Exhibit 99.1
PSB Announces 4th Quarter Earnings of $.54 Per Share
Wausau, Wisconsin – Peter W. Knitt, President and CEO of PSB Holdings, Inc. (“PSB”) and Peoples State Bank (“Peoples”) announced 2006 fourth quarter net income of $.54 per diluted share, or $873,000, down from $.60 per share, or $965,000 in the recent September 2006 quarter, and $.62 per share, or $1,063,000, in the fourth quarter of 2005. Earnings for the year ended December 31, 2006 were $3,427,000, or $2.07 per share compared to 2005 earnings of $4,340,000, or $2.52 per share.
Earnings for the quarter and year to date ended December 31, 2006 included special items from a severance charge related to retirement of a senior executive, 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 December 31, 2006 | Three months ended | Year ended | ||||
$ | per share | $ | per share | |||
Net income as reported | $ 873,000 | $ 0.54 | $ 3,427,000 | $ 2.07 | ||
Special items, net of tax effects: | ||||||
Executive severance benefit costs | 101,000 | 0.06 | 101,000 | 0.06 | ||
Change in fair value of rate swap | (11,000) | (0.01) | 89,000 | 0.05 | ||
Gain on sale of student loans | (39,000) | (0.02) | ||||
Gain on sale of land held for branching | (236,000) | (0.14) | ||||
Loss on sale of securities in restructuring | 303,000 | 0.18 | ||||
Pro-forma net income | $ 963,000 | $ 0.59 | $ 3,645,000 | $ 2.20 |
Earnings for the year to date ended December 31, 2005 also included special items as shown in the table below:
Periods ended December 31, 2005 | Three months ended | Year ended | ||||
$ | per share | $ | per share | |||
Net income as reported | $ 1,063,000 | $ 0.62 | $ 4,340,000 | $ 2.52 | ||
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 | $ 1,063,000 | $ 0.62 | $ 4,232,000 | $ 2.45 |
Return on average assets based on net income for the quarter and year ended December 31, 2006 was .70% and .68%, respectively. Return on average assets for the quarter and year ended December 31, 2005 was .85% and .90%, respectively. In addition to the special items noted in the preceding tables, the 2006 earnings decline compared to 2005 was led by a decrease in net interest margin not offset by earning asset growth, increased provisions for loan losses, and increased employee benefits expense related to rising health insurance costs.
Return on equity based on net income for the quarter and year ended December 31, 2006 was 10.05% and 9.84%, respectively. Return on equity for the quarter and year ended December 31, 2005 was 11.79% and 12.39%, respectively. Book value per share was $21.67 at December 31, 2006 compared to $20.81 for the same date a year ago, an increase of 4.1%.
Assets at December 31, 2006 were $501.8 million, compared to $506.2 million at December 31, 2005, a decrease of $4.4 million or .9%. Total loans receivable were $369.7 million at December 31, 2006 compared to $372.4 million at December 31, 2005, a decrease of $2.7 million or .7%. On a linked quarter basis, average loan receivable principal fell from $377.5 million in the September 2006 quarter to $370.3 million average in the December 2006 quarter. However, the majority of the loan decrease occurred later in the September 2006 quarter, as loans receivable were $370.0 million as of September 30, 2006 compared to $369.7 million at December 31, 2006.
Intense local competition for loans has held back growth in the amount of loan principal and the yield on new loans during 2006. In addition, PSB believes the economies of the markets it serves may face headwinds in the coming year and has tightened credit standards which have also impacted loan growth. The effects of a slowing local economy and situations with certain borrowers caused PSB to downgrade credit quality ratings on approximately 5% of its internally graded performing loan portfolio during the second half of 2006. Despite these downgrades, substantial future net charge-offs compared to past PSB experience are not expected.
PSB’s provision for loan losses was $120,000 in the fourth quarter 2006, compared to a provision of $30,000 in the fourth quarter 2005. Annualized net charge-offs were .01% and .05% during the December 2006 and 2005 quarters, respectively. At December 31, 2006, the allowance for loan losses was 1.20% of total loans, compared to 1.11% a year earlier. Nonperforming loans were 1.14% of total loans at December 31, 2006, 1.15% at September 30, 2006, and .74% at December 31, 2005. During the December 2006 quarter, PSB incurred a net loss on sale of foreclosed assets totaling $22,000 after tax benefits. Foreclosed assets were $464,000 and $373,000 at December 31, 2006, and 2005, respectively. The following table summarizes non-performing assets as of period end:
Non-Performing Assets as of December 31, | 2006 | 2005 |
Nonaccrual loans | $ 4,281,000 | $ 2,393,000 |
Accruing loans past due 90 days or more | – | – |
Restructured loans not on nonaccrual | – | 382,000 |
Total nonperforming loans | 4,281,000 | 2,775,000 |
Foreclosed assets | 464,000 | 373,000 |
Total nonperforming assets | $ 4,745,000 | $ 3,148,000 |
Nonperforming loans as a % of gross loans | 1.14% | 0.74% |
Total nonperforming assets as a % of total assets | 0.95% | 0.62% |
Tax adjusted net interest margin was 3.06% during the fourth quarter 2006 compared to 2.99% in the September 2006 quarter and 3.09% during the fourth quarter 2005. The December 2006 margin increase compared to the September 2006 quarter was due to moderation of the pace of cost increases on non-maturity interest bearing deposits and substantially increased taxable investment securities yields due to the balance sheet restructuring completed in the September 2006 quarter. Loan yield in the quarter ended December 31, 2006 was 6.90% compared to 6.26% a year ago, an increase of 64 basis points. Rate paid on interest-bearing deposits was 3.98% during the fourth quarter 2006 compared to 3.15% a year ago, an increase of 83 basis points. Despite continued repricing within the time deposit portfolio, net interest margin is expected to remain stable during early 2007.
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 against noninterest income of $147,000 ($89,000 after tax benefits) during the year ended December 31, 2006. 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. Net cash settlement expense is a reduction of other noninterest income and was $31,000 and $89,000 during the quarter ended and year ended December 31, 2006, respectively.
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.
PSB Holdings, Inc. | |||||||||
Quarterly Financial Summary | |||||||||
(dollars in thousands, except per share data) | |||||||||
Quarter ended – Unaudited | |||||||||
Dec. 31 | Sept. 30 | June 30, | March 31, | Dec. 31 | |||||
Earnings and dividends: | 2006 | 2006 | 2006 | 2006 | 2005 | ||||
Net income | $ 873 | $ 965 | $ 851 | $ 738 | $ 1,063 | ||||
Basic earnings per share (3) | $ 0.55 | $ 0.60 | $ 0.50 | $ 0.43 | $ 0.62 | ||||
Diluted earnings per share (3) | $ 0.54 | $ 0.60 | $ 0.50 | $ 0.43 | $ 0.62 | ||||
Dividends declared per share (3) | $ 0.32 | $ – | $ 0.32 | $ – | $ 0.31 | ||||
Net book value per share | $ 21.67 | $ 21.42 | $ 20.29 | $ 21.13 | $ 20.81 | ||||
Semi-annual dividend payout ratio | 27.68% | n/a | 32.22% | n/a | 24.83% | ||||
Average common shares outstanding | 1,593,320 | 1,600,364 | 1,685,166 | 1,705,290 | 1,710,720 | ||||
Balance sheet - average balances: | |||||||||
Loans receivable, net of allowances | $ 370,256 | $ 377,528 | $ 382,138 | $ 375,179 | $ 366,224 | ||||
Total assets | $ 497,502 | $ 503,209 | $ 505,586 | $ 502,194 | $ 498,429 | ||||
Deposits | $ 388,299 | $ 393,093 | $ 394,075 | $ 398,707 | $ 394,161 | ||||
Stockholders’ equity | $ 34,463 | $ 33,363 | $ 35,626 | $ 35,867 | $ 35,756 | ||||
Performance ratios: | |||||||||
Return on average assets (1) | 0.70% | 0.76% | 0.68% | 0.60% | 0.85% | ||||
Return on avg. stockholders’ equity (1) | 10.05% | 11.48% | 9.58% | 8.34% | 11.79% | ||||
Average tangible stockholders’ equity to | |||||||||
average assets (4) | 6.96% | 6.79% | 7.20% | 7.24% | 7.24% | ||||
Net loan charge-offs to average loans(1) | 0.01% | -0.04% | 0.24% | 0.00% | 0.05% | ||||
Nonperforming loans to gross loans | 1.14% | 1.15% | 0.57% | 0.72% | 0.74% | ||||
Allowance for loan loss to gross loans | 1.20% | 1.17% | 1.09% | 1.13% | 1.11% | ||||
Net interest rate margin (1)(2) | 3.06% | 2.99% | 3.06% | 3.10% | 3.09% | ||||
Net interest rate spread (1)(2) | 2.52% | 2.47% | 2.56% | 2.63% | 2.61% | ||||
Service fee revenue as a percent of | |||||||||
average demand deposits (1) | 2.39% | 2.71% | 2.66% | 2.29% | 2.10% | ||||
Noninterest income as a percent | |||||||||
of gross revenue | 10.25% | 10.85% | 10.64% | 8.08% | 10.59% | ||||
Efficiency ratio (2) | 65.68% | 62.28% | 67.51% | 69.42% | 61.35% | ||||
Noninterest expenses to avg. assets (1) | 2.34% | 2.19% | 2.41% | 2.38% | 2.18% | ||||
Stock price information: | |||||||||
High | $ 30.75 | $ 32.65 | $ 34.00 | $ 31.05 | $ 30.70 | ||||
Low | $ 30.15 | $ 30.00 | $ 30.60 | $ 30.50 | $ 29.75 | ||||
Market value at quarter-end | $ 30.25 | $ 30.35 | $ 32.50 | $ 30.80 | $ 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 | Year Ended | |||||||
December 31, | December 31, | |||||||
(dollars in thousands, except per share data – unaudited) | 2006 | 2005 | 2006 | 2005 | ||||
Interest and dividend income: | ||||||||
Loans, including fees | $ 6,493 | $ 5,829 | $ 25,546 | $ 22,347 | ||||
Securities: | ||||||||
Taxable | 619 | 559 | 2,512 | 1,966 | ||||
Tax-exempt | 283 | 253 | 1,052 | 978 | ||||
Other interest and dividends | 177 | 213 | 403 | 473 | ||||
Total interest and dividend income | 7,572 | 6,854 | 29,513 | 25,764 | ||||
Interest expense: | ||||||||
Deposits | 3,339 | 2,664 | 12,636 | 9,019 | ||||
FHLB advances | 660 | 544 | 2,477 | 2,133 | ||||
Other borrowings | 31 | 35 | 174 | 272 | ||||
Junior subordinated debentures | 114 | 112 | 454 | 231 | ||||
Total interest expense | 4,144 | 3,355 | 15,741 | 11,655 | ||||
Net interest income | 3,428 | 3,499 | 13,772 | 14,109 | ||||
Provision for loan losses | 120 | 30 | 495 | 160 | ||||
Net interest income after provision for loan losses | 3,308 | 3,469 | 13,277 | 13,949 | ||||
Noninterest income: | ||||||||
Service fees | 331 | 308 | 1,364 | 1,188 | ||||
Mortgage banking | 254 | 189 | 885 | 880 | ||||
Investment and insurance sales commissions | 132 | 158 | 530 | 689 | ||||
Net gain (loss) on sale of securities | – | – | (472) | 6 | ||||
Increase in cash surrender value of life insurance | 57 | 47 | 201 | 160 | ||||
Change in fair value of interest rate swap | 19 | – | (147) | – | ||||
Gain on sale of land held for branching | – | – | 389 | – | ||||
Other noninterest income | 72 | 110 | 526 | 545 | ||||
Total noninterest income | 865 | 812 | 3,276 | 3,468 | ||||
Noninterest expense: | ||||||||
Salaries and employee benefits | 1,809 | 1,596 | 7,057 | 6,610 | ||||
Occupancy and facilities | 453 | 459 | 1,827 | 1,767 | ||||
Data processing and other office operations | 180 | 209 | 741 | 741 | ||||
Advertising and promotion | 88 | 56 | 273 | 287 | ||||
Other noninterest expenses | 402 | 416 | 1,804 | 1,635 | ||||
Total noninterest expense | 2,932 | 2,736 | 11,702 | 11,040 | ||||
Income before provision for income taxes | 1,241 | 1,545 | 4,851 | 6,377 | ||||
Provision for income taxes | 368 | 482 | 1,424 | 2,037 | ||||
Net income | $ 873 | $ 1,063 | $ 3,427 | $ 4,340 | ||||
Basic earnings per share | $ 0.55 | $ 0.62 | $ 2.08 | $ 2.53 | ||||
Diluted earnings per share | $ 0.54 | $ 0.62 | $ 2.07 | $ 2.52 |
PSB Holdings, Inc. | |||
Consolidated Balance Sheets | |||
December 31, 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 | $ 14,738 | $ 15,708 | |
Interest-bearing deposits and money market funds | 1,048 | 988 | |
Federal funds sold | 9,756 | 9,908 | |
Cash and cash equivalents | 25,542 | 26,604 | |
Securities available for sale (at fair value) | 80,009 | 81,501 | |
Loans held for sale | 1,001 | – | |
Loans receivable, net of allowance for loan losses of $4,478 and $4,180, respectively | 369,749 | 372,411 | |
Accrued interest receivable | 2,464 | 2,245 | |
Foreclosed assets | 464 | 373 | |
Premises and equipment | 11,469 | 12,632 | |
Mortgage servicing rights, net | 908 | 880 | |
Federal Home Loan Bank stock (at cost) | 3,017 | 3,017 | |
Cash surrender value of bank-owned life insurance | 5,900 | 4,805 | |
Other assets | 1,317 | 1,690 | |
TOTAL ASSETS | $ 501,840 | $ 506,158 | |
Liabilities | |||
Non-interest-bearing deposits | $ 55,083 | $ 61,345 | |
Interest-bearing deposits | 336,332 | 339,191 | |
Total deposits | 391,415 | 400,536 | |
Federal Home Loan Bank advances | 60,000 | 54,000 | |
Other borrowings | 3,995 | 4,497 | |
Junior subordinated debentures | 7,732 | 7,732 | |
Accrued expenses and other liabilities | 4,251 | 3,908 | |
Total liabilities | 467,393 | 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 | 9,645 | 9,655 | |
Retained earnings | 30,967 | 28,561 | |
Accumulated other comprehensive loss | (105) | (542) | |
Treasury stock, at cost – 297,223 and 181,608 shares, respectively | (7,947) | (4,076) | |
Total stockholders’ equity | 34,447 | 35,485 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 501,840 | $ 506,158 |
PSB Holdings, Inc. | ||||||||
Average Balances and Interest Rates | ||||||||
Quarter Ended December 31, | ||||||||
2006 | 2005 | |||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | |||
Assets | ||||||||
Interest-earning assets: | ||||||||
Loans (1)(2) | $ 374,672 | $ 6,518 | 6.90% | $ 370,407 | $ 5,848 | 6.26% | ||
Taxable securities | 48,812 | 619 | 5.03% | 53,775 | 559 | 4.12% | ||
Tax-exempt securities (2) | 28,008 | 429 | 6.08% | 25,596 | 383 | 5.94% | ||
FHLB stock | 3,017 | 23 | 3.02% | 3,009 | 47 | 6.20% | ||
Other | 12,545 | 154 | 4.87% | 15,746 | 166 | 4.18% | ||
Total (2) | 467,054 | 7,743 | 6.58% | 468,533 | 7,003 | 5.93% | ||
Non-interest-earning assets: | ||||||||
Cash and due from banks | 11,552 | 11,768 | ||||||
Premises and equipment, net | 11,560 | 12,677 | ||||||
Cash surrender value insurance | 5,863 | 4,733 | ||||||
Other assets | 5,889 | 4,901 | ||||||
Allowance for loan losses | (4,416) | (4,183) | ||||||
Total | $ 497,502 | $ 498,429 | ||||||
Liabilities & stockholders’ equity | ||||||||
Interest-bearing liabilities: | ||||||||
Savings and demand deposits | $ 72,958 | $ 515 | 2.80% | $ 74,507 | $ 407 | 2.17% | ||
Money market deposits | 67,872 | 569 | 3.33% | 67,528 | 376 | 2.21% | ||
Time deposits | 192,601 | 2,255 | 4.65% | 194,069 | 1,881 | 3.85% | ||
FHLB borrowings | 60,000 | 660 | 4.36% | 53,355 | 544 | 4.05% | ||
Other borrowings | 3,302 | 31 | 3.72% | 3,970 | 35 | 3.50% | ||
Junior subordinated debentures | 7,732 | 114 | 5.85% | 7,732 | 112 | 5.75% | ||
Total | 404,465 | 4,144 | 4.06% | 401,161 | 3,355 | 3.32% | ||
Non-interest-bearing liabilities: | ||||||||
Demand deposits | 54,868 | 58,057 | ||||||
Other liabilities | 3,706 | 3,455 | ||||||
Stockholders’ equity | 34,463 | 35,756 | ||||||
Total | $ 497,502 | $ 498,429 | ||||||
Net interest income |
| $ 3,599 | $ 3,648 | |||||
Rate spread |
|
| 2.52% | 2.61% | ||||
Net yield on interest-earning assets |
| 3.06% | 3.09% | |||||
(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%. |
Average Balances and Interest Rates | ||||||||||
Year Ended December 31, | ||||||||||
2006 | 2005 | |||||||||
Avg Bal | Interest | Yield/Rate | Avg Bal | Interest | Yield/Rate | |||||
Assets | ||||||||||
Interest-earning assets: | ||||||||||
Loans (1)(2) | $ 380,555 | $ 25,637 | 6.74% | $ 368,626 | $ 22,423 | 6.08% | ||||
Taxable securities | 55,338 | 2,512 | 4.54% | 49,514 | 1,966 | 3.97% | ||||
Tax-exempt securities (2) | 26,299 | 1,594 | 6.06% | 24,574 | 1,482 | 6.03% | ||||
FHLB stock | 3,017 | 89 | 2.95% | 2,958 | 162 | 5.48% | ||||
Other | 6,628 | 314 | 4.74% | 8,666 | 311 | 3.59% | ||||
Total (2) | 471,837 | 30,146 | 6.39% | 454,338 | 26,344 | 5.80% | ||||
Non-interest-earning assets: | ||||||||||
Cash and due from banks | 11,356 | 13,102 | ||||||||
Premises and equipment, net | 12,069 | 12,643 | ||||||||
Cash surrender value insurance | 5,271 | 4,186 | ||||||||
Other assets | 5,859 | 4,338 | ||||||||
Allowance for loan losses | (4,302) | (4,240) | ||||||||
Total | $ 502,090 | $ 484,367 | ||||||||
Liabilities & stockholders’ equity | ||||||||||
Interest-bearing liabilities: | ||||||||||
Savings and demand deposits | $ 78,209 | $ 2,173 | 2.78% | $ 69,894 | $ 1,201 | 1.72% | ||||
Money market deposits | 66,394 | 2,029 | 3.06% | 70,042 | 1,222 | 1.74% | ||||
Time deposits | 194,735 | 8,434 | 4.33% | 188,335 | 6,596 | 3.50% | ||||
FHLB borrowings | 57,644 | 2,477 | 4.30% | 52,208 | 2,133 | 4.09% | ||||
Other borrowings | 4,719 | 174 | 3.69% | 8,739 | 272 | 3.11% | ||||
Junior subordinated debentures | 7,732 | 454 | 5.87% | 3,961 | 231 | 5.83% | ||||
Total | 409,433 | 15,741 | 3.84% | 393,179 | 11,655 | 2.96% | ||||
Non-interest-bearing liabilities: | ||||||||||
Demand deposits | 54,236 | 53,285 | ||||||||
Other liabilities | 3,605 | 2,864 | ||||||||
Stockholders’ equity | 34,816 | 35,039 | ||||||||
Total | $ 502,090 | $ 484,367 | ||||||||
Net interest income | $ 14,405 | $ 14,689 | ||||||||
Rate spread | 2.55% | 2.84% | ||||||||
Net yield on interest-earning assets |
| 3.05% | 3.23% | |||||||
(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%. |