Exhibit 99.1
PSB Announces 2nd Quarter Earnings of $.50 Per Share
Wausau, Wisconsin – Peter W. Knitt, recently appointed President of PSB Holdings, Inc. (“PSB”) and Peoples State Bank (“Peoples”), today announced 2006 second quarter net income of $.50 per diluted share, or $851,000, as compared to $.68 per diluted share, or $1,171,000, in the second quarter of 2005.
Earnings for the quarter and year to date ended June 30, 2006 included special items from recording an interest rate swap at fair value without the ability to offset the liability against the hedged certificate of deposit and gain on sale of the student loan portfolio. The impact of these special items on 2006 is shown below:
Periods ended June 30, 2006 | Three months ended | Six months ended | ||||
|
| $ | per share |
| $ | per share |
Net income as reported | $ 851,000 | $ 0.50 | $1,589,000 | $ 0.93 | ||
Special items, net of tax effects: | ||||||
Change in fair value of rate swap | 59,000 | 0.03 | 183,000 | 0.11 | ||
Gain on sale of student loans | (42,000) | (0.02) | (42,000) | (0.02) | ||
Pro-forma net income | $ 868,000 | $ 0.51 |
| $1,730,000 | $ 1.02 |
Earnings for the quarter and year to date ended June 30, 2005 also included special items from a gain on sale of Pulse ATM stock and recovery of collection costs recorded in the prior year. The impact of these special items on 2005 is shown below:
Periods ended June 30, 2005 | Three months ended | Six months ended | ||||
|
| $ | per share |
| $ | per share |
Net income as reported | $1,171,000 | $ 0.68 | $2,211,000 | $ 1.28 | ||
Special items, net of tax effects: | ||||||
Gain on sale of Pulse stock | (5,000) | – | (47,000) | (0.03) | ||
Recovery of collection costs from prior year | (61,000) | (0.04) | ||||
Pro-forma net income | $1,166,000 | $ 0.68 |
| $2,103,000 | $ 1.21 |
Return on average assets based on net income for the quarter and six months ended June 30, 2006 was .68% and .64%, respectively. Return on average assets based on net income for the quarter and six months ended June 30, 2005 was .98% and .94%, respectively.
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Return on equity based on net income for the quarter and six months ended June 30, 2006 was 9.58% and 8.96%, respectively. Return on equity based on net income for the quarter and six months ended June 30, 2005 was 13.55% and 12.90%, respectively.
Assets at June 30, 2006 were $503.7 million, compared to $486.2 million at June 30, 2005, an increase of $17.5 million or 3.6%. Total net loans were $380.3 million at June 30, 2006 compared to $370.3 million at June 30, 2005, an increase of $10.0 million or 2.7%. Book value per share was $20.29 at June 30, 2006 compared to $20.27 for the same date a year ago. During the June 2006 quarter, PSB completed a tender offer stock buyback of 100,000 shares totaling $3.375 million which reduced book value per share by $.79. Prior to the impact of the stock buyback, net book value per share increased by 4.0% during the twelve months ended June 30, 2006.
PSB’s provision for loan losses was $120,000 in the second quarter 2006, versus $30,000 in the same period last year. Net charge-offs were .06% and .01% during the quarters ended June 30, 2006 and 2005, respectively. At June 30, 2006, the allowance for loan losses was 1.09% of total loans, compared to 1.15% a year earlier. Nonperforming loans were .57% of total loans at June 30, 2006, and .60% at June 30, 2005. Other real estate owned increased $540,000 and $509,000 during the June 2006 and March 2006 quarters, respectively from the addition of three unrelated properties previously reported as nonaccrual loans. The following table summarizes non-performing assets as of period end:
Non-Performing Assets as of | June 30, | Dec. 31, | ||
(dollars in thousands) | 2006 | 2005 | 2005 | |
Nonaccrual loans | $ 2,175 | $ 1,740 | $ 2,393 | |
Accruing loans past due 90 days or more | – | – | – | |
Restructured loans not on nonaccrual | 26 | 524 | 382 | |
Total nonperforming loans | 2,201 | 2,264 | 2,775 | |
Foreclosed assets | 1,422 | 229 | 373 | |
Total nonperforming assets | $ 3,623 | $ 2,493 | $ 3,148 | |
Nonperforming loans as a % of gross loans | 0.57% | 0.60% | 0.74% | |
Total nonperforming assets as a % of total assets | 0.72% | 0.51% | 0.62% |
Tax adjusted net interest margin was 3.06% during the second quarter 2006 compared to 3.10% in the March 2006 quarter and 3.32% during the second quarter 2005. The June 2006 margin decline compared to the March 2006 quarter was primarily due to increased FHLB borrowings to replace lower cost seasonal interest-bearing demand deposit run-off. Loan yield in the quarter ended June 30, 2006 was 6.69% compared to 6.03% a year ago, an increase of 66 basis points. Rate paid on interest-bearing deposits was 3.64% during the second quarter 2006 compared to 2.64% a year ago, an increase of 100 basis points.
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Yield curve flattening also continues to impact net interest spread as short-term deposit cost increases are greater than longer term loan yield increases. As in the March 2006 quarter, the June 2006 quarter saw certain existing core deposits migrate to higher yielding accounts.
During 2005, PSB entered into an interest rate swap to hedge the interest rate risk inherent in a brokered certificate of deposit. During 2005, PSB applied the “short-cut method” of fair value hedge accounting under Statement of Financial Accounting Standard No. 133,Accounting for Derivative Instruments and Hedging Activities (“FAS 133”). During March 2006, PSB determined this swap did not qualify for the “short-cut method” because in retrospect the related broker fee was determined to have caused the swap not to have a zero value at inception (which is required under FAS 133 to qualify for the “short-cut method”). Fair value hedge accounting allows a company to record the change in fair value of the hedged item, in this case, the brokered certificate, as an adjustment to income as an offset to the mark-to-market adjustment on the related interest rate swap.
Hedge accounting for FAS 133 is not allowed for 2005 because the hedge documentation required for the “long-haul method” was not in place at the inception of the hedge. In addition, because current and prospective hedge effectiveness testing does not show the hedge to be “highly effective” in offsetting the change in fair value of the certificate, use of hedge accounting is not allowed in future periods. Eliminating the application of fair value hedge accounting in 2006 reversed the fair value adjustment that was made to the brokered certificate. Marking the swap liability to fair value generated a charge of $302,000 ($183,000 after tax benefits) during the six months ended June 30, 2006. Approximately $168,000 of the pre-tax charge recorded in the March 2006 quarter was related to activity during 2005 which was not restated to prior periods due to the insignificant impact on previously reported 2005 res ults. The remaining increase in the fair value liability was $37,000 and $97,000 in the March 2006 and June 2006 quarters, respectively. The swap continues to be economically effective and any swap liability provision to expense represents a temporary timing difference to be recovered in future periods before swap maturity in October 2008.
PSB Holdings, Inc. (OTCBB:PSBQ.OB), is the parent company of Peoples. Peoples is headquartered in Wausau, Wisconsin with eight retail locations serving north central Wisconsin in Marathon, Oneida, and Vilas counties. In addition to traditional retail and commercial banking products, Peoples provides retail investments, retirement planning, commercial treasury management services, and long-term fixed rate residential mortgages.
Forward-Looking Statements
Certain matters discussed in this news release, including those relating to the growth of PSB, its profits, and future interest rates, are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in this release. Among other things, these risks and uncertainties include the strength of the economy, the effects of government policies, including, in particular, interest rate policies, and other risks and assumptions described under “Forward-Looking Statements” in Item 1 and “Risk Factors” in Item 1A of PSB’s Form 10-K for the year ended December 31, 2005. PSB assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
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PSB Holdings, Inc. | ||||||
Quarterly Financial Summary | ||||||
(dollars in thousands, except per share data) | ||||||
Quarter ended – Unaudited | ||||||
June 30, | March 31, | Dec. 31 | Sept. 30 | June 30, | ||
Earnings and dividends: | 2006 | 2006 | 2005 | 2005 | 2005 | |
Net income | $ 851 | $ 738 | $ 1,063 | $ 1,066 | $ 1,171 | |
Basic earnings per share (3) | $ 0.50 | $ 0.43 | $ 0.62 | $ 0.62 | $ 0.68 | |
Diluted earnings per share (3) | $ 0.50 | $ 0.43 | $ 0.62 | $ 0.62 | $ 0.68 | |
Dividends declared per share (3) | $ 0.32 | $ – | $ 0.31 | $ – | $ 0.31 | |
Net book value per share | $ 20.29 | $ 21.13 | $ 20.81 | $ 20.81 | $ 20.27 | |
Semi-annual dividend payout ratio | 32.22% | n/a | 24.83% | n/a | 24.06% | |
Average common shares outstanding | 1,685,166 | 1,705,290 | 1,710,720 | 1,712,771 | 1,714,134 | |
Balance sheet - average balances: | ||||||
Loans receivable, net of allowances | $ 382,138 | $ 375,179 | $ 366,224 | $ 369,489 | $ 367,948 | |
Total assets | $ 505,586 | $ 502,194 | $ 498,429 | $ 493,035 | $ 480,325 | |
Deposits | $ 394,075 | $ 398,707 | $ 394,161 | $ 387,969 | $ 376,252 | |
Stockholders’ equity | $ 35,626 | $ 35,867 | $ 35,756 | $ 35,143 | $ 34,665 | |
Performance ratios: | ||||||
Return on average assets (1) | 0.68% | 0.60% | 0.85% | 0.86% | 0.98% | |
Return on avg. stockholders’ equity (1) | 9.58% | 8.34% | 11.79% | 12.03% | 13.55% | |
Average tangible stockholders’ equity to | ||||||
average assets | 7.20% | 7.24% | 7.24% | 7.14% | 7.22% | |
Net loan charge-offs to average loans | 0.06% | 0.00% | 0.01% | 0.02% | 0.01% | |
Nonperforming loans to gross loans | 0.57% | 0.72% | 0.74% | 0.71% | 0.60% | |
Allowance for loan loss to gross loans | 1.09% | 1.13% | 1.11% | 1.14% | 1.15% | |
Net interest rate margin (1)(2) | 3.06% | 3.10% | 3.09% | 3.14% | 3.32% | |
Net interest rate spread (1)(2) | 2.56% | 2.63% | 2.61% | 2.72% | 2.96% | |
Service fee revenue as a percent of | ||||||
average demand deposits (1) | 2.66% | 2.29% | 2.10% | 2.10% | 2.56% | |
Noninterest income as a percent | ||||||
of gross revenue | 10.64% | 8.08% | 10.59% | 12.06% | 13.00% | |
Efficiency ratio (2) | 67.51% | 69.42% | 61.35% | 63.25% | 59.53% | |
Noninterest expenses to avg. assets (1) | 2.41% | 2.38% | 2.18% | 2.32% | 2.32% | |
Stock price information: | ||||||
High | $ 34.00 | $ 31.05 | $ 30.70 | $ 32.00 | $ 31.85 | |
Low | $ 30.60 | $ 30.50 | $ 29.75 | $ 30.65 | $ 30.63 | |
Market value at quarter-end | $ 32.50 | $ 30.80 | $ 30.70 | $ 30.70 | $ 30.75 | |
(1) Annualized | ||||||
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent basis. | ||||||
(3) Due to rounding, cumulative quarterly per share performance may not equal annual per share totals. |
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PSB Holdings, Inc. | |||||
Consolidated Statements of Income | |||||
Three Months Ended | Six Months Ended | ||||
June 30, | June 30, | ||||
(dollars in thousands, except per share data – unaudited) | 2006 | 2005 | 2006 | 2005 | |
Interest and dividend income: | |||||
Loans, including fees | $ 6,421 | $ 5,581 | $ 12,532 | $ 10,784 | |
Securities: | |||||
Taxable | 648 | 467 | 1,252 | 919 | |
Tax-exempt | 249 | 237 | 503 | 478 | |
Other interest and dividends | 51 | 55 | 158 | 123 | |
Total interest and dividend income | 7,369 | 6,340 | 14,445 | 12,304 | |
Interest expense: | |||||
Deposits | 3,086 | 2,141 | 6,022 | 3,952 | |
FHLB advances | 623 | 507 | 1,157 | 1,057 | |
Other borrowings | 63 | 106 | 91 | 189 | |
Junior subordinated debentures | 114 | 4 | 227 | 4 | |
Total interest expense | 3,886 | 2,758 | 7,497 | 5,202 | |
Net interest income | 3,483 | 3,582 | 6,948 | 7,102 | |
Provision for loan losses | 120 | 30 | 255 | 180 | |
Net interest income after provision for loan losses | 3,363 | 3,552 | 6,693 | 6,922 | |
Noninterest income: | |||||
Service fees | 358 | 324 | 653 | 584 | |
Mortgage banking | 226 | 249 | 433 | 404 | |
Investment and insurance sales commissions | 145 | 202 | 280 | 372 | |
Net gain on sale of securities | – | – | – | 6 | |
Increase in cash surrender value of life insurance | 45 | 46 | 91 | 66 | |
Change in fair value of interest rate swap | (97) | – | (302) | – | |
Other noninterest income | 200 | 126 | 344 | 318 | |
Total noninterest income | 877 | 947 | 1,499 | 1,750 | |
Noninterest expense: | |||||
Salaries and employee benefits | 1,792 | 1,641 | 3,606 | 3,270 | |
Occupancy and facilities | 453 | 427 | 925 | 872 | |
Data processing and other office operations | 201 | 168 | 381 | 340 | |
Advertising and promotion | 79 | 95 | 122 | 158 | |
Other noninterest expenses | 519 | 449 | 952 | 780 | |
Total noninterest expense | 3,044 | 2,780 | 5,986 | 5,420 | |
Income before provision for income taxes | 1,196 | 1,719 | 2,206 | 3,252 | |
Provision for income taxes | 345 | 548 | 617 | 1,041 | |
Net income | $ 851 | $ 1,171 | $ 1,589 | $ 2,211 | |
Basic earnings per share | $ 0.50 | $ 0.68 | $ 0.94 | $ 1.29 | |
Diluted earnings per share | $ 0.50 | $ 0.68 | $ 0.93 | $ 1.28 |
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PSB Holdings, Inc. | ||
Consolidated Balance Sheets | ||
June 30, 2006 unaudited, December 31, 2005 derived from audited financial statements | ||
(dollars in thousands, except per share data) – Unaudited | 2006 | 2005 |
Assets | ||
Cash and due from banks | $ 10,933 | $ 15,708 |
Interest-bearing deposits and money market funds | 1,611 | 988 |
Federal funds sold | – | 9,908 |
Cash and cash equivalents | 12,544 | 26,604 |
Securities available for sale (at fair value) | 83,680 | 81,501 |
Loans held for sale | 569 | – |
Loans receivable, net of allowance for loan losses of $4,210 and $4,180, respectively | 380,305 | 372,411 |
Accrued interest receivable | 2,228 | 2,245 |
Foreclosed assets | 1,422 | 373 |
Premises and equipment | 12,267 | 12,632 |
Mortgage servicing rights, net | 915 | 880 |
Federal Home Loan Bank stock (at cost) | 3,017 | 3,017 |
Cash surrender value of bank-owned life insurance | 4,897 | 4,805 |
Other assets | 1,872 | 1,690 |
TOTAL ASSETS | $ 503,716 | $ 506,158 |
Liabilities | ||
Non-interest-bearing deposits | $ 56,427 | $ 61,345 |
Interest-bearing deposits | 338,341 | 339,191 |
Total deposits | 394,768 | 400,536 |
Federal Home Loan Bank advances | 60,000 | 54,000 |
Other borrowings | 4,934 | 4,497 |
Junior subordinated debentures | 7,732 | 7,732 |
Accrued expenses and other liabilities | 3,766 | 3,908 |
Total liabilities | 471,200 | 470,673 |
Stockholders’ equity | ||
Common stock - no par value with a stated value of $1 per share: | ||
Authorized – 3,000,000 shares | ||
Issued – 1,887,179 shares | 1,887 | 1,887 |
Additional paid-in capital | 9,647 | 9,655 |
Retained earnings | 29,638 | 28,561 |
Accumulated other comprehensive loss | (1,109) | (542) |
Treasury stock, at cost – 284,431 and 181,608 shares, respectively | (7,547) | (4,076) |
Total stockholders’ equity | 32,516 | 35,485 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 503,716 | $ 506,158 |
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PSB Holdings, Inc. | ||||||||
Average Balances and Interest Rates | ||||||||
Quarter Ended June 30, | ||||||||
2006 | 2005 | |||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | |||
Assets | ||||||||
Interest-earning assets: | ||||||||
Loans (1)(2) | $ 386,391 | $ 6,442 | 6.69% | $ 372,286 | $ 5,600 | 6.03% | ||
Taxable securities | 58,949 | 648 | 4.41% | 48,311 | 467 | 3.88% | ||
Tax-exempt securities (2) | 24,789 | 377 | 6.10% | 23,693 | 359 | 6.08% | ||
FHLB stock | 3,017 | 23 | 3.06% | 2,941 | 40 | 5.46% | ||
Other | 2,310 | 28 | 4.86% | 2,201 | 15 | 2.73% | ||
Total (2) | 475,456 | 7,518 | 6.34% | 449,432 | 6,481 | 5.78% | ||
Non-interest-earning assets: | ||||||||
Cash and due from banks | 11,022 | 14,145 | ||||||
Premises and equipment, | ||||||||
net | 12,371 | 12,607 | ||||||
Cash surrender value ins. | 4,868 | 4,602 | ||||||
Other assets | 6,122 | 3,877 | ||||||
Allowance for loan | ||||||||
losses | (4,253) | (4,338) | ||||||
Total | $ 505,586 |
|
| $ 480,325 | ||||
Liabilities & stockholders’ equity | ||||||||
Interest-bearing liabilities: | ||||||||
Savings and demand | ||||||||
deposits | $ 78,479 | $ 542 | 2.77% | $ 64,624 | $ 249 | 1.55% | ||
Money market deposits | 66,015 | 490 | 2.98% | 69,945 | 301 | 1.73% | ||
Time deposits | 195,501 | 2,054 | 4.21% | 190,932 | 1,591 | 3.34% | ||
FHLB borrowings | 57,934 | 623 | 4.31% | 53,066 | 507 | 3.83% | ||
Other borrowings | 6,514 | 63 | 3.88% | 13,433 | 106 | 3.17% | ||
Junior sub. debentures | 7,732 | 114 | 5.91% | 255 | 4 | 6.29% | ||
Total | 412,175 | 3,886 | 3.78% | 392,255 | 2,758 | 2.82% | ||
Non-interest-bearing liabilities: | ||||||||
Demand deposits | 54,080 | 50,751 | ||||||
Other liabilities | 3,705 | 2,654 | ||||||
Stockholders’ equity | 35,626 | 34,665 | ||||||
Total | $ 505,586 |
|
| $ 480,325 | ||||
Net interest income |
| $ 3,632 |
|
| $ 3,723 |
| ||
Rate spread |
|
| 2.56% |
|
| 2.96% | ||
Net yield on interest-earning assets |
| 3.06% |
|
| 3.32% | |||
(1) Nonaccrual loans are included in the daily average loan balances outstanding. | ||||||||
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent basis using a tax rate of 34%. |
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PSB Holdings, Inc. | ||||||||
Average Balances and Interest Rates | ||||||||
Six Months Ended June 30, | ||||||||
2006 | 2005 | |||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | |||
Assets | ||||||||
Interest-earning assets: | ||||||||
Loans (1)(2) | $ 382,929 | $ 12,573 | 6.62% | $ 365,348 | $ 10,822 | 5.97% | ||
Taxable securities | 57,710 | 1,252 | 4.37% | 47,530 | 919 | 3.90% | ||
Tax-exempt securities (2) | 25,287 | 762 | 6.08% | 24,100 | 724 | 6.06% | ||
FHLB stock | 3,017 | 42 | 2.81% | 2,921 | 80 | 5.52% | ||
Other | 5,094 | 116 | 4.59% | 3,460 | 43 | 2.51% | ||
Total (2) | 474,037 | 14,745 | 6.27% | 443,359 | 12,588 | 5.73% | ||
Non-interest-earning assets: | ||||||||
Cash and due from banks | 11,169 | 13,811 | ||||||
Premises and equipment, | ||||||||
net | 12,462 | 12,563 | ||||||
Cash surrender value ins. | 4,845 | 3,670 | ||||||
Other assets | 5,638 | 3,613 | ||||||
Allowance for loan | ||||||||
losses | (4,251) | (4,277) | ||||||
Total | $ 503,900 |
|
| $ 472,739 | ||||
Liabilities & stockholders’ equity | ||||||||
Interest-bearing liabilities: | ||||||||
Savings and demand | ||||||||
deposits | $ 83,091 | $ 1,137 | 2.76% | $ 68,595 | $ 488 | 1.43% | ||
Money market deposits | 66,282 | 923 | 2.81% | 70,807 | 523 | 1.49% | ||
Time deposits | 193,790 | 3,962 | 4.12% | 182,980 | 2,941 | 3.24% | ||
FHLB borrowings | 55,249 | 1,157 | 4.22% | 50,989 | 1,057 | 4.18% | ||
Other borrowings | 5,228 | 91 | 3.51% | 12,861 | 189 | 2.96% | ||
Junior sub. debentures | 7,732 | 227 | 5.92% | 128 | 4 | 6.30% | ||
Total | 411,372 | 7,497 | 3.68% | 386,360 | 5,202 | 2.72% | ||
Non-interest-bearing liabilities: | ||||||||
Demand deposits | 53,202 | 49,464 | ||||||
Other liabilities | 3,582 | 2,351 | ||||||
Stockholders’ equity | 35,744 | 34,564 | ||||||
Total | $ 503,900 |
|
| $ 472,739 | ||||
Net interest income |
| $ 7,248 |
|
| $ 7,386 |
| ||
Rate spread |
|
| 2.59% |
|
| 3.01% | ||
Net yield on interest-earning assets |
| 3.08% |
|
| 3.36% | |||
(1) Nonaccrual loans are included in the daily average loan balances outstanding. | ||||||||
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent basis using a tax rate of 34%. |
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