Exhibit 99.1
PSB ANNOUNCES 2ND QUARTER EARNINGS OF $.68 PER SHARE
Wausau, Wisconsin - David K. Kopperud, President of PSB Holdings, Inc. ("PSB")
and Peoples State Bank ("Peoples") today announced PSB's financial results for
the second quarter of 2005.
"PSB earned $.68 per share (on net income of $1,171,000) this quarter compared
to $.45 (on net income of $782,000) during the second quarter last year.
However, abandonment of the old main office located on the same property
generated a cumulative one-time charge to operations of $199,000 after-tax
benefits during the prior year quarter. Prior to the abandonment charge, June
2004 quarterly earnings were $.56 per share. Disregarding the prior year
special charge, quarterly earnings per share are up 21% over 2004. Year to
date through June 30, 2005, PSB earned $1.28 per share (on net income of
$2,211,000) compared to $.99 (on net income of $1,736,000) during 2004."
"In June 2005, PSB raised $7.5 million of regulatory capital for the bank for
general corporate purposes from the issuance of trust preferred securities.
This capital will support continued asset growth at a minimal cost of capital
without diluting the holdings of existing shareholders. This capital issue is
reflected as junior subordinated debentures on PSB's balance sheet in
accordance with current accounting standards."
"PSB has seen improving credit quality for several quarters, as well as
origination of a significant number of high credit quality commercial loans
from large local businesses as part of our strategic product expansion in
Treasury Management services. This high level of credit quality has allowed us
to reduce the amount of provisions for loan losses, which helped to increase
second quarter 2005 net income to the highest level since the December 2003
quarter. We continue to work aggressively to achieve our goal of net income in
the range of $4.3 million to $4.6 million for all of 2005, which would be a
substantial improvement over 2004 earnings of approximately $3.5 million."
Kopperud further noted "PSB is continuing its history of increased cash
dividend payments with a semi-annual dividend of $.31 per share to be paid July
29, compared to $.30 per share paid last year."
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 $17.5 million, or 3.7%
since March 2005, to $486.2 million. Asset growth since June 2004 has been
$55.0 million, or 12.8%. A large portion of the recent quarter's growth has
been in the non real estate commercial and industrial loan portfolio, which
increased $7.1 million or 8.5% during the past three months. Cash and cash
equivalents also grew during the quarter as $7.5 million in trust preferred
capital securities proceeds were received on June 28, 2005. Asset growth
during the quarter was funded primarily by an increase in wholesale brokered
deposits totaling $16.9 million, continuing a trend of significant wholesale
funding during 2005. Wholesale broker deposits have increased $6.7 million, or
10.2% since June 2004. Retail and local deposits continue to comprise the bulk
of asset funding and were 63.2% of total assets at June 30, 2005 compared to
66.2% of total assets at March 31, 2005 and 63.7% at June 30, 2004.
In addition to growth, credit quality remains strong. Nonperforming loans
(including non-accrual and restructured loans) to gross loans was .60% at June
2005 compared to .74% at March 2005, and .98% at June 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 .57% at June
2005 compared to .59% at March 2005, and .84% at June 2004. The allowance for
loan losses was 1.15% of gross loans at June 2005 compared to 1.19% at June
2004. The continued improvement in credit quality and growing history of
minimal net loan charge-offs of similar loans allowed PSB to reduce the
provision for loan losses during the June 2005 quarter. The provision for loan
loses was $30,000 during the quarter ended June 2005 and $240,000 during the
quarter ended June 2004.
Tax-adjusted net interest income increased $63,000, or 1.7% to $3,723,000 for
the quarter ended June 30, 2005 from $3,660,000 for the quarter ended June 30,
2004, and increased $60,000 from $3,663,000 for the quarter ended March 31,
2005. 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 3.64% in the June 2004 quarter, and from 3.40% in the March 2005 quarter
to 3.32% during the June 2005 quarter. Earning asset yields increased slightly
and were 5.78% at June 2005, 5.66% at March 2005, and 5.57% at June 2004.
However, the cost of interest-bearing liabilities increased from 2.27% at June
2004 to 2.61% at March 2005, and 2.82% at June 2005.
PSB updated accounting procedures early during 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 3.46% during the June 2005 quarter (compared to a reported 3.32%),
3.51% during the March 2005 quarter (compared to a reported 3.40%), and 3.68%
in the June 2004 quarter (compared to a reported 3.64%).
PSB's balance sheet is slightly asset sensitive as assets are expected to
reprice faster than liabilities if interest rates increase. However, rising
short-term rates with stable longer-term rates producing a flatter yield curve
are expected to contribute to a decline in net margin during the coming
quarter. 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 $190,000 (1.34%) if rates
increase 200 basis points, and decrease $709,000 (5.02%) if interest rates
decrease 200 basis points.
Service Fee and Noninterest Income
Quarterly noninterest income increased $92,000 in the June 2005 quarter to
$947,000 compared to $855,000 in June 2004. The change was led by an increase
of $110,000 in commissions from the sale of retail investment products. A
decline in mortgage banking income of $59,000 to $249,000 in June 2005 compared
to $308,000 in June 2004 was offset by a $46,000 increase in the cash surrender
value of life insurance.
Service fee income of $324,000 during the June 2005 quarter was similar to
income of $322,000 during the June 2004 quarter, but recovered substantially
from $260,000 of fees in the March 2005 quarter. Fees for retail service
products increased effective April 1, 2005, contributing to the increase over
March 2005.
Operating Expenses
Noninterest operating expenses declined $134,000 to $2,780,000 in the quarter
ended June 2005 compared to $2,914,000 during the quarter ended June 2004.
However, the June 2004 quarter included a special charge to write-off the
remaining investment in the prior home office totaling $329,000. In addition,
salaries and wages in the June 2005 quarter were reduced by $183,000 during the
June 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)
earlier in 2005. 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.
Before the June 2005 deferral of wages under FAS 91 and the June 2004 special
home office write-off, noninterest expenses were $2,963,000 for June 2005, and
$2,585,000 in June 2004, an increase of $378,000, or 14.6%. The increase over
the prior year quarter consisted primarily of $277,000 in additional wages and
benefits and $66,000 in additional occupancy expenses in the June 2005 quarter.
Total quarterly operating expenses to average total assets before the FAS 91
deferral of wages and the June 2004 special home office write-off were 2.47%
for June 2005 and 2.43% for June 2004 (annualized).
Offsetting the increase to June 2005 income from deferred employee wage expense
related to new loan originations under FAS 91 were reductions to income from
deferral of loan origination fees collected, and amortization of previously
capitalized net loan origination costs against net interest income. Taken
together, all FAS 91 accounting adjustments increased June 2005 net income by
$18,000 and decreased June 2004 net income by $22,000.
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
JUNE 30, March 31, Dec. 31, Sept. 30 June 30,
EARNINGS AND DIVIDENDS: 2005 2005 2004 2004 2004
Net income $ 1,171 $ 1,040 $ 1,043 $ 747 $ 782
Basic earnings per share (3) $ 0.68 $ 0.60 $ 0.61 $ 0.43 $ 0.45
Diluted earnings per share (3) $ 0.68 $ 0.60 $ 0.60 $ 0.43 $ 0.45
Dividends declared per share (3) $ 0.31 $ - $ 0.30 $ - $ 0.30
Net book value per share $ 20.27 $ 19.77 $ 19.55 $ 19.41 $ 18.68
Semi-annual dividend payout ratio 24.06% n/a 28.82% n/a 28.84%
Average common shares outstanding 1,714,134 1,721,058 1,717,394 1,720,436 1,728,322
BALANCE SHEET - AVERAGE BALANCES:
Loans receivable, net of allowances $367,948 $354,136 $341,997 $331,167 $320,471
Total assets $480,325 $465,083 $448,591 $439,177 $426,826
Deposits $376,252 $367,394 $353,310 $347,015 $330,337
Stockholders' equity $ 34,665 $ 33,989 $ 34,076 $ 33,010 $ 32,942
PERFORMANCE RATIOS:
Return on average assets (1) 0.98% 0.91% 0.92% 0.67% 0.73%
Return on avg. stockholders' equity (1) 13.55% 12.41% 12.18% 8.98% 9.52%
Average tangible stockholders' equity to
average assets 7.22% 7.25% 7.49% 7.46% 7.61%
Net loan charge-offs to average loans 0.01% 0.00% 0.04% 0.00% 0.01%
Nonperforming loans to gross loans 0.60% 0.74% 0.80% 0.94% 0.98%
Allowance for loan loss to gross loans 1.15% 1.18% 1.19% 1.22% 1.19%
Net interest rate margin (1)(2) 3.32% 3.40% 3.50% 3.51% 3.64%
Net interest rate spread (1)(2) 2.96% 3.05% 3.12% 3.17% 3.30%
Service fee revenue as a percent of
average demand deposits (1) 2.56% 2.19% 2.22% 2.52% 2.63%
Noninterest income as a percent
of gross revenue 13.00% 11.87% 11.64% 11.93% 13.54%
Efficiency ratio (2) 59.53% 59.11% 58.52% 63.95% 64.54%
Noninterest expenses to avg. assets (1) 2.32% 2.30% 2.33% 2.56% 2.74%
STOCK PRICE INFORMATION:
High $31.85 $32.20 $33.25 $35.25 $35.60
Low $30.63 $31.85 $32.00 $33.00 $34.50
Market value at quarter-end $30.75 $31.85 $32.10 $33.00 $34.50
<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 Six Months Ended
(dollars in thousands, June 30, June 30,
except per share data - unaudited) 2005 2004 2005 2004
Interest and dividend income:
Loans, including fees $ 5,581 $ 4,714 $10,784 $ 9,268
Securities:
Taxable 467 453 919 914
Tax-exempt 237 245 478 488
Other interest and dividends 55 46 123 92
Total interest and dividend income 6,340 5,458 12,304 10,762
Interest expense:
Deposits 2,141 1,360 3,952 2,651
FHLB advances 507 504 1,057 970
Other borrowings 106 77 189 150
Junior subordinated deferrable interest debentures 4 - 4 -
Total interest expense 2,758 1,941 5,202 3,771
Net interest income 3,582 3,517 7,102 6,991
Provision for loan losses 30 240 180 480
Net interest income after provision for loan losses 3,552 3,277 6,922 6,511
Noninterest income:
Service fees 324 322 584 613
Mortgage banking 249 308 404 468
Investment and insurance sales commissions 202 90 372 181
Net gain on sale of securities - - 6 111
Increase in cash surrender value of life insurance 46 - 66 -
Other noninterest income 126 135 318 222
Total noninterest income 947 855 1,750 1,595
Noninterest expense:
Salaries and employee benefits 1,641 1,547 3,270 3,095
Occupancy and facilities 427 361 872 662
Loss on abandonment of premises and equipment - 329 - 329
Data processing and other office operations 168 187 340 347
Advertising and promotion 95 64 158 98
Other noninterest expenses 449 426 780 985
Total noninterest expense 2,780 2,914 5,420 5,516
Income before provision for income taxes 1,719 1,218 3,252 2,590
Provision for income taxes 548 436 1,041 854
Net income $ 1,171 $ 782 $ 2,211 $ 1,736
Basic earnings per share $ 0.68 $ 0.45 $ 1.29 $ 1.00
Diluted earnings per share $ 0.68 $ 0.45 $ 1.28 $ 0.99
PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2005 unaudited, December 31, 2004 derived from audited financial
statements
JUNE 30, December 31,
(dollars in thousands, except per share data) 2005 2004
ASSETS
Cash and due from banks $ 13,019 $ 12,680
Interest-bearing deposits and money market funds 2,633 3,265
Federal funds sold 2,610 7,379
Cash and cash equivalents 18,262 23,324
Securities available for sale (at fair value) 72,464 68,894
Federal Home Loan Bank stock (at cost) 2,953 2,874
Loans held for sale 610 342
Loans receivable, net of allowance for loan losses of $4,309
and $4,157, respectively 370,252 343,923
Accrued interest receivable 1,971 1,744
Foreclosed assets 229 7
Premises and equipment 12,662 12,432
Mortgage servicing rights, net 853 839
Cash surrender value of bank-owned life insurance 4,627 -
Other assets 1,347 595
TOTAL ASSETS $486,230 $454,974
LIABILITIES
Non-interest-bearing deposits $ 53,759 $ 51,635
Interest-bearing deposits 325,781 306,590
Total deposits 379,540 358,225
Federal Home Loan Bank advances 55,000 52,000
Other borrowings 5,879 8,565
Junior subordinated deferrable interest debentures 7,732 -
Accrued expenses and other liabilities 3,363 2,568
Total liabilities 451,514 421,358
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 26,960 25,281
Accumulated other comprehensive income 72 384
Treasury stock, at cost - 174,408 and 167,586 shares, respectively (3,858) (3,608)
Total stockholders' equity 34,716 33,616
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $486,230 $454,974