Exhibit 99.1
PSB Announces 3rd Quarter Earnings of $.60 Per Share
Wausau, Wisconsin – Peter W. Knitt, President and CEO of PSB Holdings, Inc. (“PSB”) and Peoples State Bank (“Peoples”) today announced 2006 third quarter net income of $.60 per diluted share, or $965,000, as compared to $.62 per diluted share, or $1,066,000, in the third quarter of 2005.
Earnings for the quarter and year to date ended September 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 various gains and losses on the sale of assets. The impact of these special items on 2006 is shown below:
Periods ended September 30, 2006 | Three months ended | Nine months ended | ||||
$ | per share | $ | per share | |||
Net income as reported | $965,000 | $0.60 | $2,554,000 | $1.53 | ||
Special items, net of tax effects: | ||||||
Change in fair value of rate swap | (82,000) | (0.05) | 101,000 | 0.06 | ||
(Gain) loss on sale of student loans | 3,000 | - | (39,000) | (0.02) | ||
Gain on sale of land held for branching | (236,000) | (0.15) | (236,000) | (0.14) | ||
Loss on sale of securities | 303,000 | 0.19 | 303,000 | 0.18 | ||
Pro-forma net income | $953,000 | $0.59 | $2,683,000 | $1.61 |
Earnings for the year to date ended September 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 September 30, 2005 | Three months ended | Nine months ended | ||||
$ | per share | $ | per share | |||
Net income as reported | $1,066,000 | $0.62 | $3,277,000 | $1.90 | ||
Special items, net of tax effects: | ||||||
Gain on sale of Pulse stock | (47,000) | (0.03) | ||||
Recovery of collection costs from prior year | (61,000) | (0.04) | ||||
Pro-forma net income | $1,066,000 | $0.62 | $3,169,000 | $1.83 |
Return on average assets based on net income for the quarter and nine months ended September 30, 2006 was .76% and .68%, respectively. Return on average assets for the quarter and nine months ended September 30, 2005 was .86% and .91%, respectively.
Return on equity based on net income for the quarter and nine months ended September 30, 2006 was 11.48% and 9.73%, respectively. Return on equity for the quarter and nine months ended September 30, 2005 was 12.03% and 12.61%, respectively.
Assets at September 30, 2006 were $500.7 million, compared to $494.7 million at September 30, 2005, an increase of $6.0 million or 1.2%. Total net loans were $370.0 million at September 30, 2006 compared to $363.4 million at September 30, 2005, an increase of $6.6 million or 1.8%. Intense local competition for loans and deposits has held back growth in the amount and yield of loans during 2006. In addition, during the September 2006 quarter, a $5.2 million loan relationship was refinanced into the long-term fixed rate commercial real estate secondary market which decreased loans receivable at quarter-end. Book value per share was $21.42 at September 30, 2006 compared to $20.81 for the same date a year ago.
PSB’s provision for loan losses was $120,000 in the third quarter 2006, versus a $50,000 credit to the loan loss allowance in the same period last year. The prior year credit was due to favorable resolution of a long-time problem loan which had carried specific reserves for loss. Net charge-offs were .02% during the quarters ended September 30, 2006 and 2005. At September 30, 2006, the allowance for loan losses was 1.17% of total loans, compared to 1.14% a year earlier. Nonperforming loans were 1.15% of total loans at September 30, 2006, and .71% at September 30, 2005. After increasing $1,049,000 during the first six months of 2006, other real estate owned declined $311,000 during the September 2006 quarter due to the sale of foreclosed properties.
Nonperforming loans increased substantially during the September 2006 quarter as PSB identified certain borrowers whose debt is expected to be repaid via sale of collateral. The effects of a slowing local economy plus the aforementioned work out plans caused PSB to downgrade approximately $5.7 million in loans receivable during the quarter. Substantial future net charge-offs compared to past PSB experience are not expected. However, these elevated levels of nonperforming loans are expected to continue through the end of 2006 and have a negative impact on loan yields until resolved. The following table summarizes non-performing assets as of period end:
Non-Performing Assets as of | September 30, | Dec. 31, | ||
(dollars in thousands) | 2006 | 2005 | 2005 | |
Nonaccrual loans | $ 4,306 | $ 2,383 | $ 2,393 | |
Accruing loans past due 90 days or more | – | – | – | |
Restructured loans not on nonaccrual | 1 | 238 | 382 | |
Total nonperforming loans | 4,307 | 2,621 | 2,775 | |
Foreclosed assets | 1,111 | 313 | 373 | |
Total nonperforming assets | $ 5,418 | $ 2,934 | $ 3,148 | |
Nonperforming loans as a % of gross loans | 1.15% | 0.71% | 0.74% | |
Total nonperforming assets as a % of total assets | 1.08% | 0.59% | 0.62% |
Tax adjusted net interest margin was 2.99% during the third quarter 2006 compared to 3.06% in the June 2006 quarter and 3.14% during the third quarter 2005. The September 2006 margin decline compared to the June 2006 quarter was due in part to slow loan yield growth as the Federal Reserve stopped increases in the discount rate following their June 29 meeting after two years of regular increases. Until this quarter, local competitive depository institutions had lagged deposit pricing behind the increased prime rate recognized in loan income. In the September 2006 quarter, local competitive pressures have eliminated this lag in deposit pricing contributing to a continued rise in deposit costs. In addition, certain money market deposits continue to reprice higher as balances migrate to higher yielding account options. Loan yield in the quarter ended September 30, 2006 was 6.80% compared to 6.11% a year ago, an increase of 69 b asis points. Rate paid on interest-bearing deposits was 3.85% during the third quarter 2006 compared to 2.87% a year ago, an increase of 98 basis points.
In response to falling long-term market rates in September and the ability to offset a securities loss against the one-time gain on sale of land held for branching, PSB sought to restructure their balance sheet for higher future earnings and to reduce interest rate sensitivity to falling rates by selling low yielding securities for a loss and reinvesting in longer-term higher yielding securities. During the September 2006 quarter, PSB sold $17 million of securities which generated an after tax loss of $303,000. Approximately $11 million of the sales proceeds were reinvested in higher coupon securities with the remainder of the funds held to repay upcoming maturities of wholesale funding. The transaction is expected to decrease total assets but contribute to improved earnings and performance ratios beginning in the December 2006 quarter. PSB typically holds securities to maturity and excluding the current sale had sold $14 million in securities in the aggregate since January 2003. The current security sale does not represent a change in management of the securities portfolio and PSB expects to continue to hold the majority of securities until maturity.
Following a decision not to enter a nearby market with a stand alone de novo banking location, vacant land held for branching was sold during the September 2006 quarter for an after tax gain of $236,000.
During 2005, PSB entered into an interest rate swap (receive fixed, pay variable payments) to hedge the interest rate risk inherent in a brokered certificate of deposit. 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. However, during March 2006, PSB determined this swap did not qualify for hedge accounting. 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 $167,000 ($101,000 after tax benefits) during the nine months ended September 30, 2006. As expectations for a decline in short-term market rates occurred during the September 2006 quarter, the fair value of the swap liab ility declined which increased quarterly income $135,000 ($82,000 after tax benefits). 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.
Quarterly Financial Summary | |||||||
(dollars in thousands, except per share data) | Quarter ended – Unaudited | ||||||
Sept. 30 | June 30, | March 31, | Dec. 31 | Sept. 30 | |||
2006 | 2006 | 2006 | 2005 | 2005 | |||
Earnings and dividends: | |||||||
Net income | $ 965 | $ 851 | $ 738 | $ 1,063 | $ 1,066 | ||
Basic earnings per share (3) | $ 0.60 | $ 0.50 | $ 0.43 | $ 0.62 | $ 0.62 | ||
Diluted earnings per share (3) | $ 0.60 | $ 0.50 | $ 0.43 | $ 0.62 | $ 0.62 | ||
Dividends declared per share (3) | $ – | $ 0.32 | $ – | $ 0.31 | $ – | ||
Net book value per share | $ 21.42 | $ 20.29 | $ 21.13 | $ 20.81 | $ 20.81 | ||
Semi-annual dividend payout ratio | n/a | 32.22% | n/a | 24.83% | n/a | ||
Average common shares outstanding | 1,600,364 | 1,685,166 | 1,705,290 | 1,710,720 | 1,712,771 | ||
Balance sheet – average balances: | |||||||
Loans receivable, net of allowances | $ 377,528 | $ 382,138 | $ 375,179 | $ 366,224 | $ 369,489 | ||
Total assets | $ 503,209 | $ 505,586 | $ 502,194 | $ 498,429 | $ 493,035 | ||
Deposits | $ 393,093 | $ 394,075 | $ 398,707 | $ 394,161 | $ 387,969 | ||
Stockholders’ equity | $ 33,363 | $ 35,626 | $ 35,867 | $ 35,756 | $ 35,143 | ||
Performance ratios: | |||||||
Return on average assets (1) | 0.76% | 0.68% | 0.60% | 0.85% | 0.86% | ||
Return on avg. stockholders’ equity (1) | 11.48% | 9.58% | 8.34% | 11.79% | 12.03% | ||
Average tangible stockholders’ equity to | |||||||
average assets (4) | 6.79% | 7.20% | 7.24% | 7.24% | 7.14% | ||
Net loan charge-offs to average loans | 0.02% | 0.06% | 0.00% | 0.01% | 0.02% | ||
Nonperforming loans to gross loans | 1.15% | 0.57% | 0.72% | 0.74% | 0.71% | ||
Allowance for loan loss to gross loans | 1.17% | 1.09% | 1.13% | 1.11% | 1.14% | ||
Net interest rate margin (1)(2) | 2.99% | 3.06% | 3.10% | 3.09% | 3.14% | ||
Net interest rate spread (1)(2) | 2.47% | 2.56% | 2.63% | 2.61% | 2.72% | ||
Service fee revenue as a percent of | |||||||
average demand deposits (1) | 2.71% | 2.66% | 2.29% | 2.10% | 2.10% | ||
Noninterest income as a percent | |||||||
of gross revenue | 10.85% | 10.64% | 8.08% | 10.59% | 12.06% | ||
Efficiency ratio (2) | 62.28% | 67.51% | 69.42% | 61.35% | 63.25% | ||
Noninterest expenses to avg. assets (1) | 2.19% | 2.41% | 2.38% | 2.18% | 2.32% | ||
Stock price information: | |||||||
High | $ 32.65 | $ 34.00 | $ 31.05 | $ 30.70 | $ 32.00 | ||
Low | $ 30.00 | $ 30.60 | $ 30.50 | $ 29.75 | $ 30.65 | ||
Market value at quarter-end | $ 30.35 | $ 32.50 | $ 30.80 | $ 30.70 | $ 30.70 | ||
(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. | |||||||
(4) Tangible stockholders’ equity excludes the impact of cumulative other comprehensive income (loss). |
PSB Holdings, Inc. | ||||||||
Consolidated Statements of Income | ||||||||
Three Months Ended | Nine Months Ended | |||||||
(dollars in thousands, | September 30, | September 30, | ||||||
except per share data – unaudited) | 2006 | 2005 | 2006 | 2005 | ||||
| ||||||||
Interest and dividend income: | ||||||||
Loans, including fees | $ 6,521 | $ 5,734 | $ 19,053 | $ 16,518 | ||||
Securities: | ||||||||
Taxable | 641 | 488 | 1,893 | 1,407 | ||||
Tax-exempt | 266 | 247 | 769 | 725 | ||||
Other interest and dividends | 68 | 137 | 226 | 260 | ||||
Total interest and dividend income | 7,496 | 6,606 | 21,941 | 18,910 | ||||
Interest expense: | ||||||||
Deposits | 3,275 | 2,403 | 9,297 | 6,355 | ||||
FHLB advances | 660 | 532 | 1,817 | 1,589 | ||||
Other borrowings | 52 | 48 | 143 | 237 | ||||
Junior subordinated debentures | 113 | 115 | 340 | 119 | ||||
Total interest expense | 4,100 | 3,098 | 11,597 | 8,300 | ||||
Net interest income | 3,396 | 3,508 | 10,344 | 10,610 | ||||
Provision (credit) for loan losses | 120 | (50) | 375 | 130 | ||||
Net interest inc. after provision (credit) for loan losses | 3,276 | 3,558 | 9,969 | 10,480 | ||||
Noninterest income: | ||||||||
Service fees | 380 | 296 | 1,033 | 880 | ||||
Mortgage banking | 198 | 287 | 631 | 691 | ||||
Investment and insurance sales commissions | 118 | 159 | 398 | 531 | ||||
Net gain (loss) on sale of securities | (472) | – | (472) | 6 | ||||
Increase in cash surrender value of life insurance | 53 | 47 | 144 | 113 | ||||
Change in fair value of interest rate swap | 135 | – | (167) | – | ||||
Gain on sale of land held for branching | 389 | – | 389 | – | ||||
Other noninterest income | 111 | 117 | 455 | 435 | ||||
Total noninterest income | 912 | 906 | 2,411 | 2,656 | ||||
Noninterest expense: | ||||||||
Salaries and employee benefits | 1,642 | 1,744 | 5,248 | 5,014 | ||||
Occupancy and facilities | 449 | 436 | 1,374 | 1,308 | ||||
Data processing and other office operations | 180 | 192 | 561 | 532 | ||||
Advertising and promotion | 63 | 73 | 185 | 231 | ||||
Other noninterest expenses | 450 | 439 | 1,402 | 1,219 | ||||
Total noninterest expense | 2,784 | 2,884 | 8,770 | 8,304 | ||||
Income before provision for income taxes | 1,404 | 1,580 | 3,610 | 4,832 | ||||
Provision for income taxes | 439 | 514 | 1,056 | 1,555 | ||||
Net income | $ 965 | $ 1,066 | $ 2,554 | $ 3,277 | ||||
Basic earnings per share | $ 0.60 | $ 0.62 | $ 1.54 | $ 1.91 | ||||
Diluted earnings per share | $ 0.60 | $ 0.62 | $ 1.53 | $ 1.90 |
PSB Holdings, Inc. | |||
Consolidated Balance Sheets | |||
September 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 | $ 15,211 | $ 15,708 | |
Interest-bearing deposits and money market funds | 6,772 | 988 | |
Federal funds sold | 8,290 | 9,908 | |
Cash and cash equivalents | 30,273 | 26,604 | |
Securities available for sale (at fair value) | 73,475 | 81,501 | |
Loans held for sale | 395 | – | |
Loans receivable, net of allowance for loan losses of $4,370 | |||
and $4,180, respectively | 370,033 | 372,411 | |
Accrued interest receivable | 2,607 | 2,245 | |
Foreclosed assets | 1,111 | 373 | |
Premises and equipment | 11,643 | 12,632 | |
Mortgage servicing rights, net | 894 | 880 | |
Federal Home Loan Bank stock (at cost) | 3,017 | 3,017 | |
Cash surrender value of bank-owned life insurance | 5,843 | 4,805 | |
Other assets | 1,374 | 1,690 | |
TOTAL ASSETS | $ 500,665 | $ 506,158 | |
Liabilities | |||
Non-interest-bearing deposits | $ 55,288 | $ 61,345 | |
Interest-bearing deposits | 337,103 | 339,191 | |
Total deposits | 392,391 | 400,536 | |
Federal Home Loan Bank advances | 60,000 | 54,000 | |
Other borrowings | 3,158 | 4,497 | |
Junior subordinated debentures | 7,732 | 7,732 | |
Accrued expenses and other liabilities | 3,188 | 3,908 | |
Total liabilities | 466,469 | 470,673 | |
Stockholder’ 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 | 9,645 | 9,655 | |
Retained earnings | 30,603 | 28,561 | |
Accumulated other comprehensive loss | (191) | (542) | |
Treasury stock, at cost – 290,723 and 181,608 shares, respectively | (7,748) | (4,076) | |
Total stockholders’ equity | 34,196 | 35,485 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 500,665 | $ 506,158 |
PSB Holdings, Inc. | |||||||||
Average Balances and Interest Rates | |||||||||
Quarter Ended September 30, | |||||||||
2006 | 2005 | ||||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | ||||
Assets | |||||||||
Interest-earning assets: | |||||||||
Loans (1)(2) | $ 381,814 | $ 6,546 | 6.80% | $ 373,716 | $ 5,753 | 6.11% | |||
Taxable securities | 57,195 | 641 | 4.45% | 49,107 | 488 | 3.94% | |||
Tax-exempt securities (2) | 26,580 | 403 | 6.02% | 24,474 | 374 | 6.06% | |||
FHLB stock | 3,017 | 24 | 3.16% | 2,982 | 35 | 4.66% | |||
Other | 3,728 | 44 | 4.68% | 11,752 | 102 | 3.44% | |||
Total (2) | 472,334 | 7,658 | 6.43% | 462,031 | 6,752 | 5.80% | |||
Non-interest-earning assets: | |||||||||
Cash and due from banks | 11,529 | 13,058 | |||||||
Premises and equipment, | |||||||||
net | 11,787 | 12,769 | |||||||
Cash surrender value ins. | 5,516 | 4,649 | |||||||
Other assets | 6,329 | 4,755 | |||||||
Allowance for loan | |||||||||
losses | (4,286) | (4,227) | |||||||
Total | $ 503,209 | $ 493,035 | |||||||
Liabilities & stockholders’ equity | |||||||||
Interest-bearing liabilities: | |||||||||
Savings and demand | |||||||||
deposits | $ 73,617 | $ 521 | 2.81% | $ 67,787 | $ 306 | 1.79% | |||
Money market deposits | 65,107 | 537 | 3.27% | 71,080 | 323 | 1.80% | |||
Time deposits | 198,729 | 2,217 | 4.43% | 193,076 | 1,774 | 3.65% | |||
FHLB borrowings | 60,000 | 660 | 4.36% | 53,446 | 532 | 3.95% | |||
Other borrowings | 5,133 | 52 | 4.02% | 5,450 | 48 | 3.49% | |||
Junior sub. debentures | 7,732 | 113 | 5.80% | 7,732 | 115 | 5.90% | |||
Total | 410,318 | 4,100 | 3.96% | 398,571 | 3,098 | 3.08% | |||
Non-interest-bearing liabilities: | |||||||||
Demand deposits | 55,640 | 56,026 | |||||||
Other liabilities | 3,888 | 3,295 | |||||||
Stockholders’ equity | 33,363 | 35,143 | |||||||
Total | $ 503,209 | $ 493,035 | |||||||
Net interest income | $ 3,558 | $ 3,654 | |||||||
Rate spread | 2.47% | 2.72% | |||||||
Net yield on interest-earning assets | 2.99% | 3.14% | |||||||
(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%. |
PSB Holdings, Inc. | |||||||||
Average Balances and Interest Rates | |||||||||
Nine Months Ended September 30, | |||||||||
2006 | 2005 | ||||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | ||||
Assets | |||||||||
Interest-earning assets: | |||||||||
Loans (1)(2) | $ 382,593 | $ 19,119 | 6.68% | $ 367,999 | $ 16,575 | 6.02% | |||
Taxable securities | 57,536 | 1,893 | 4.40% | 48,062 | 1,407 | 3.91% | |||
Tax-exempt securities (2) | 25,723 | 1,165 | 6.06% | 24,226 | 1,098 | 6.06% | |||
FHLB stock | 3,017 | 66 | 2.92% | 2,941 | 115 | 5.23% | |||
Other | 4,634 | 160 | 4.62% | 6,254 | 145 | 3.10% | |||
Total (2) | 473,503 | 22,403 | 6.33% | 449,482 | 19,340 | 5.75% | |||
Non-interest-earning assets: | |||||||||
Cash and due from banks | 11,290 | 13,557 | |||||||
Premises and equipment, | |||||||||
net | 12,235 | 12,632 | |||||||
Cash surrender value ins. | 5,071 | 4,000 | |||||||
Other assets | 5,871 | 4,168 | |||||||
Allowance for loan | |||||||||
losses | (4,263) | (4,260) | |||||||
Total | $ 503,707 | $ 479,579 | |||||||
Liabilities & stockholders’ equity | |||||||||
Interest-bearing liabilities: | |||||||||
Savings and demand | |||||||||
deposits | $ 79,899 | $ 1,658 | 2.77% | $ 68,323 | $ 794 | 1.55% | |||
Money market deposits | 65,899 | 1,460 | 2.96% | 70,899 | 846 | 1.60% | |||
Time deposits | 195,454 | 6,179 | 4.23% | 186,382 | 4,715 | 3.38% | |||
FHLB borrowings | 56,850 | 1,817 | 4.27% | 51,817 | 1,589 | 4.10% | |||
Other borrowings | 5,196 | 143 | 3.68% | 10,364 | 237 | 3.06% | |||
Junior sub. debentures | 7,732 | 340 | 5.88% | 2,691 | 119 | 5.91% | |||
Total | 411,030 | 11,597 | 3.77% | 390,476 | 8,300 | 2.84% | |||
Non-interest-bearing liabilities: | |||||||||
Demand deposits | 54,024 | 51,659 | |||||||
Other liabilities | 3,572 | 2,701 | |||||||
Stockholders’ equity | 35,081 | 34,743 | |||||||
Total | $ 503,707 | $ 479,579 | |||||||
Net interest income | $ 10,806 | $ 11,040 | |||||||
Rate spread |
| 2.56% | 2.91% | ||||||
Net yield on interest-earning assets |
| 3.05% | 3.28% | ||||||
(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%. |