance for loan losses represents 186% of non-performing loans and 1.17% of total loans as of the end of the third quarter.

WSB Financial remains well capitalized with equity to assets of 13.8% at September 30, 2007.

WSB Financial expects to report final results for the third quarter of 2007 on November 14, 2007.

ABOUT WSB FINANCIAL GROUP, INC.

WSB Financial Group, Inc., based out of Bremerton, Washington, is the holding company for Westsound Bank and Mortgage. The company was founded in 1999, and currently operates nine full service offices located within 6 contiguous counties within Western Washington. Our website ishttp://www.westsoundbank.com.

This news release may contains “forward-looking statements” that are subject to risks and uncertainties. These forward-looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, maintenance of the net interest margin, credit quality and loan losses, the efficiency ratio and continued success of the Company’s business plan. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The words “should,” “anticipate,” “expect,” “will,” “believe,” and words of similar meaning are intended, in part, to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are subject to risk and uncertainty that may cause actual results to differ materially. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filing with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others: (1) local and national general and economic condition; (2) changes in interest rates and their impact on net interest margin; (3) competition among financial institutions; (4) legislation or regulatory requirements; and (5) success of the Company’s expansion efforts. WSB Financial Group, Inc. does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. Any such statements are made in reliance on the safe harbor protections provided under the Securities Exchange Act of 1934, as amended.

CONSOLIDATED STATEMENTS OF INCOME	Quarter Ended							Nine Months Ended
(Unaudited)	Sept. 30,			June 30,		Sept. 30,		Sept. 30,		Sept. 30,
(in thousands except share data)	2007			2007		2006		2007		2006
Interest Income
Interest and fees on loans	$	9,826		$	9,324	$	7,542	$	27,493	$	19,539
Taxable investment securities		88			71		68		232		199
Tax exempt securities		18			19		19		56		57
Federal funds sold		171			257		48		584		229
Other interest income		39			44		11		133		67
Total interest income		10,142			9,715		7,688		28,498		20,091
Interest Expense
Deposits		4,514			4,182		3,107		12,358		7,650
Other borrowings		—			—		5		1		31
Junior subordinated debentures		152			150		149		448		417
Total interest expense		4,666			4,332		3,261		12,807		8,098
Net Interest Income		5,476			5,383		4,427		15,691		11,993
Provision for loan losses		497			326		464		1,314		1,267
Net interest income after provision for loan losses		4,979			5,057		3,963		14,377		10,726
Noninterest Income
Service charges on deposit accounts		95			96		67		275		181
Other customer fees		198			233		215		677		612
Net gain on sale of loans		737			886		941		2,602		2,699
Other income		(5	)		16		1		47		52
Total noninterest income		1,025			1,231		1,224		3,601		3,544
Noninterest Expense
Salaries and employee benefits		2,510			2,576		2,260		7,753		6,246
Premises lease		80			82		87		252		249
Depreciation expense		206			204		156		603		429
Occupancy and equipment		150			141		114		459		368
Data and item processing		167			172		130		490		375
Advertising expense		59			42		73		155		174
Printing, stationary and supplies		38			45		58		143		159
Telephone expense		26			28		32		83		84
Postage and courier		43			43		33		125		98
Legal fees		34			71		8		143		33
Director fees		70			66		69		193		231
Business and occupation taxes		83			84		70		240		204
Other expenses		610			596		356		1,646		952
Total noninterest expense		4,076			4,150		3,446		12,285		9,602
Income before provision for income taxes		1,928			2,138		1,741		5,693		4,668
Provision for income taxes		666			708		581		1,919		1,561
Net Income	$	1,262		$	1,430	$	1,160	$	3,774	$	3,107
Basic Earnings per Common Share	$	0.23		$	0.26	$	0.42	$	0.68	$	1.13
Diluted Earnings per Common Share	$	0.21		$	0.24	$	0.36	$	0.64	$	0.99
Average Number of Common Shares Outstanding		5,573,089			5,563,887		2,752,163		5,561,844		2,738,775
Fully Diluted Average Common Shares Outstanding		5,885,411			5,926,369		3,203,347		5,933,747		3,149,552

CONSOLIDATED BALANCE SHEETS
(Unaudited)	September 30,			December 31,			September 30,
(in thousands except share data)	2007			2006			2006
ASSETS
Cash and due from banks	$	8,538		$	9,048		$	8,310
Fed funds sold		21,825			17,150			5,500
Total cash and cash equivalents		30,363			26,198			13,810
Investment securities available for sale, at fair value		8,700			8,244			8,238
Federal Home Loan Bank stock, at cost		319			234			234
Loans held for sale		6,650			11,007			5,947
Loans receivable		419,023			333,173			303,834
Less: allowance for loan losses		(4,987	)		(3,972	)		(3,725	)
Loans, net		414,036			329,201			300,109
Premises and equipment, net		9,496			7,846			6,604
Accrued interest receivable		2,537			1,980			1,638
Other assets		4,096			2,044			1,500
TOTAL ASSETS	$	476,197		$	386,754		$	338,080
LIABILITIES
Deposits:
Noninterest-bearing	$	27,658		$	26,864		$	26,542
Interest-bearing		372,152			288,158			281,524
Total deposits		399,810			315,022			308,066
Accrued interest payable		1,764			1,109			989
Other liabilities		777			718			562
Junior subordinated debentures		8,248			8,248			8,248
TOTAL LIABILITIES		410,599			325,097			317,865
STOCKHOLDERS’ EQUITY
Common Stock, $ 1 par value; 15,357,250 shares authorized; 5,574,853 shares issued and outstanding September 30, 2007, 5,545,673 and 2,884,026 shares issued and outstanding at December 31, 2006 and September 30, 2006, respectively		5,575			5,546			2,884
Additional paid-in capital		48,217			48,089			9,974
Retained earnings		11,828			8,054			7,401
Accumulated other comprehensive loss		(22	)		(32	)		(44	)
TOTAL STOCKHOLDERS’ EQUITY		65,598			61,657			20,215
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	476,197		$	386,754		$	338,080

Financial Statistics	Quarter Ended									Nine Months Ended
(Unaudited)	Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
(in thousands except share data)	2007			2007			2006			2007			2006
Revenues
(Net interest income plus non-interest income)	$	6,501		$	6,614		$	5,651		$	19,292		$	15,537
Averages
Total Assets	$	464,602		$	441,352		$	319,347		$	435,427		$	287,741
Loans and Loans Held for Sale	$	424,407		$	395,639		$	294,759		$	394,448		$	259,774
Interest Earning Assets	$	449,343		$	427,049		$	307,655		$	421,274		$	276,318
Deposits	$	388,079		$	366,568		$	290,712		$	360,866		$	259,636
Shareholders’ Equity	$	65,319		$	63,779		$	18,872		$	63,798		$	17,668
Financial Ratios
Return on Average Assets		1.08	%		1.30	%		1.44	%		1.16	%		1.44	%
Return on Average Equity		7.67	%		8.99	%		24.40	%		7.91	%		23.50	%
Net Interest Margin		4.83	%		5.06	%		5.71	%		4.98	%		5.80	%
Efficiency Ratio		62.7	%		62.7	%		61.0	%		63.7	%		62.1	%
Non-performing Assets to Total Assets		0.94	%		0.40	%		0.00	%		0.94	%		0.00	%

Asset Quality	Quarter Ended									Nine Months Ended
(Unaudited)	Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
(dollars in thousands)	2007			2007			2006			2007			2006
Allowance for Loan Losses Activity:
Balance of Beginning of Period	$	4,492		$	4,407		$	3,289		$	3,972		$	2,520
Charge-offs		(15	)		(234	)		(5	)		(299	)		(20	)
Recoveries		—			—			—			—			—
Net Loan Charge-offs		(15	)		(234	)		(5	)		(299	)		(20	)
Reclassification of unfunded credit commitments		13			(7	)		(23	)		—			(42	)
Provision for Loan Losses		497			326			464			1,314			1,267
Balance at End of Period	$	4,987		$	4,492		$	3,725		$	4,987		$	3,725
Selected Ratios:
Net Charge-offs to average loans		0.00	%		0.06	%		0.00	%		0.08	%		0.01	%
Provision for loan losses to average loans		0.12	%		0.08	%		0.16	%		0.33	%		0.49	%
Allowance for loan losses to total loans		1.17	%		1.10	%		1.20	%		1.17	%		1.20	%
Nonperforming Assets:
Non-Accrual loans	$	2,395		$	201		$	—
Accruing Loans past due 90 days or more		282			—			—
Total non-performing loans (NPLs)	$	2,677		$	201		$	—
Other real estate owned		1,795			1,605			—
Total non-performing assets (NPAs)	$	4,472		$	1,806		$	—
Selected Ratios:
NPLs to total loans		0.63	%		0.05	%		0.00	%
NPAs to total assets		0.94	%		0.40	%		0.00	%

NOTE: Transmitted on PrimeNewswire on October 23, 2007