Exhibit 99.1
PSB Announces 2nd Quarter Earnings of $.63 Per Share
Wausau, Wisconsin - July 23, 2003
Highlights
Net income for the second quarter June 2003 was $1.057 million compared to
$1.024 million in June 2002. Year to date earnings for the six months ended
June 2003 are up 15% over prior year.
* Quarterly 2003 diluted earnings per share of $.63, up from $.61 in 2002.
* Quarterly 2003 return on assets of 1.14% compared to 1.22% in 2002.
* Quarterly 2003 return on stockholders' equity of 13.82% compared to
15.23% in 2002.
* Second quarter dividend of $.30 per share to be paid July 29 for
shareholders as of July 8.
PSB Holdings, Inc. (OTCBB:PSBQ.OB), parent company of Peoples State Bank of
Wausau, Wisconsin today reported second quarter June 2003 earnings of $.63 per
share, compared to $.61 per share during the second quarter of 2002. Net book
value increased to $18.63 per share, compared to $16.34 at June 2002. A 2 for
1 stock split was effective November 19, 2002. All per share information has
been updated to reflect the split. Financial performance is expressed in
thousands, except per share data.
Peoples State Bank is headquartered in Wausau, Wisconsin with seven retail
locations serving north central Wisconsin in Marathon, Lincoln, Oneida, and
Vilas counties. In addition to traditional retail and commercial loan and
deposit products, the Bank provides investments and retirement planning and
long-term fixed rate residential mortgages.
Net income for the quarter ended June 30, 2003 was $1,057 compared to $1,224 in
the first quarter of 2003 and $1,024 in June 2002. Operating results for the
second quarter 2003 generated an annualized return on average assets (ROA) and
return on average equity (ROE) of 1.14% and 13.82%, respectively. Comparable
ratios for the same quarter in 2002 were ROA of 1.22% and ROE of 15.23%. Year
to date ROA and ROE for 2003 are 1.25% and 15.20%, respectively. ROA and ROE
were 1.19% and 15.13% during the six months ended June 30, 2002, respectively.
Net Interest Income
Net interest income increased $164 from $3,104 for the quarter ended June 30,
2002 to $3,268 for the current quarter ended June 30, 2003 due to increased
earning assets held although margin on those assets has declined. Tax-adjusted
net interest margin as a percent of average interest earning assets decreased
from the year earlier quarter to 3.83% from 4.04%. Net interest margin for
calendar year 2002 was 3.95%. The Company has experienced compressed interest
rate margins since prime rate adjustable and other maturing term loans and
securities are repriced at today's significantly lower rates. However, deposit
costs are already near their floor and unable to fully recover decreasing
earning asset yields. Compared to the year earlier quarter, earning assets
yields have decreased 84 basis points from 6.91% at June 2002 to 6.07% at June
2003. However, the cost of paying liabilities declined only 65 basis points
from 3.38% at June 2002 to 2.73% at June 2003.
The Company continues to seek net interest income growth by minimizing excess
overnight funds and originating assets with terms in line with proactive asset-
liability management. The Company's balance sheet is "asset sensitive" and
therefore margins would improve in a rising interest rate environment.
Management expects the net interest margin to continue to come under pressure
and decrease during the third quarter of 2003 by 7 to 10 basis points due to
lower reinvestment yields on the investment securities portfolio and the impact
of the recent 1/4% reduction in the federal funds rate on prime rate
adjustable loans.
The Company saw growth in total average loans of $25,261, or 10% over the
comparable year-ago quarter. The majority of this growth came from additional
owner-occupied commercial real estate loans. Total assets increased to
$379,936 at June 30, 2003 compared to $342,104 at June 30, 2002.
Service Fee and Noninterest Income
Noninterest income grew $124 in the second quarter 2003 to $726 compared to
$602 in 2002. The majority of this growth ($69) was from an increase of income
from the sale of long-term fixed rate mortgage loans, net of servicing right
amortization and provision for impairment. The majority of loans sold to
outside investors continue to be serviced by the Bank directly with the
customer. Gain on sale and servicing of such loans during the quarter was $216
in June 2003 compared to $147 during June 2002. However, during June 2003,
additional expense from a change in accounting estimate related to accounting
for mortgage servicing rights of $236 was recorded, as well as an $18 provision
for impairment of servicing rights reducing gain on sale and servicing of loans
by $254 in total.
During June, the Company contracted with an outside consultant for monthly
mortgage servicing right (MSR) accounting services due to continued growth in
serviced mortgage loans. The Company began servicing mortgage loans for other
investors in November 2000. The Company adopted new estimates related to
customer mortgage payment activity as part of the new accounting model.
Serviced loans are now broken down into a greater number of "pools" with
amortization and impairment calculated based on individual customer activity
within each pool. Initial servicing rights are based on national prepayment
estimates at the time of origination. The new accounting model provides an
estimated original MSR cost lower than that using the previous estimates, and
amortizes that cost faster than under the Company's previous model. The change
in accounting estimate reduced gain on sale and servicing of loans by $236
($143 after tax benefits).
Through June 30, 2003, the gain on sale and servicing of loans after the change
in estimate is more than double the prior year's activity through June 30,
2002, and has substantially enhanced income as interest margins declined during
2003. Management does not expect the current level of mortgage refinancing
income to continue during all of 2003. The Company intends to replace this
income with ongoing servicing fees of the existing mortgage portfolio and
additional investment and insurance sales income. During 2003, the Bank
increased the number of commissioned investment sales professionals on staff.
Investment and insurance sales commissions were $188 during the six months
ended June 2003 compared to $96 in the same period ended June 2002.
Operating Expenses
Noninterest operating expenses increased $174 to $2,220 in June 2003 compared
to $2,046 during June 2002, an increase of 8.5%. Increases in employee
salaries and benefits totaled $217, as bank employees were granted inflationary
and merit increases effective January 1, 2003 averaging 6.1%. In addition, the
Company hired additional lenders and investment sales representatives during
2003 who are expected to make a significant impact in our new Rhinelander,
Wisconsin full service office and other bank locations. In addition, operating
expenses as a percent of average assets declined to 2.40% during the second
quarter June 2003 compared to 2.44% during June 2002. Year to date, additional
operating costs have been offset by increased revenue, as the expense
efficiency ratio improved to 52.72% for the six months ended June 2003 compared
to 53.87% in the prior year.
Branch Market Expansion
The Company recently announced construction of a new bank and financial
services office and administrative headquarters located on property adjacent to
the existing Wausau main office location. Construction of the 32,000 square
foot office and drive-through canopy is anticipated to begin in August with
completion by the end of the second quarter 2004. The existing Wausau main
office which has been used since the Bank opened in 1962 and as most recently
expanded during 1992 will be razed. Building project costs including necessary
furniture, fixtures, and equipment are estimated to be $4.4 million. Annual
depreciation expense after this investment in fixed assets and equipment is
estimated to increase $165 ($100 after income tax benefits). President David
Kopperud commented "Our growth in size and services demanded we expand for the
future. Every aspect of the project from efficiency in operations and customer
service to minimizing building costs has been thoroughly considered. This
investment allows Peoples to build on relationships from the past and reach new
customers well into the future."
Credit Quality and Capitalization
The Company ceases to accrue interest on loans which are 90 days past due and
considers them nonperforming loans until the borrower has made up any late
payments and is able to continue required payments in the future.
Nonperforming loans also include restructured loans until 6 consecutive monthly
payments are received under the new loan terms. The Company continues to
aggressively manage past due customers and lowered the level of nonperforming
loans to gross loans from 1.23% at June 2002 to 1.06% at June 2003. The
Company also tracks delinquencies on a contractual basis quarter to quarter.
Loans contractually delinquent 30 days or more as a percentage of gross loans
were 1.01% at June 2003 compared to .87% at December 2002 and 1.75% at June
2002. The allowance for loan losses was 1.26% of gross loans at June 2003
compared to 1.30% at June 2002. Management reviews the activity in identified
problem loans weekly and recognizes adequate and reasonable loan loss reserves
as required.
Average tangible stockholder's equity was 7.92% during the quarter ended June
2003 compared to 7.87% in the prior year quarter. Management believes the
Company to be well capitalized at June 30, 2003 to remain well capitalized
during the remainder of 2003 based on planned asset growth. During the quarter
ended June 30, 2003, the Company continued an annual buyback program of
purchasing up to 1% of outstanding shares by repurchasing 14,500 shares at an
average price of $33.86 per share. For the remainder of 2003, management
anticipates retaining capital to support asset growth while continuing a cash
dividend to shareholders.
Effective with the $.30 dividend declared June 17, 2003, the Company intends to
equalize the amounts of the semi-annual cash dividends. Accordingly, under the
dividend policy, the Company expects that the dividend to be paid in January,
2004 will be less than the January 2003 dividend, but that the total dividends
to be paid in July 2003 and January 2004 will exceed the $.565 per share total
dividends paid in July 2002 and January 2003. The Company also reaffirmed its
goal of increasing its shareholder dividend on an annual basis subject to
operating results and financial condition of the Company.
Forward Looking Statements
Certain matters discussed in this news release, including those relating to the
growth of the Company 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 "Cautionary Statement
Regarding Forward Looking Information" in Item 1 of the company's Form 10-K for
the year ended December 31, 2002. The Company assumes no obligation to update
or supplement forward-looking statements that become untrue because of
subsequent events.
(tables follow)
PSB HOLDINGS, INC. (Unaudited) (Audited)
FINANCIAL HIGHLIGHTS Three months ended Six months ended Calendar
(dollars in thousands, June 30, June 30,Year Year
except per share data) 2003 2002 2003 2002 2002
EARNINGS
Net income $ 1,057 $ 1,024 $ 2,281 $ 1,982 $ 4,365
Diluted earnings per share 0.63 0.61 1.36 1.18 2.60
Net book value per share 18.63 16.34 18.63 16.34 17.59
PERIOD END BALANCE SHEET
Gross loans receivable $ 279,053 $ 249,938 $ 279,053 $ 249,938 $ 259,173
Total assets 379,936 342,104 379,936 342,104 371,468
Deposits 303,688 271,088 303,688 271,088 297,831
Borrowings 43,052 41,194 43,052 41,194 41,302
KEY EARNINGS RATIOS (ANNUALIZED
AND TAX ADJUSTED)
Return on average assets 1.14% 1.22% 1.25% 1.19% 1.25%
Return on stockholders' equity 13.82% 15.23% 15.20% 15.13% 15.97%
Net interest margin 3.83% 4.04% 3.86% 3.99% 3.95%
Efficiency ratio 53.86% 53.23% 52.72% 53.87% 50.68%
CREDIT QUALITY AND CAPITALIZATION
Allowance for loan losses
to gross loans 1.26% 1.30% 1.26% 1.30% 1.22%
Net loans charge-offs to
average loans 0.01% 0.03% 0.04% 0.03% 0.37%
Average tangible stockholders'
equity to average assets 7.92% 7.87% 7.85% 7.68% 7.66%
SHARE PRICE INFORMATION
High $ 34.00 $ 19.63 $ 34.00 $ 19.63 $25.00
Low 30.00 17.50 23.75 16.63 16.63
Market value at period end 33.25 19.25 33.25 19.25 25.00
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
(dollars in thousands, June 30, June 30,
except per share data - unaudited) 2003 2002 2003 2002
Interest income:
Interest and fees on loans $ 4,476 $ 4,448 $ 8,872 $ 8,839
Interest on securities:
Taxable 501 678 1,116 1,368
Tax-exempt 221 227 444 451
Other interest and dividends 60 52 119 117
Total interest income 5,258 5,405 10,551 10,775
Interest expense:
Deposits 1,432 1,696 2,944 3,462
FHLB advances 506 571 1,014 1,135
Other borrowings 52 34 93 80
Total interest expense 1,990 2,301 4,051 4,677
Net interest income 3,268 3,104 6,500 6,098
Provision for loan losses 240 180 465 360
Net interest income after provision
for loan losses 3,028 2,924 6,035 5,738
Noninterest income:
Service fees 325 321 628 556
Gain on sale of loans 547 134 1,153 332
Mortgage loan servicing, net (331) 13 (309) 19
Investment and insurance sales
Commissions 89 51 188 96
Other noninterest income 96 83 188 64
Total noninterest income 726 602 1,848 1,167
Noninterest expense:
Salaries and employee benefits 1,387 1,170 2,835 2,415
Occupancy 285 325 573 565
Data processing and other office
Operations 148 128 287 260
Advertising and promotion 51 115 88 191
Other noninterest expenses 349 308 754 627
Total noninterest expense 2,220 2,046 4,537 4,058
Income before provision for income taxes 1,534 1,480 3,346 2,847
Provision for income taxes 477 456 1,065 865
Net income $ 1,057 $ 1,024 $ 2,281 $ 1,982
Basic earnings per share $ 0.64 $ 0.61 $ 1.37 $ 1.18
Diluted earnings per share $ 0.63 $ 0.61 $ 1.36 $ 1.18
PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2003 unaudited, December 31, 2002 derived from audited financial statements)
JUNE 30, December 31,
(dollars in thousands, except per share data) 2003 2002
ASSETS
Cash and due from banks $ 14,278 $ 15,890
Interest-bearing deposits and money market funds 5,278 5,490
Federal funds sold 507 172
Cash and cash equivalents 20,063 21,552
Securities available for sale (at fair value) 72,731 81,056
Federal Home Loan Bank stock (at cost) 2,364 2,264
Loans held for sale - 949
Loans receivable, net of allowance for loan
losses of $3,517 and $3,158, respectively 275,536 256,015
Accrued interest receivable 1,674 1,732
Foreclosed assets, net 381 573
Premises and equipment 6,219 6,158
Mortgage servicing rights, net 689 697
Other assets 279 472
TOTAL ASSETS $ 379,936 $ 371,468
LIABILITIES
Non-interest-bearing deposits $ 54,052 $ 45,458
Interest-bearing deposits 249,636 252,373
Total deposits 303,688 297,831
Federal Home Loan Bank advances 38,000 38,000
Other borrowings 5,052 3,302
Accrued expenses and other liabilities 2,427 3,033
Total liabilities 349,167 342,166
STOCKHOLDERS' EQUITY
Common stock - no par value with a stated value
of $1 per share:
Authorized - 3,000,000 shares
Issued - 1,804,850 shares 1,805 1,805
Additional paid-in capital 7,150 7,150
Retained earnings 23,392 21,607
Unrealized gain on securities available for sale,
net of tax 1,481 1,306
Treasury stock, at cost - 153,381 and 138,748
shares, respectively (3,059) (2,566)
Total stockholders' equity 30,769 29,302
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 379,936 $ 371,468