FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
T
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
£
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-26480
PEOPLES STATE BANK
PROFIT SHARING 401(k) PLAN
(Full title of the plan and the address of the plan, if different from the issuer named below)
PSB HOLDINGS, INC.
1905 West Stewart Avenue
Wausau, WI 54401
(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office)
Peoples State Bank Profit Sharing 401(k) Plan
Financial Statements and Supplemental Schedules
Year Ended December 31, 2005
Table of Contents
Report of Independent Registered Public Accounting Firm
Financial Statements
Statements of Net Assets Available for Benefits
Statement of Changes in Net Assets Available for Benefits
Notes to Financial Statements
Supplemental Schedules
Schedule 1 - Item 4i - Schedule of Assets (Held at End of Year)
2005 Form 5500 Line 4a – Schedule of Delinquent Participant Contributions
Report of Independent Registered Public Accounting Firm
Board of Trustees
Peoples State Bank
Wausau, Wisconsin
We have audited the accompanying statements of net assets available for benefits of Peoples State Bank Profit Sharing 401(k) Plan (the “Plan”) as of December 31, 2005 and 2004, and the related statement of changes in net assets available for benefits for the year ended December 31, 2005. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2005 and 2004, and the changes in its net assets available for benefits for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets (held at end of year) and the supplemental schedule of delinquent participant contributions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
WIPFLI LLP
May 18, 2006
Wausau, Wisconsin
1
Peoples State Bank Profit Sharing 401(k) Plan
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
| 2005 | 2004 |
Assets | ||
Receivables: | ||
Employer contributions | $ 211,424 | $ 192,605 |
Participant contributions | 0 | 8,852 |
Investments | 4,420,135 | 4,825,062 |
Net assets available for benefits | $4,631,559 | $5,026,519 |
See accompanying notes to financial statements.
2
Peoples State Bank Profit Sharing 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
Additions: | |
Employer contributions | $ 323,440 |
Participant deferral contributions | 338,529 |
Participant rollover contributions | 8,674 |
Interest income: | |
Participant loans | 1,869 |
Investment contracts | 25,399 |
Net appreciation in fair value of investments | 165,210 |
Total additions | 863,121 |
Deductions: | |
Participant benefits and withdrawals | 1,257,831 |
Loan processing and maintenance fees | 250 |
Total deductions | 1,258,081 |
Net deductions | (394,960) |
Net assets available for benefits at beginning | 5,026,519 |
Net assets available for benefits at end | $4,631,559 |
See accompanying notes to financial statements.
3
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Note 1
Description of Plan and Funding Policies
The following description of Peoples State Bank Profit Sharing 401(k) Plan (the “Plan”) provides only general information. Participants should refer to the Plan Agreement for a more complete description of the Plan’s provisions.
General
The Plan was established on October 1, 1989. It is a defined contribution plan covering all full-time employees of Peoples State Bank (the “Bank”). Employees become eligible to participate in the Plan on the first entry date (the first day of the quarter) following the completion of 1,000 hours of service or one year of service, provided they have reached the age of 21. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Contributions
Participants are allowed to contribute up to the maximum amount of pretax annual compensation determined by the federal government each year. The Plan allows participants to roll over distributions from other retirement plans. The Bank currently matches 50% of the first 6% of compensation a participant contributes to the Plan. Additionally, the Bank may make a discretionary profit sharing contribution as determined by its Board of Directors. Contributions are subject to certain limitations.
All investments in the participants’ accounts are participant directed. The Plan currently offers six mutual funds, PSB Holdings, Inc. common stock, and two stable value funds as investment options for participants.
Participant Accounts
Each participant’s account is credited with the participant’s contribution, the Bank’s matching contribution and allocations of (a) the Bank’s discretionary profit sharing contribution and (b) plan earnings/losses. Discretionary profit sharing allocations are based upon each participant’s eligible pay in proportion to the pay of all eligible participants. Allocations of plan earnings are based on investment options and account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Vesting
Participants are fully vested in their salary deferral and rollover contributions plus actual earning/losses thereon. Vesting in the Bank’s matching and discretionary contributions plus actual earnings/losses thereon is based on years of continuous service. A participant is fully vested in the Bank’s contributions after six years of continuous full-time service.
4
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Participant Loans
Participants may borrow from their fund accounts up to a maximum of one-half the participant’s total vested balance, not to exceed $50,000. Loan transactions are treated as transfers between the participant’s investment fund and the Participant Loan Fund. Loan terms range from one to five years. The loans are secured by the balance in the participant’s account. Loans bear interest at a rate commensurate with the local prevailing rates as determined by the Plan trustee. Interest rates on existing loans range from 4.75% to 6.75%. Principal and interest are paid ratably through biweekly payroll deductions.
Payment of Benefits
On termination of service due to death, disability, retirement, or termination of employment, a participant may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in his or her account or annual installments over a period of time if the vested account balance exceeds $1,000. If the participant’s vested account balance does not exceed $1,000, the Plan will distribute that portion, in lump-sum, on the first distribution date after the participant terminates employment with the Bank, or as soon as administratively practical following that date.
Forfeitures
Plan forfeitures arise as a result of participants who terminate service with the Bank before becoming 100% vested in the Bank’s contribution. Any forfeited amounts will be allocated to qualifying participants as if they were additional employer profit sharing contributions.
Expenses of the Plan
The Bank absorbs various plan expenses, including third-party administration and audit fees.
Plan Termination
The Bank intends to continue the Plan indefinitely, but reserves the right to terminate the Plan at any time. In the event of termination, the account of each participant will be 100% vested and nonforfeitable. The account will be held under the Plan and continue to accrue investment earnings until it is used to provide benefits according to the terms of the Plan.
Note 2
Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are presented on the accrual basis of accounting in accordance with generally accepted accounting principles.
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires the plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates.
Investment Valuation
Investments are stated at fair value. The Plan’s various mutual fund investments are carried at current value, which represents the quoted market values of the underlying investments. The investment contracts are stated at contract value, which approximates fair value. The fair value of common stocks is based on published market prices on the last business day of the plan year. Loans are valued at cost, which approximates fair value, and are deemed collectible. Securities transactions are accounted for on the trade-date basis (the date the order to buy or sell is executed).
Gains or losses on security transactions are recorded as the difference between proceeds received and the carrying value of the investments. Interest income is recognized on the accrual method, and dividend income is recorded on the ex-dividend date.
Payment of Benefits
Benefit payments to participants are recorded upon distribution.
Risk and Uncertainties
The Plan invests in various mutual funds as well as PSB Holdings, Inc. common stock. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of certain investments will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
Note 3
Recently Issued Accounting Pronouncements
In December 2005, the Financial Accounting Standards Board (FASB) issued Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans, which is effective for plan years ending after December 15, 2006. Management is currently evaluating the applicability of the FASB Staff Position to the Plan's financial statements.
5
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Note 4
Investments
The following represents a summary of the market value of investments at December 31, 2005 and 2004. Investments that individually represent 5% or more of the Plan’s net assets available for benefits are separately identified.
Asset Market Value | ||
| 2005 | 2004 |
Investments at Fair Value as | ||
Determined by Quoted Market Price | ||
Common stock - PSB Holdings, Inc. | $ 93,111 | $ 96,365 |
Registered investment companies: | ||
American Funds Europacific Growth Fund | 364,837 | * |
American Funds The Growth Fund of America, Inc. | 544,444 | * |
Oppenheimer Small & Mid Cap Value Fund | 831,937 | * |
Pimco Total Return Institutional Fund | 721,450 | * |
Vanguard 500 Index Fund | 783,477 | * |
Vanguard Windsor II Admiral Shares Fund | 565,624 | * |
Other | 1,254 | 4,273,356 |
Investments at Estimated Fair Value | ||
Participant loans | 11,974 | 48,125 |
Investments at Contract Value | ||
Common collective trust with Delaware Management | ||
Trust Company – Stable Value Trust A | 369,658 | 407,216 |
Common collective trust with MetLife – Stable Value | ||
Fund AST Version | 132,369 | * |
Total investments | $4,420,135 | $4,825,062 |
*Does not represent 5% or more of the Plan’s net assets available for benefits.
6
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
During 2005, the Plan’s investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value as follows:
Net | |
Change | |
Investments at Fair Value as | in Fair |
Determined by Quoted Market Price | Value |
Common stock - PSB Holdings, Inc. | $ (1,630) |
Registered investment companies | 166,840 |
Net change in fair value | $165,210 |
Note 5
Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits at December 31, 2005 and 2004 to Form 5500. Reconciling differences exist since the financial statements are prepared on the accrual basis of accounting and the Form 5500 in 2004 was prepared on a modified cash basis. The 2005 Form 5500 is prepared on the accrual basis of accounting.
| 2005 | 2004 |
Net assets available for benefits | $4,631,559 | $5,026,519 |
Less - Receivables for employer and participant | ||
contributions | 0 | 201,457 |
Net assets available for benefits - Form 5500 | $4,631,559 | $4,825,062 |
Following is a reconciliation of contributions received per the financial statements at December 31, 2005, to Form 5500:
| Employer | Participant |
Contributions per the financial statements (accrual basis) | $323,440 | $338,529 |
Plus - Contributions receivable at December 31, 2004 | 192,605 | 8,852 |
Contributions per Form 5500 | $516,045 | $347,381 |
7
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Note 6
Transactions with Parties-in-Interest
PSB Holdings, Inc. is the parent company of Peoples State Bank, which serves as the sponsor of the Plan. The Plan had the following transactions with PSB Holdings, Inc.
2005 | 2004 | |
Purchases of stock: | ||
Number of shares | 293 | 2,191 |
Value of shares on transaction dates | $8,990 | $75,512 |
Average share price purchased | $30.68 | $ 34.46 |
Sales of stock: | ||
Number of shares | 289 | 0 |
Value of shares on transaction dates | $8,807 | N/A |
Average share price sold | $30.47 | N/A |
At December 31, 2005 and 2004, the Plan held 3,006 and 3,002 shares of PSB Holdings, Inc. common stock, respectively.
Note 7
Party-in-Interest Nonexempt Transactions
During the plan years ended December 31, 2004, 2003, and 2002, the Bank engaged in nonexempt prohibited transactions by not timely remitting employee deferral contributions and participant loan payments (“deposits”) to the Plan’s trust as required by the Department of Labor’s plan asset regulations for the majority of payroll periods between June 15, 2002 and June 7, 2004.
Prior to June 15, 2002, the transmittal of deposits to the trust funding the Plan was the responsibility of the Bank’s controller, and deposits were made timely in accordance with the Department of Labor’s plan asset regulations. On or around June 15, 2002, responsibility for the transmittal of deposits was transferred to a new department. Due to inadequate training of employees in this new department regarding the time period for remitting deposits, deposits were not remitted to the trust timely for a majority of the payroll periods between June 15, 2002 and June 7, 2004. As a result, deposits were generally remitted to the Plan approximately 15 days after the date the funds were withheld from an employee’s paycheck.
The Department of Labor has established a Voluntary Fiduciary Correction Program (VFCP), which allows plan sponsors to correct nonexempt prohibited transactions such as the failure to timely remit deposits and obtain full relief from any civil investigation by the Department of Labor and civil penalties.
Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Under this program, the Bank was required to correct the breach fully and make the Plan whole.
The Bank worked with employee benefits counsel and filed an application under the VFCP to correct the violations. On April 29, 2005, the Bank paid $1,468 to the Plan as restoration of profit on lost earnings. The Plan received a “no action letter” from the Department of Labor on January 25, 2006.
The prohibited transactions have been reported on the supporting schedule as nonexempt prohibited transactions in accordance with the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA.
In addition, the Bank failed the Actual Deferral Percentage (ADP) Test in 2005 and 2004. Excess contributions were not distributed to participants by March 15, 2006 and 2005, as required by the Internal Revenue Service (IRS). Corrective distributions of excess deferrals, which were immaterial to the financial statements, were made subsequent to March 15, 2006 and 2005, and prior to December 31, 2006 and 2005.
Form 5330 will be filed with the IRS for the years ended December 31, 2005 and 2004, and the appropriate excise tax will be paid on the above disclosed nonexempt transactions.
Note 8
Investment Contracts
The Plan maintains investment contract funds with Delaware Management Trust Company and MetLife, referred to as the Stable Value Trust A and the Stable Value Fund AST Version, respectively. These funds hold investment contracts with various investment companies. Contributions are maintained in common/collective trust accounts. The accounts are credited with earnings on the underlying investments and charged for plan withdrawals and administrative expenses charged by Delaware Management Trust Company and MetLife, respectively. The contracts are included in the financial statements at contract value, which approximates fair value, as reported to the Plan by Delaware Management Trust Company and MetLife, respectively. Contract value represents contributions made under the contract, plus earnings, less plan withdrawals and administrative expenses.
Note 9
Tax-Exempt Status of the Plan
The Bank adopted a Prototype Nonstandard 401(k) Profit Sharing Plan with CODA (cash or deferred arrangement) and utilizes the services of its third-party administrator. Interactive Retirement Systems Ltd. has received an IRS notification letter dated August 26, 2002, which indicates that an employer who adopts this plan may rely on the notification letter with respect to the qualification of its plan under the appropriate sections of the Internal Revenue Code. Companies that adopt a prototype plan approved by the IRS are no longer required to obtain a determination letter.
8
Peoples State Bank Profit Sharing 401(k) Plan
Plan’s EIN #39-1305529 Plan #002
Schedule 1 - Item 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
(a) | (b) | (c) | (d) | (e) |
Identity of Issue, Borrower, | Description of Investment Including | Cost | Current | |
Lessor, or Similar Party | Maturity Date, Rate of Interest, | Value | ||
Collateral, Par, or Maturity Value | ||||
Fiserv Trust | Fiserv Trust Money Market Account | ** | $ 1,254 | |
American Funds | American Funds Europacific Growth Fund | ** | 364,837 | |
American Funds | American Funds The Growth Fund of America, Inc. | ** | 544,444 | |
Oppenheimer | Oppenheimer Small & Mid Cap Value Fund | ** | 831,937 | |
Pimco | Pimco Total Return Institutional Fund | ** | 721,450 | |
Vanguard | Vanguard 500 Index Fund | ** | 783,477 | |
Vanguard | Vanguard Windsor II Admiral Shares Fund | ** | 565,624 | |
* | PSB Holdings, Inc. | PSB Holdings, Inc. common stock | ** | 93,111 |
Delaware Management Trust Company | Delaware Stable Value Trust A | ** | 369,658 | |
MetLife | MetLife Stable Value Fund AST Version | ** | 132,369 | |
Participant Loans | Loans receivable - 4.75% to 6.75% | 0 | 11,974 |
*Party-in-interest
**All investments are participant-directed; therefore, cost information may be omitted.
See Independent Auditor’s Report.
9
Peoples State Bank Profit Sharing 401(k) Plan
Plan’s EIN #39-1305529 Plan #002
2005 Form 5500 Line 4a – Schedule of Delinquent Participant Contributions
December 31, 2005
Participant | Total that Constitutes Nonexempt Prohibited Transactions | Total Fully | ||
Contributions |
| Contributions | Contributions | Corrected |
Transferred | Contributions | Corrected | Pending Correction | Under VFCP and |
Late to Plan | Not Corrected | Outside VFCP | in VFCP | PTE 2002-51 |
$575,012 | $0 | $0 | $0 | $575,012 |
See Independent Auditor’s Report.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan administrator of the Peoples State Bank Profit Sharing 401(k) Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
PEOPLES STATE BANK
DATE: June 29, 2006
By: SCOTT M. CATTANACH
Scott M. Cattanach
Senior Vice President and
Chief Financial Officer
11
EXHIBIT INDEX
to
FORM 11-K
of
PEOPLES STATE BANK
PROFIT SHARING 401(k) PLAN
for the year ended December 31, 2005
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. §232.102(d))
Exhibit 23.1
Consent of Wipfli LLP