Exhibit 99.1
PSB ANNOUNCES 1ST QUARTER EARNINGS OF $.60 PER SHARE
Wausau, Wisconsin - David K. Kopperud, President of PSB Holdings, Inc. ("PSB")
and Peoples State Bank ("Peoples") today announced the Company's financial
results for the first quarter of 2005.
"PSB earned $.60 per share (on net income of $1,040,000) this quarter compared
to $.55 (on net income of $954,000) during the first quarter last year. The
recent quarter saw increased earnings over last year and we expect 2005 net
income to be in a range of $4.3 million to $4.6 million. We are aggressively
working toward this goal, which would be a significant increase in net income
over that seen during 2004."
"The current quarter benefited from two special items. The first was a large
recovery of collection expenses on a problem loan that increased net income
$61,000. In addition, a payout of our investment on the sale of the Pulse ATM
system (a cooperative) to Discover Financial Services increased net income
$42,000. The March 2004 results included special items of a write-off of
collection expenses and a large security gain. Net income before these special
collection costs and security gains was $933,000 in 2005 compared to $964,000
in 2004."
"Our investments in branching during the past year are already beginning to pay
dividends. Our Minocqua, Wisconsin location opened May 1, 2004 has already
grown to $16 million in assets and has provided $20,000 of pre-tax income so
far this year. Our new Weston, Wisconsin location opened during February 2005
and captured over 3,500 transactions in the first full month, confirming our
research that existing customers and new customers will be well served by this
new site."
"In many respects, banking providers in our primary market of Marathon County,
Wisconsin are in transition at the same time our community experiences a
substantial near-term expansion in new retailers, manufacturers, service and
health care industries, and households. New additions to our lending staff
bring with them experience and relationships providing us immediate in-roads to
large, local companies we are now much better able to serve. This has
contributed to a decrease in net margin from origination of large, very credit-
worthy, but thinly priced loans funded initially by wholesale deposits. Full
Treasury Management services will be on-line on June 1, and our bid to acquire
local, low-cost commercial deposits will improve margin and diversify our
balance sheet. We are expanding with a new type of customer to support our
long-term goal of increasing local deposits and selling additional non-
traditional services. We evaluate each new relationship to maximize profits
and monitor them regularly."
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 property and casualty insurance
services, and long-term fixed rate residential mortgages.
Asset Growth and Net Interest Income
PSB continues to have strong asset growth, increasing $13.7 million, or 3.0%
since December 2004, to $468.7 million. Asset growth since March 2004 has been
$48.0 million, or 11.4%. Most of the recent quarter's growth has been in the
non real estate commercial and industrial loan portfolio, which increased $11.0
million or 15.2% during the past three months. Asset growth during the quarter
was funded primarily by an increase in federal funds purchased of $5.6 million,
core deposit growth of $5.4 million, and wholesale certificates of deposits of
$1.3 million. Retail and local deposits and other local borrowings continue to
comprise the bulk of asset funding and were 68.2% of total assets at March 31,
2005 compared to 68.8% of total assets at December 31, 2004 and 66.4% at March
31, 2004.
In addition to growth, credit quality improved and remains strong.
Nonperforming loans (including non-accrual and restructured loans) to gross
loans was .74% at March 2005 compared to .80% at December 2004, and 1.17% at
March 2004. PSB also tracks delinquencies on a contractual basis quarter to
quarter since some problem loans currently making payments remain on non-
accrual status until ongoing ability to repay according to the contract is
shown. Loans contractually delinquent 30 days or more as a percentage of gross
loans were .59% at March 2005 compared to .56% at December 2004, and .88% at
March 2004. The allowance for loan losses was 1.18% of gross loans at March
2005 compared to 1.16% at March 2004.
Tax-adjusted net interest income increased $47,000, or 1.3% to $3,663,000 for
the quarter ended March 31, 2005 from $3,616,000 for the quarter ended March
31, 2004, but declined $60,000 from $3,723,000 for the quarter ended December
31, 2004. Net interest income has been negatively impacted by a flattening
yield curve and competitive pressures on deposit rates while funding continued
loan growth with higher cost wholesale funds. Margin on earning assets
declined from 3.73% in the March 2004 quarter, and from 3.50% in the December
2004 quarter to 3.40% during the March 2005 quarter. Earning asset yields
increased slightly and were 5.66% at March 2005, 5.59% at December 2004, and
5.60% at March 2004. However, the cost of interest-bearing liabilities
increased from 2.24% at March 2004 to 2.47% at December 2004, and 2.61% at
March 2005.
PSB updated accounting procedures during March 2005 to improve recognition and
amortization of deferred loan origination fees and costs in accordance with
Statement of Financial Accounting Standard No. 91, Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans ("FAS 91"). This
change is more fully described in this press release under operating expenses.
Tax-adjusted net interest margin before accounting adjustments for FAS 91 would
have been 3.51% during the March 2005 quarter (compared to a reported 3.40%),
3.63% during the December 2004 quarter (compared to a reported 3.50%), and
3.78% in the March 2004 quarter (compared to a reported 3.73%).
The increase in funding costs has been led by interest-bearing core deposits
(excluding retail certificates of deposit), whose rate increased from .87% at
December 2004 to 1.30% at March 2005, an increase of 43 basis points. This
increase is due to several factors. Prior to the March 2005 quarter, recent
increases in the Federal Reserve discount rate (totaling 125 basis points by
December 31, 2004) were not yet reflected in core deposits rates, as the
average rate for these deposits was .79% in the June 2004 quarter (the initial
discount rate increase occurred in June 2004). Future discount rate increases
are expected to continue to be reflected in the core deposit rates. In
addition, a portion of the commercial loan growth in the March 2005 quarter was
funded by high-yield money market and NOW accounts sold to new large depositors
and local governmental entities earning rates tied to the 30 day LIBOR rate or
other adjustable wholesale rates. Lastly, these core deposits made up a larger
base of our funding, with average quarterly balances growing $20.0 million over
the December 2004 quarter, an increase of 16.2%. Because the local
governmental entities within these categories generally carry their highest
annual balances during the first quarter of the year, this level of average
balance growth is not expected to continue.
While PSB's balance sheet remains largely neutral to interest rate changes, to
facilitate retention and growth in core deposits a change in the money market
product to introduce higher tiered rates for higher balances effective April 1,
2005 is expected to continue the margin decline in the coming months. As a
measure of margin variability from the current base rate scenario, the most
current internal interest rate simulations project net interest income for the
next 12 months to increase $179,000 (1.28%) if rates increase 200 basis points,
and decrease $78,000 (.56%) if interest rates decrease 100 basis points.
Service Fee and Noninterest Income
Quarterly noninterest income increased $63,000 in the March 2005 quarter to
$803,000 compared to $740,000 in 2004. However, a one-time payout of $70,000
was received during the March 2005 quarter from Discover Financial Services on
the purchase of the Pulse ATM system (in which Peoples was a cooperative
member) which increased noninterest income. A decline of $105,000 in gain on
sale securities compared to the March 2004 quarter was offset largely by an
increase in investment and insurance sales commissions of $79,000 during March
2005. Mortgage banking income was $155,000 in March 2005 compared to $160,000
in March 2004.
Service fee income declined $31,000 to $260,000 in March 2005 compared to the
prior year quarter, continuing a quarterly downward trend. President Kopperud
noted "We have completed a comprehensive retail and commercial fee review and
updated fees to be effective on April 1 for retail products and June 1 for
commercial products. Our fees continue to be extremely competitive locally but
we do expect service fee income to increase going forward."
During February 2005, PSB purchased $4.5 million of bank-owned life insurance
on bank officers in connection with new employee deferred compensation and
incentive plans. The increase in cash surrender value of life insurance was
$20,000 during the March 2005 quarter. The incremental tax-favored earnings on
the life insurance are intended to offset the cost of the additional
compensation plans. President Kopperud indicated, "The new compensation plans
are a win-win for PSB and key officers. The compensation plans give key
employees the opportunity to reach personal financial goals so long as they
remain at Peoples with benefits dependent on PSB achieving profit and growth
benchmarks."
Peoples Insurance Services LLC, our commercial property and casualty insurance
agency and brokerage (a September 2003 start-up), incurred a net loss of
$24,000 after tax benefits during March 2005, compared to a net loss of $31,000
during the March 2004 quarter (excluding internal cost allocations). Total
revenue during the March 2005 quarter of $16,000 continues to be less than
budgeted. Management continues to consider changes to agency operations and
products to meet budget.
Operating Expenses
Noninterest operating expenses increased $38,000, or 1.5% to $2,640,000 in the
quarter ended March 2005 compared to $2,602,000 during the quarter ended March
2004. Increases in salaries and wages of $81,000 and in occupancy expenses of
$144,000 were offset by a decline in other noninterest expenses of $228,000.
During the March 2005 quarter, a reimbursement of collection fees on a problem
loan were recovered, which decreased other noninterest expenses by $101,000.
Conversely, the March 2004 quarter included $127,000 of collection fees written
off to other noninterest expense in response to regulatory requirements to
account for collection fees as expense until collected.
The increase in employee salaries and benefits of $81,000 previously mentioned
was up 5.2% from the prior year. Company employees were granted inflationary
and merit increases effective January 1, 2005 averaging 3.4% of base pay.
However, salaries and wages were also reduced by $165,000 during the March 2005
quarter as PSB implemented a daily automated system to improve accounting for
deferred loan fees and costs (including lender and support personnel salaries)
in accordance with current accounting standards (FAS 91). FAS 91 requires loan
origination fees and direct loan origination costs to be deferred and amortized
as a yield adjustment earned on the loan. Previously, these accounting
adjustments for deferral of costs were made only at year-end and in prior years
had an immaterial impact on the individual quarterly financial statements. The
change in accounting procedure was made to simplify operations and improve the
accuracy of earnings reporting.
Offsetting the increase to March 2005 income from deferred employee wage
expense related to new loan originations under FAS 91 were decreases to income
from deferral of $28,000 in fees collected, and amortization of previously
capitalized net loan origination costs of $89,000 against net interest income.
Taken together, FAS 91 accounting adjustments increased March 2005 net income
by $29,000 and decreased March 2004 net income by $22,000.
Total noninterest expenses excluding the special collection expense items and
the impact of deferred loan origination costs (wages) in the March 2005 quarter
were $2,906,000 compared to $2,475,000 in March 2004, an increase of 17.4%.
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 "Cautionary Statement Regarding Forward Looking Information" in Item 1 of
the company's Form 10-K for the year ended December 31, 2004. PSB assumes no
obligation to update or supplement forward-looking statements that become
untrue because of subsequent events.
(tables follow)
PSB HOLDINGS, INC.
QUARTERLY FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Quarter ended - Unaudited
March 31, Dec. 31, Sept. 30 June 30, March 31,
EARNINGS AND DIVIDENDS: 2005 2004 2004 2004 2004
Net income $ 1,040 $ 1,043 $ 747 $ 782 $ 954
Basic earnings per share (3) $ 0.60 $ 0.61 $ 0.43 $ 0.45 $ 0.55
Diluted earnings per share (3) $ 0.60 $ 0.60 $ 0.43 $ 0.45 $ 0.55
Dividends declared per share (3) $ - $ 0.30 $ - $ 0.30 $ -
Net book value per share $ 19.77 $ 19.55 $ 19.41 $ 18.68 $ 19.33
Semi-annual dividend payout ratio n/a 28.82% n/a 29.84% n/a
Average common shares outstanding 1,721,058 1,717,394 1,720,436 1,729,322 1,733,531
BALANCE SHEET - AVERAGE BALANCES:
Loans receivable, net of allowances $ 354,136 $ 341,997 $ 331,167 $ 320,471 $ 307,109
Total assets $ 465,083 $ 448,591 $ 439,177 $ 426,826 $ 407,577
Deposits $ 367,394 $ 353,310 $ 347,015 $ 330,337 $ 312,455
Stockholders' equity $ 33,989 $ 34,076 $ 33,010 $ 32,942 $ 32,878
PERFORMANCE RATIOS:
Return on average assets (1) 0.91% 0.92% 0.67% 0.73% 0.94%
Return on avg. stockholders' equity (1) 12.41% 12.18% 8.98% 9.52% 11.64%
Average tangible stockholders' equity to
average assets 7.25% 7.49% 7.46% 7.61% 7.83%
Net loan charge-offs to average loans 0.00% 0.04% 0.00% 0.01% 0.02%
Nonperforming loans to gross loans 0.74% 0.80% 0.94% 0.98% 1.17%
Allowance for loan loss to gross loans 1.18% 1.19% 1.22% 1.19% 1.16%
Net interest rate margin (1)(2) 3.40% 3.50% 3.51% 3.64% 3.73%
Net interest rate spread (1)(2) 3.05% 3.12% 3.17% 3.30% 3.38%
Service fee revenue as a percent of
average demand deposits (1) 2.19% 2.22% 2.52% 2.63% 2.60%
Noninterest income as a percent
of gross revenue 11.87% 11.64% 11.93% 13.54% 12.24%
Efficiency ratio (2) 59.11% 58.52% 63.95% 64.54% 59.73%
Noninterest expenses to avg. assets (1) 2.30% 2.33% 2.56% 2.74% 2.56%
STOCK PRICE INFORMATION:
High $32.20 $33.25 $35.25 $35.60 $35.60
Low $31.85 $32.00 $33.00 $34.50 $33.50
Market value at quarter-end $31.85 $32.10 $33.00 $34.50 $35.00
<FN>
(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.
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
(dollars in thousands, except per share data - unaudited) March 31,
2005 2004
Interest and dividend income:
Loans, including fees $5,203 $4,554
Securities:
Taxable 452 461
Tax-exempt 241 243
Other interest and dividends 68 46
Total interest and dividend income 5,964 5,304
Interest expense:
Deposits 1,811 1,291
FHLB advances 550 466
Other borrowings 83 73
Total interest expense 2,444 1,830
Net interest income 3,520 3,474
Provision for loan losses 150 240
Net interest income after provision for loan losses 3,370 3,234
Noninterest income:
Service fees 260 291
Mortgage banking 155 160
Investment and insurance sales commissions 170 91
Net gain on sale of securities 6 111
Increase in cash surrender value life insurance 20 -
Other noninterest income 192 87
Total noninterest income 803 740
Noninterest expense:
Salaries and employee benefits 1,629 1,548
Occupancy and facilities 445 301
Data processing and other office operations 172 160
Advertising and promotion 63 34
Other noninterest expenses 331 559
Total noninterest expense 2,640 2,602
Income before provision for income taxes 1,533 1,372
Provision for income taxes 493 418
Net income $1,040 $ 954
Basic earnings per share $ 0.60 $ 0.55
Diluted earnings per share $ 0.60 $ 0.55
PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2005 unaudited, December 31, 2004 derived from audited financial
statements
March 31, December 31,
(dollars in thousands, except per share data) 2005 2004
ASSETS
Cash and due from banks $ 9,301 $ 12,680
Interest-bearing deposits and money market funds 1,877 3,265
Federal funds sold - 7,379
Cash and cash equivalents 11,178 23,324
Securities available for sale (at fair value) 71,083 68,894
Federal Home Loan Bank stock (at cost) 2,913 2,874
Loans held for sale 274 342
Loans receivable, net of allowance for loan losses of $4,303
and $4,157, respectively 361,876 343,923
Accrued interest receivable 1,943 1,744
Foreclosed assets 287 7
Premises and equipment 12,574 12,432
Mortgage servicing rights, net 818 839
Cash surrender value of bank-owned life insurance 4,582 -
Other assets 1,164 595
TOTAL ASSETS $468,692 $454,974
LIABILITIES
Non-interest-bearing deposits $ 48,458 $ 51,635
Interest-bearing deposits 316,926 306,590
Total deposits 365,384 358,225
Federal Home Loan Bank advances 52,000 52,000
Other borrowings 15,044 8,565
Accrued expenses and other liabilities 2,327 2,568
Total liabilities 434,755 421,358
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 9,655 9,672
Retained earnings 26,321 25,281
Accumulated other comprehensive income (loss) (194) 384
Treasury stock, at cost - 170,408 and 167,586 shares, respectively (3,732) (3,608)
Total stockholders' equity 33,937 33,616
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $468,692 $454,974