FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number:
PSB HOLDINGS, INC.
(Exact name of registrant as specified in charter)
WISCONSIN 39-1804877
(State of incorporation) (I.R.S Employer Identification Number)
1905 West Stewart Avenue
Wausau, Wisconsin 54401
(Address of principal executive office)
Registrant's telephone number, including area code: 715-842-2191
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of common shares outstanding at March 31, 2002 was 839,416.
PSB HOLDINGS, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 2002
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2002 (unaudited) and December 31,
2001 (derived from audited financial statements) 1
Condensed Consolidated Statements of Income
Three Months Ended March 31, 2002 and 2001 (unaudited) 2
Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 2002 (unaudited) 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001 (unaudited) 4
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18
-i-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(March 31, 2002 unaudited, December 31, 2001
derived from audited financial statements)
March 31, December 31,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2002 2001
ASSETS
Cash and due from banks $ 8,756 $ 16,736
Interest-bearing deposits and money market funds 1,518 3,539
Federal funds sold 5,375 5,275
Securities:
Held to maturity (fair values of $21,128 and $20,355, respectively) 20,899 20,287
Available for sale (at fair value) 48,089 50,157
Federal Home Loan Bank stock (at cost) 2,182 2,151
Loans held for sale 634 1,403
Loans receivable, net of allowance for loan losses of $3,155
and $2,969, respectively) 237,187 236,574
Accrued interest receivable 1,965 1,873
Foreclosed assets, net 250 421
Premises and equipment 4,885 4,755
OTHER ASSETS 1,321 1,125
TOTAL ASSETS $ 333,061 $ 344,296
LIABILITIES
Non-interest bearing deposits $ 33,324 $ 41,507
INTEREST-BEARING DEPOSITS 230,702 232,128
Total deposits 264,026 273,635
Short-term borrowings 3,086 4,327
Long-term Federal Home Loan Bank advances 38,000 38,000
ACCRUED EXPENSES AND OTHER LIABILITIES 1,773 2,984
TOTAL LIABILITIES 306,885 318,946
STOCKHOLDERS' EQUITY
Common stock - no par value with a stated value of $2 per share:
Authorized - 1,000,000 shares
Issued - 902,425 shares 1,805 1,805
Additional paid-in capital 7,159 7,159
Retained earnings 19,144 18,186
Unrealized gain on securities available for sale, net of tax 369 491
TREASURY STOCK, AT COST - 63,009 AND 62,720 SHARES, RESPECTIVELY (2,301) (2,291)
TOTAL STOCKHOLDERS' EQUITY 26,176 25,350
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 333,061 $ 344,296
-1-
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
(dollars in thousands, MARCH 31,
EXCEPT PER SHARE DATA - UNAUDITED) 2002 2001
Interest income:
Interest and fees on loans $ 4,391 $ 5,021
Interest on securities:
Taxable 690 748
Tax-exempt 224 159
OTHER INTEREST AND DIVIDENDS 65 117
TOTAL INTEREST INCOME 5,370 6,045
Interest expense:
Deposits 1,766 2,861
Short-term borrowings 46 155
LONG-TERM FHLB ADVANCES 564 542
TOTAL INTEREST EXPENSE 2,376 3,558
Net interest income 2,994 2,487
PROVISION FOR LOAN LOSSES 180 150
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,814 2,337
Noninterest income:
Service fees 235 246
Gain on sale of loans 198 29
Investment product sales commissions 45 46
Net gain (loss) on sale of securities - -
OTHER NONINTEREST INCOME 87 134
TOTAL NONINTEREST INCOME 565 455
Noninterest expense:
Salaries and employee benefits 1,245 1,012
Occupancy 240 236
Data processing and other office operations 132 122
Advertising and promotion 76 58
OTHER NONINTEREST EXPENSES 319 276
TOTAL NONINTEREST EXPENSE 2,012 1,704
Income before provision for income taxes 1,367 1,088
PROVISION FOR INCOME TAXES 409 319
NET INCOME $ 958 $ 769
BASIC AND DILUTED EARNINGS PER SHARE $ 1.14 $ 0.92
-2-
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Three months ended March 31, 2002 - unaudited
Unrealized
Gain (Loss)
Additional on Securities
Common Paid-in Retained Available Treasury
(DOLLARS IN THOUSANDS) STOCK CAPITAL EARNINGS FOR SALE STOCK TOTALS
Balance January 1, 2002 $ 1,805 $ 7,159 $ 18,186 $ 491 $ (2,291) $ 25,350
Comprehensive income:
Net income 958 958
Unrealized loss on
securities available for sale,
NET OF TAX (122) (122)
TOTAL COMPREHENSIVE INCOME 836
Purchase of treasury stock (70) (70)
Distribution of treasury stock in
settlement of liability to
Company directors 60 60
BALANCE MARCH 31, 2002 $ 1,805 $ 7,159 $ 19,144 $ 369 $ (2,301) $ 26,176
-3-
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2002 and 2001 - unaudited
2002 2001
Cash flows from operating activities:
Net income $ 958 $ 769
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Provision for depreciation and net amortization 179 172
Provision for loan losses 180 150
Gain on sale of loans held for sale (198) (29)
Gain on sale of premises and equipment - (54)
FHLB stock dividends (31) (40)
Changes in operating assets and liabilities:
Accrued interest receivable (92) (123)
Other assets (70) (123)
OTHER LIABILITIES (1,151) (193)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (225) 529
Cash flows from investing activities:
Net (increase) decrease in interest-bearing deposits
and money market funds 2,021 (2,248)
Net (increase) decrease in federal funds sold (100) (9,338)
Proceeds from sale and maturities of:
Securities held to maturity - 180
Securities available for sale 4,350 8,279
Payment for purchase of:
Securities held to maturity (618) (2,695)
Securities available for sale (2,496) (7,584)
Net decrease in loans 88 620
Capital expenditures (251) (105)
Proceeds from sale of premises and equipment - 31
PROCEEDS FROM SALE OF FORECLOSED ASSETS 171 -
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,165 (12,860)
Cash flows from financing activities:
Net decrease in non-interest-bearing deposits (8,183) (3,522)
Net increase (decrease) in interest-bearing deposits (1,426) 9,955
Net decrease in short-term borrowings (1,241) (2,918)
Proceeds from long-term FHLB advances - 10,000
PURCHASE OF TREASURY STOCK (70) -
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (10,920) 13,515
Net increase (decrease) in cash and due from banks (7,980) 1,184
CASH AND DUE FROM BANKS AT BEGINNING 16,736 9,226
CASH AND DUE FROM BANKS AT END $ 8,756 $ 10,410
-4-
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
Three months ended March 31, 2002 and 2001 - unaudited
Supplemental cash flow information:
2002 2001
Cash paid during the period for:
Interest $ 2,527 $ 3,425
Income taxes 317 12
Noncash investing and financing activities:
Loans charged off $ 23 $ 22
Loans transferred to foreclosed assets 94 143
Loans originated on sale of foreclosed assets 136 -
Distribution of treasury stock
in settlement of liability to Company directors 60 -
-5-
PSB HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
PSB Holdings, Inc.'s ("Company") financial position, results of its
operations, and cash flows for the periods presented, and all such
adjustments are of a normal recurring nature. The consolidated financial
statements include the accounts of all subsidiaries. All material
intercompany transactions and balances are eliminated. The results of
operations for the interim periods are not necessarily indicative of the
results to be expected for the full year.
These interim consolidated financial statements have been prepared
according to the rules and regulations of the Securities and Exchange
Commission and, therefore, certain information and footnote disclosures
normally presented in accordance with generally accepted accounting
principles have been omitted or abbreviated. The information contained in
the consolidated financial statements and footnotes in the Company's 2001
annual report on Form 10-K, should be referred to in connection with the
reading of these unaudited interim financial statements.
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the balance sheet and revenues
and expenses for the period. Actual results could differ significantly
from those estimates. Estimates that are susceptible to significant
change include the determination of the allowance for loan losses and the
valuations of investments.
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLE
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets." SFAS No. 141 requires the use of the purchase method
of accounting for business combinations initiated after June 30, 2001.
SFAS No. 142 addresses how intangible assets acquired outside of a
business combination should be accounted for upon acquisition and how
goodwill and other intangible assets should be accounted for after they
have been initially recognized. SFAS No. 142 eliminates the amortization
for goodwill and other intangible assets with indefinite lives. Other
intangible assets with a finite life will be amortized over their useful
life. Goodwill and other intangible assets with indefinite useful lives
shall be tested for impairment annually or more frequently if events or
changes in circumstances indicate that the asset may be impaired. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001.
The Corporation's adoption of SFAS No. 142 on January 1, 2002 had no
impact on the consolidated financial statements as of the date of
adoption.
-6-
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share of common stock is based on the weighted average
number of common shares outstanding during the period. Diluted earnings
per share is calculated by dividing net income by the weighted average
number of shares adjusted for the dilutive effect of outstanding stock
options. Presented below are the calculations for basic and diluted
earnings per share:
Three months ended
(dollars in thousands, except per share data) March 31,
2002 2001
Net income available to common stockholders $ 958 $ 769
Weighted average shares outstanding 839,615 839,705
Effect of dilutive stock options outstanding 801 -
Diluted weighted average shares outstanding 840,416 839,705
Basic earnings per share $ 1.14 $ 0.92
Diluted earnings per share $ 1.14 $ 0.92
NOTE 4 - COMPREHENSIVE INCOME
Generally accepted accounting principles require comprehensive income and
its components, as recognized under the accounting standards, to be
displayed in a financial statement with the same prominence as other
financial statements. The disclosure requirements with respect to the
Form 10-Q have been included in the Company's consolidated statement of
changes in stockholders' equity. Comprehensive income totaled the
following for the periods indicated:
Three Months Ended
($ THOUSANDS - UNAUDITED) 3/31/02 3/31/01
Net income $958 $769
Change in net unrealized gain or loss on
SECURITIES AVAILABLE FOR SALE, NET OF TAX (122) 432
COMPREHENSIVE INCOME $836 $1,201
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS IS PRESENTED TO ASSIST IN THE
UNDERSTANDING AND EVALUATION OF THE COMPANY'S FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. IT IS INTENDED TO COMPLEMENT THE UNAUDITED
FINANCIAL STATEMENTS, FOOTNOTES, AND SUPPLEMENTAL FINANCIAL DATA APPEARING
ELSEWHERE IN THIS FORM 10-Q AND SHOULD BE READ IN CONJUNCTION THEREWITH.
DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS.
FORWARD-LOOKING STATEMENTS HAVE BEEN MADE IN THIS DOCUMENT THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES. WHILE THE COMPANY BELIEVES THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, ALL SUCH
STATEMENTS INVOLVE RISK AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED IN THIS REPORT. THE
ASSUMPTIONS, RISKS, AND UNCERTAINTIES RELATING TO THE FORWARD-LOOKING
STATEMENTS IN THIS REPORT INCLUDE THOSE DESCRIBED UNDER THE CAPTION
"CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION" IN PART I OF
THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001 AND, FROM
TIME TO TIME, IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION.
BALANCE SHEET
AT MARCH 31, 2002, TOTAL ASSETS WERE $333,061, AN INCREASE OF $12,299, OR
3.8%, OVER MARCH 31, 2001, WHILE ASSETS DECREASED $11,235 FROM DECEMBER
31, 2001. GROSS LOANS (EXCLUDING LOANS HELD FOR SALE BUT INCLUDING
UNAMORTIZED DIRECT LOAN ORIGINATION COSTS) WERE $240,342 AT MARCH 31,
2002, GROWING $14,434 OVER FIRST QUARTER 2001 AND INCREASING $799 OVER
FOURTH QUARTER 2001.
TABLE 1: PERIOD-END LOAN COMPOSITION
MARCH 31, MARCH 31, DECEMBER 31, 2001
DOLLARS DOLLARS PERCENTAGE OF TOTAL PERCENTAGE
(DOLLARS IN THOUSANDS) 2002 2001 2002 2001 DOLLARS OF TOTAL
Commercial, industrial
and agricultural $ 65,617 $ 66,015 27.2% 29.1% $ 55,363 23.0%
Commercial real estate
mortgage 97,647 57,110 40.5% 25.2% 98,554 40.9%
Residential real estate
mortgage 60,669 83,917 25.2% 37.0% 67,723 28.1%
Residential real estate loans
held for sale 634 950 0.3% 0.4% 1,403 0.6%
Consumer home equity 5,028 4,426 2.1% 2.0% 4,576 1.9%
CONSUMER AND INSTALLMENT 11,381 14,440 4.7% 6.3% 13,327 5.5%
TOTALS $ 240,976 $ 226,858 100.0% 100.0% $ 240,946 100.0%
The decline in overall long-term real estate loan interest rates during
2001 and early 2002 contributed to a reallocation of the Bank's loans held
for investment. As part of the Company's strategic and asset liability
management plan, residential real estate customer refinancing loans were
subsequently sold to investors in the secondary market, but commercial
real estate loans were increased.
-8-
The loan portfolio is the Company's primary asset subject to credit risk.
The Company's process for monitoring credit risks includes weekly analysis
of loan quality, delinquencies, non-performing assets, and potential
problem loans. Loans are placed on a nonaccrual status when they become
contractually past due 90 days or more as to interest or principal
payments. All interest accrued but not collected for loans (including
applicable impaired loans) that are placed on nonaccrual or charged off is
reversed to interest income. The interest on these loans is accounted for
on the cash basis until qualifying for return to accrual status. Loans
are returned to accrual status when all the principal and interest amounts
contractually due have been collected and there is reasonable assurance
that repayment will continue within a reasonable time frame.
The term "impaired loan" refers to certain commercial loans with respect
to which, based on current information, it is probable that the Company
will not be able to collect all amounts due in accordance with the
contractual terms of the loan agreement. Impairment is based on
discounted cash flows of expected future payments using the loan's
effective interest rate or the fair value of the collateral if the loan is
collateral-dependent.
The aggregate amount of nonperforming assets increased $1,739 to $4,147 at
March 31, 2002 from $2,408 at March 31, 2001, primarily because of
additional loans going on nonaccrual status. Approximately $826 of the
nonaccrual loans is related to one commercial loan relationship. The
Company holds a first lien mortgage on the property of this operating
business with foreclosure scheduled to occur prior to June 30, 2002. The
Company believes it has reasonable buyers for the property and has
obtained an independent appraisal which indicates a market value in excess
of outstanding principal and estimated foreclosure and selling costs. No
significant loss is anticipated.
Nonperforming assets include: 1) loans that are either contractually past
due 90 days or more as to interest or principal payments, on a nonaccrual
status, or the terms of which have been renegotiated to provide a
reduction or deferral of interest or principal (restructured loans) and 2)
foreclosed assets.
-9-
Table 2: Allowance for Loan Losses and Nonperforming Assets
Three months ended
March 31,
(DOLLARS IN THOUSANDS) 2002 2001
Allowance for loan losses at beginning $ 2,969 $ 2,407
Provision for loan losses 180 150
Recoveries on loans previously charged-off 29 1
LOANS CHARGED OFF (23) (22)
ALLOWANCE FOR LOAN LOSSES AT END $ 3,155 $ 2,536
Table 3: Nonperforming Assets
March 31, Dec. 31,
(DOLLARS IN THOUSANDS) 2002 2001 2001
Nonaccrual loans $ 2,870 $ 1,189 $ 3,036
Accruing loans past due 90 days or more 34 215 -
Restructured loans 993 863 999
Total non-performing loans $ 3,897 $ 2,267 $ 4,035
Foreclosed assets $ 250 $ 141 $ 421
Non-performing loans as a % of gross
LOANS RECEIVABLE 1.62% 1.00% 1.68%
Total non-performing assets as a % of total
ASSETS 1.25% 0.75% 1.29%
Management is not aware of any additional loans that represent material
credits or of any information that causes management to have serious
doubts as to the ability of such borrowers to comply with the loan
repayment terms.
LIQUIDITY
Liquidity refers to the ability of the Company to generate adequate
amounts of cash to meet the Company's need for cash. The Company manages
its liquidity to provide adequate funds to support borrowing needs and
deposit flow of its customers. Management views liquidity as the ability
to raise cash at a reasonable cost or with a minimum of loss and as a
measure of balance sheet flexibility to react to marketplace, regulatory,
and competitive changes. Deposit growth is the primary source of
liquidity. Deposits as a percentage of total funding sources were 86.5%
at March 31, 2002, and 84.2% at March 31, 2001. Wholesale funding
represents the balance of the Company's total funding needs.
-10-
Table 4: Period-end Deposit Composition
March 31, March 31,
December 31, 2001
Dollars Dollars Percentage of
total
Percentage
(DOLLARS IN THOUSANDS) 2002 2001 2002 2001
DOLLARS
OF TOTAL
Noninterest bearing demand $ 33,324 $ 31,705 12.6% 12.8% $ 41,508 15.2%
Interest bearing demand
and savings 28,735 23,202 10.9% 9.4% 33,691 12.3%
Money market deposits 74,101 74,204 28.1% 29.9% 76,973 28.1%
Time deposits 69,687 63,729 26.4% 25.7% 68,233 24.9%
TIME DEPOSITS $100 AND OVER 58,179 55,127 22.0% 22.2% 53,230 19.5%
TOTALS $264,026 $247,967 100.0% 100.0% $273,635 100.0%
The interest rate paid on money market deposits is adjustable based on a
weekly index of national money market funds. As short-term interest rates
have decreased during 2001 and 2002, the yield on this account has
declined substantially. At the same time, the Company has offered above
average (compared to local competition) long term (three years or longer)
certificate of deposits rates to stabilize deposit funding cost during a
rising rate interest market. Some customers appear to have moved money market
funds into time deposits to secure a higher yield.
As of March 31, 2002, federal funds sold, loan principal, and investment
securities maturing within one year totaled $74,053, while certificates of
deposit and short-term borrowings maturing within one year totaled
$87,088. Unused credit advances from the Federal Home Loan Bank available
to the Company at March 31, 2002 totaled approximately $5,700. The
primary funding sources utilized are Federal Home Loan Bank advances,
federal funds purchased, repurchase agreements from a base of individuals,
businesses and public entities, and brokered time deposits.
CAPITAL RESOURCES
Stockholders' equity at March 31, 2002 increased $2,700 from $23,476 at
March 31, 2001. Stockholders' equity included unrealized gains on
securities available for sale, net of their tax effect, of $369 at March
31, 2002 compared to unrealized gains of $307 at March 31, 2001.
The adequacy of the Company's capital is regularly reviewed to ensure
sufficient capital is available for current and future needs and is in
compliance with regulatory guidelines. As of March 31, 2002, the
Subsidiary Bank's tier 1 risk-based capital ratio, total risk-based
capital, and tier 1 leverage ratio were well in excess of regulatory
minimums.
-11-
Table 5: Capital Ratios - Consolidated Holding Company
Tier 1 Total Risk-
Leverage Based
CAPITAL CAPITAL
March 31, 2002 7.7% 11.6%
December 31, 2001 7.2% 11.2%
March 31, 2001 7.3% 11.5%
Regulatory minimum for capital adequacy 4.0% 8.0%
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 2002 totaled $958, or $1.14 per
share for basic and diluted earnings per share. Comparatively, net income
for the quarter ended March 31, 2001 was $769, or $.92 per share for basic
and diluted earnings per share. Operating results for the first quarter
2002 generated an annualized return on average assets of 1.14% and an
annualized return on average equity of 14.78%, compared to .98% and 13.46%
for the comparable period in 2001. The net interest margin for the first
quarter 2002 was 3.87% compared to 3.47% for the comparable quarter in
2001.
-12-
The following table presents consolidated financial data of PSB Holdings,
Inc. and Subsidiary.
Table 6: Financial Summary
(dollars in thousands, except per share data) Quarter ended
March 31, Dec. 31, Sept. 30, June 30, March 31,
2002 2001 2001 2001 2001
EARNINGS AND DIVIDENDS:
Net interest income $ 2,994 $ 2,934 $ 2,909 $ 2,630 $ 2,487
Provision for loan losses $ 180 $ 440 $ 150 $ 150 $ 150
Other noninterest income $ 565 $ 798 $ 357 $ 455 $ 455
Other noninterest expense $ 2,012 $ 2,006 $ 1,868 $ 1,738 $ 1,704
Net income $ 958 $ 873 $ 885 $ 839 $ 769
Basic earnings per share $ 1.14 $ 1.04 $ 1.05 $ 1.00 $ 0.92
Diluted earnings per share $ 1.14 $ 1.04 $ 1.05 $ 1.00 $ 0.92
Dividends declared per share $ - $ 0.70 $ - $ 0.38 $ -
Net book value per share $ 31.18 $ 30.19 $ 30.25 $ 28.65 $ 27.96
Dividend payout ratio 0.00% 67.31% 0.00% 38.00% 0.00%
Average common shares outstanding 839,615 839,705 839,705 839,705 839,705
Balance sheet - average balances:
Loans receivable, net $ 238,284 $ 229,994 $ 219,793 $ 220,837 $ 224,038
Assets $ 336,879 $ 331,381 $ 316,592 $ 317,740 $ 313,474
Deposits $ 267,050 $ 261,556 $ 245,177 $ 244,422 $ 244,751
Stockholders' equity $ 25,924 $ 25,671 $ 24,737 $ 23,772 $ 22,859
PERFORMANCE RATIOS:
Return on average assets (1) 1.14% 1.05% 1.12% 1.06% 0.98%
Return on average stockholders' equity (1) 14.78% 13.60% 14.31% 14.12% 13.46%
Average tangible stockholders' equity to
average assets 7.59% 7.61% 7.57% 7.53% 7.20%
Net loan charge-offs to average loans 0.00% 0.11% 0.02% 0.01% 0.01%
Nonperforming loans to gross loans 1.62% 1.68% 0.96% 0.90% 1.00%
Allowance for loan losses to gross loans 1.31% 1.24% 1.24% 1.21% 1.12%
Net interest rate margin (1)(2) 3.87% 3.89% 4.03% 3.64% 3.47%
Net interest rate spread (1)(2) 3.35% 3.38% 3.41% 2.96% 2.69%
Service fee revenue as a percent of
average demand deposits (1) 2.65% 2.91% 3.21% 3.30% 2.94%
Noninterest income as a percent
of gross revenue 9.52% 12.56% 5.77% 7.07% 7.00%
Efficiency ratio 54.54% 52.20% 55.39% 54.59% 56.35%
Noninterest expenses to average assets (1) 2.39% 2.42% 2.36% 2.19% 2.17%
STOCK PRICE INFORMATION:
High $ 36.00 $ 33.40 $ 31.75 $ 40.00 $ 29.50
Low $ 33.25 $ 30.75 $ 29.00 $ 29.00 $ 27.00
Market value at quarter-end $ 35.50 $ 33.40 $ 31.75 $ 30.00 $ 29.50
<FN>
(1) Annualized
(2) The yield on tax-exempt loans and securities is computed on a tax-
equivalent basis using a tax rate of 34%.
-13-
NET INTEREST INCOME
Net interest income is the most significant component of earnings. Net
interest income increased $507 from $2,487 for the quarter ended March 31,
2001 to $2,994 for the current quarter ended March 31, 2002. Tax-adjusted
net interest margin as a percent of average interest earning assets also
increased from 3.47 percent in March 2001 to 3.87 percent in March 2002.
Net interest margin was 3.73 percent for the year ended December 31, 2001.
Since March 2001, the Company has benefited from a falling interest rate
environment as deposits and short-term borrowings have repriced faster
than loans with longer terms. In addition to the increase in tax-adjusted
net interest margin percentage, net interest income included income earned
from additional loans originated since March 31, 2001. Since March 2001,
average loans receivable increased nearly $14 million from $224,038 in
March 2001 to $238,284 in March 2002.
Yield on earning assets decreased to 6.82% compared to 8.28% at March 31,
2001. Similarly, the costs for interest-bearing liabilities decreased to
3.47% from 5.59%. The majority of the decline in interest-bearing
deposits is a result of declines in the index used to determine the yield
paid on the Company's money market account, which was 28.1% of total
deposits at March 31, 2002. Since March 31, 2001, the money market yield
has declined from 4.74% to 1.41% at March 31, 2002. The Company is
positioning liabilities for an anticipated rising interest rate market by
offering long-term certificate of deposit yields in the top 25% of the
local markets served by the subsidiary bank. In addition, loans are
originated with terms as short as acceptable in the local market and the
Company is accepting lower loan yields for the benefit of faster repricing
in the event of an increase in interest rates.
-14-
Table 7: Net Interest Income Analysis
(dollars in thousands) Quarter ended March 31, 2002
Average Yield/
BALANCE INTEREST RATE
Assets
Interest earning assets:
Loans (1)(2) $ 241,320 $ 4,406 7.30%
Taxable securities 49,826 690 5.54%
Tax-exempt securities (2) 20,043 339 6.77%
FHLB stock 2,177 26 4.78%
OTHER INTEREST INCOME 9,151 39 1.70%
TOTAL (2) 322,517 5,500 6.82%
Non-interest earning assets:
Cash and due from banks 9,158
Premises and equipment,
net 4,849
Other assets 3,391
Allowance for loan
LOSSES (3,036)
TOTAL $ 336,879
Liabilities & stockholders' equity
Interest bearing liabilities:
Savings and demand
deposits $ 31,501 $ 93 1.18%
Money market deposits 75,738 284 1.50%
Time deposits 124,383 1,389 4.47%
Short-term borrowings 3,883 46 4.74%
LONG-TERM BORROWINGS 38,000 564 5.94%
TOTAL 273,505 2,376 3.47%
Non-interest bearing liabilities:
Demand deposits 35,428
Other liabilities 2,022
STOCKHOLDERS' EQUITY 25,924
TOTAL $ 336,879
Net interest income 3,124
Rate spread 3.35%
Net yield on interest earning assets 3.87%
<FN>
(1) Non-accrual 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%.
-15-
PROVISION FOR LOAN LOSSES
Management determines the adequacy of the provision for loan losses based
on past loan experience, current economic conditions, composition of the
loan portfolio, and the potential for future loss. Accordingly, the
amount charged to expense is based on management's evaluation of the loan
portfolio. It is the Company's policy that when available information
confirms that specific loans and leases, or portions thereof, including
impaired loans, are uncollectible, these amounts are promptly charged off
against the allowance. The provision for loan losses was $180 for the
three months ended March 31, 2002, and $150 for the three months ended
March 31, 2001. Net charge-offs as a percentage of average loans
outstanding were .00% and .01% during the three months ended March 31,
2002 and 2001, respectively.
Nonperforming loans are reviewed to determine exposure for potential loss
within each loan category. The adequacy of the allowance for loan losses
is assessed based on credit quality and other pertinent loan portfolio
information. The adequacy of the reserve and the provision for loan
losses is consistent with the composition of the loan portfolio and recent
credit quality history.
NONINTEREST INCOME
Noninterest income increased 24.2% to $565 during the three months ended
March 31, 2002, from the comparable first quarter of 2001. There were no
gains or losses on securities during the three months ended March 31, 2002
and 2001. Service fees on deposit accounts decreased $11, or 4.5%, for
the three months ended March 31, 2002 from the three months ended March
31, 2001.
The Company continued to earn a significant amount of income from the sale
of long-term fixed rate mortgage loans to outside investors. The Bank
does not retain such fixed rate loans as part of its asset liability
management strategy. Gain on sale of such loans was $198 in March 2002
compared to $29 during March 2001. The majority of loans sold to outside
investors continue to be serviced by the Bank. At March 31, 2002, the Bank
serviced $44,486 of loans for outside investors. The Bank has seen customer
demand for fixed rate mortgages increase as long-term fixed interest rates in
the overall market reached the lowest point in 40 years. The gain on sale of
loans during the quarter ended March 31, 2002 was increased $86 from
capitalization of originated mortgage servicing rights. At March 31, 2002,
mortgage servicing rights totaled $352, which were carried at amortized cost.
Total service fee and noninterest income, including gain on sale of loans,
was 9.5 percent of gross income during March 2002 compared to 7.0 percent
of gross income during March 2001.
NONINTEREST EXPENSE
Noninterest operating expenses increased $308 to $2,012 in March 2002
compared to $1,704 during March 2001. In addition, operating costs as a
percentage of total assets increased from 2.17 percent in March 2001 to
2.39 percent in the current quarter. The majority of the increase in
operating expenses was from additional salaries, wages, and benefits paid
to employees. As part of the Bank's strategic growth plan, additional
employees have joined the Company since
-16-
2001 at Bank locations in Wausau and Eagle River, Wisconsin. In addition,
average wages and benefits per full time equivalent employee increased
approximately 9 percent from March 2001 to March 2002. Separate from salaries
and wages, noninterst expenses increased $75, or 10.8% in March 2002 compared
to March 2001.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in the information provided in response
to Item 7A of the Company's Form 10-K for the year ended December 31,
2001.
-17-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits.
The following exhibits have been filed with the Securities and Exchange
Commission. Exhibits filed as part of this report, and listed below, are
set forth on the Exhibit Index which follows the signature page.
Exhibit
NUMBER DESCRIPTION
3.1 Restated Articles of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 2000)
4.1 Articles of Incorporation and Bylaws (see Exhibits 3.1 and 3.2)
-18-
10.1 Bonus Plan of Directors of the Bank (incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000)*
10.2 Non-Qualified Retirement Plan for Directors of the Bank
(incorporated by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 2001)*
10.3 Senior Management Incentive Compensation Plan (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 2000)*
10.4 2001 Stock Option Plan (incorporated by reference to Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the period
ended June 30, 2001)*
21.1 Subsidiaries of the Company (incorporated by reference to Exhibit
21.1 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000)
*Denotes Executive Compensation Plans and Arrangements.
(b) Reports on Form 8-K:
None.
-19-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PSB HOLDINGS, INC.
May 14, 2002 SCOTT M. CATTANACH
Scott M. CATTANACH
Treasurer and Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial Officer)
-20-
EXHIBIT INDEX
TO
FORM 10-Q
OF
PSB HOLDINGS, INC.
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
PURSUANT TO SECTION 102(D) OF REGULATION S-T
(17 C.F.R. SECTION 232.102(D))
The following exhibits are filed as part this report:
NONE
-21-