Exhibit 99.1
PSB ANNOUNCES 3RD QUARTER EARNINGS OF $.62 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 third quarter of 2005.
"PSB earned $.62 per share (on net income of $1,066,000) this quarter compared
to $.43 (on net income of $747,000) during the third quarter last year. In
2004, PSB settled an income tax audit with the Wisconsin Department of Revenue
via a standardized agreement (as did many Wisconsin banks with out-of-state
subsidiaries) which reduced earnings by $.09 per share (or $150,000). Year to
date earnings in 2005 are $1.90 per diluted share (on net income of $3,277,000)
compared to $1.42 per share (on net income of $2,483,000) in 2004. Even if the
impact of the September 2004 quarter tax settlement and the June 2004 quarter
charge on abandonment of the old home office of $199,000 are disregarded, 2005
year-to-date net income is up 16% over last year."
"Similar to the quarter ended June 2005, PSB reduced provisions for loan losses
in the current quarter as repayment was received from a long-time problem
borrower without loss, allowing previously allocated reserves to be recaptured
into income. Combined with a reduction on loans held on the balance sheet
during the quarter, third quarter provision for loan losses was reduced $80,000
compared to the June 2005 quarter after being reduced $120,000 in the June 2005
quarter compared to the March 2005 quarter. These reductions from improved
credit quality have contributed to increased earnings over 2004."
"On September 14, 2005, PSB reached $500 million in assets. We reached this
milestone with pro-active customer service and support by our local communities
after reaching $300 million in the fourth quarter 2000 and $400 million in
September 2003. Despite very competitive local markets, we continue to seek
steady increases in market share for our stockholders."
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
Earnings in the September 2005 quarter were significantly impacted by a
continued decline in net interest margin which was amplified by slower average
loan growth. Average loans receivable increased just .40% on a linked quarter
basis in September 2005 compared to June 2005, although average loan balances
increased 11.6% over the prior year September 2004 quarter. Net loans
receivable were $363.4 million as of September 30, 2005, down $6.8 million from
June 30, 2005 and repaid loan principal contributed to an increase in overnight
federal funds sold holdings by $9.1 million during the September quarter.
However, total assets grew $8.5 million during the quarter to $494.7 million
(1.7%) as of September 30, 2005 as interest bearing demand and savings accounts
(primarily municipal funds) increased $13.6 million.
David Kopperud commented "Competition in our market increased with a flattening
yield curve and aggressive pricing from both large bank and community bank
competitors. In some cases our profit analysis has shown competitor pricing to
be out of line with borrower credit and interest rate risk. This past
September, we were unwilling to match competitor terms on an existing $2.6
million loan and lost this relationship. In addition, our on-balance sheet
residential mortgages declined $2.9 million in part to borrower construction
loans placed into permanent financing and sold into the secondary market."
Kopperud continued "Our credit quality continues to be strong and we were
pleased to receive payoff from a long time problem borrower for which we had
set aside a specific reserve of $160,000. Our statistical reserve analysis
showed the decline in loans receivable and recapture of the problem borrower
reserve allowed us to reduce our provision for loan losses resulting in a
credit of $50,000 for the September 2005 quarter."
Nonperforming loans (including non-accrual and restructured loans) to gross
loans was .71% at September 2005 compared to .60% at June 2005, and .94% at
September 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 .67% at September 2005 compared to .57% at June 2005, and .71% at
September 2004. The allowance for loan losses was 1.14% of gross loans at
September 2005 compared to 1.22% at September 2004.
Tax-adjusted net interest income declined $12,000 to $3,654,000 for the quarter
ended September 30, 2005 from $3,666,000 for the quarter ended September 30,
2004, and declined $69,000 from $3,723,000 for the quarter ended June 30, 2005.
Net interest income has been negatively impacted by a flattening yield curve
and competitive pressures on both loan and deposit rates. Margin on earning
assets declined from 3.51% in the September 2004 quarter, and from 3.32% in the
June 2005 quarter to 3.14% during the September 2005 quarter. Earning asset
yields increased slightly and were 5.80% at September 2005, 5.78% at June 2005,
and 5.54% at September 2004. However, the cost of interest-bearing liabilities
increased from 2.37% at September 2004 to 2.82% at June 2005, and 3.08% at
September 2005.
PSB's balance sheet is asset sensitive (assets reprice faster than liabilities)
with a cumulative 12 month gap ratio of approximately 112%. However, a
flattening yield curve impacts the extent to which assets can reprice compared
to greater repricing potential on shorter-term funding liabilities. Projecting
continued rate increases of 200 basis points fully implemented over the next 12
months, net interest margin for the upcoming December 2005 quarter is expected
to decline within a range of 0 to 10 basis points compared to the September
2005 quarter. Net margin is expected to continue to experience pressure into
2006 in the current interest rate and competitive environment.
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 3.27% during the September 2005 quarter (compared to a reported
3.14%), 3.46% during the June 2005 quarter (compared to a reported 3.32%), and
3.55% in the September 2004 quarter (compared to a reported 3.51%).
Service Fee and Noninterest Income
Quarterly noninterest income increased $142,000 in the September 2005 quarter
to $906,000 compared to $764,000 in September 2004. The change was led by an
increase of $100,000 in mortgage banking income and $47,000 from increase in
the cash surrender value of life insurance.
Year to date, noninterest income before gains on sale of securities has
increased $402,000 to $2,650,000, or 17.9%. The increase was due primarily to
higher retail investment sales commissions of $139,000, increase in cash
surrender value of life insurance of $113,000, and $78,000 payout of our
investment on the sale of the Pulse ATM system (a cooperative) to Discover
Financial Services.
Service fee income of $880,000 year to date through September 2005 declined
$53,000, or 5.7% from $933,000 in September 2004. During 2005, substantial
changes to deposit service fee structure have occurred for both retail and
commercial accounts. Some changes reduced fee income in an effort to market
more competitive demand deposit accounts. These changes, along with an
emphasis on sale of demand accounts has increased average quarterly non-
interest bearing demand account balances 11.1% from September 2004 to September
2005.
Operating Expenses
Noninterest operating expenses increased $51,000, or 1.8%, to $2,884,000 in the
quarter ended September 2005 compared to $2,833,000 during the quarter ended
September 2004. In addition, salaries and wages in the September 2005 quarter
were reduced by $154,000 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 September 2005 deferral of wages under FAS 91, noninterest expenses
were $3,038,000 for September 2005, and $2,833,000 in September 2004, an
increase of $205,000, or 7.2%. The increase over the prior year quarter
consisted primarily of $180,000 in additional wages and benefits in the
September 2005 quarter. Total quarterly operating expenses to average total
assets before the FAS 91 deferral of wages were 2.44% for September 2005 and
2.56% for September 2004 (annualized).
Offsetting the increase to September 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 decreased September 2005 net
income by $3,000 and decreased September 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
PSB'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
SEPT. 30 June 30, March 31, Dec. 31 Sept. 30,
EARNINGS AND DIVIDENDS: 2005 2005 2005 2004 2004
Net income $ 1,066 $ 1,171 $ 1,040 $ 1,043 $ 747
Basic earnings per share (3) $ 0.62 $ 0.68 $ 0.60 $ 0.61 $ 0.43
Diluted earnings per share (3) $ 0.62 $ 0.68 $ 0.60 $ 0.60 $ 0.43
Dividends declared per share (3) $ - $ 0.31 $ - $0.30 $ -
Net book value per share $ 20.81 $ 20.27 $ 19.77 $ 19.55 $ 19.41
Semi-annual dividend payout ratio N/A 24.06% n/a 28.82% n/a
Average common shares outstanding 1,712,771 1,714,134 1,721,058 1,717,394 1,720,436
BALANCE SHEET - AVERAGE BALANCES:
Loans receivable, net of allowances $ 369,489 $ 367,948 $ 354,136 $ 341,997 $ 331,167
Total assets $ 493,035 $ 480,325 $ 465,083 $ 448,591 $ 439,177
Deposits $ 387,969 $ 376,252 $ 367,394 $ 353,310 $ 347,015
Stockholders' equity $ 35,143 $ 34,665 $ 33,989 $ 34,076 $ 33,010
PERFORMANCE RATIOS:
Return on average assets (1) 0.86% 0.98% 0.91% 0.92% 0.67%
Return on avg. stockholders' equity (1) 12.03% 13.55% 12.41% 12.18% 8.98%
Average tangible stockholders' equity to
average assets 7.14% 7.22% 7.25% 7.49% 7.46%
Net loan charge-offs to average loans 0.02% 0.01% 0.00% 0.04% 0.00%
Nonperforming loans to gross loans 0.71% 0.60% 0.74% 0.80% 0.94%
Allowance for loan loss to gross loans 1.14% 1.15% 1.18% 1.19% 1.22%
Net interest rate margin (1)(2) 3.14% 3.32% 3.40% 3.50% 3.51%
Net interest rate spread (1)(2) 2.72% 2.96% 3.05% 3.12% 3.17%
Service fee revenue as a percent of
average demand deposits (1) 2.10% 2.56% 2.19% 2.22% 2.52%
Noninterest income as a percent
of gross revenue 12.06% 13.00% 11.87% 11.64% 11.93%
Efficiency ratio (2) 63.25% 59.53% 59.11% 58.52% 63.95%
Noninterest expenses to avg. assets (1) 2.32% 2.32% 2.30% 2.33% 2.56%
STOCK PRICE INFORMATION:
High $32.00 $31.85 $32.20 $33.25 $35.25
Low $30.65 $30.63 $31.85 $32.00 $33.00
Market value at quarter-end $30.70 $30.75 $31.85 $32.10 $33.00
<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 Nine Months Ended
(dollars in thousands, September 30, September 30,
except per share data - unaudited) 2005 2004 2005 2004
Interest and dividend income:
Loans, including fees $ 5,734 $ 4,882 $ 16,518 $ 14,150
Securities:
Taxable 488 454 1,407 1,368
Tax-exempt 247 247 725 735
Other interest and dividends 137 55 260 147
Total interest and dividend income 6,606 5,638 18,910 16,400
Interest expense:
Deposits 2,403 1,543 6,355 4,194
FHLB advances 532 515 1,589 1,485
Other borrowings 48 59 237 209
Junior subordinated debentures 115 - 119 -
Total interest expense 3,098 2,117 8,300 5,888
Net interest income 3,508 3,521 10,610 10,512
Provision (credit) for loan losses (50) 195 130 675
Net interest income after provision for loan losses 3,558 3,326 10,480 9,837
Noninterest income:
Service fees 296 320 880 933
Mortgage banking 287 187 691 655
Investment and insurance sales commissions 159 164 531 345
Net gain on sale of securities - - 6 111
Increase in cash surrender value of life insurance 47 - 113 -
Other noninterest income 117 93 435 315
Total noninterest income 906 764 2,656 2,359
Noninterest expense:
Salaries and employee benefits 1,744 1,718 5,014 4,813
Occupancy and facilities 436 445 1,308 1,107
Loss on abandonment of premises and equipment - - - 329
Data processing and other office operations 192 155 532 502
Advertising and promotion 73 97 231 195
Other noninterest expenses 439 418 1,219 1,403
Total noninterest expense 2,884 2,833 8,304 8,349
Income before provision for income taxes 1,580 1,257 4,832 3,847
Provision for income taxes 514 510 1,555 1,364
Net income $ 1,066 $ 747 $ 3,277 $ 2,483
Basic earnings per share $ 0.62 $ 0.43 $ 1.91 $ 1.44
Diluted earnings per share $ 0.62 $ 0.43 $ 1.90 $ 1.42
PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2005 unaudited, December 31, 2004 derived from audited financial
statements
(dollars in thousands, except per share data) - Unaudited 2005 2004
ASSETS
Cash and due from banks $ 11,978 $ 12,680
Interest-bearing deposits and money market funds 3,324 3,265
Federal funds sold 1,683 7,379
Cash and cash equivalents 26,985 23,324
Securities available for sale (at fair value) 78,598 68,894
Federal Home Loan Bank stock (at cost) 2,989 2,874
Loans held for sale 451 342
Loans receivable, net of allowance for loan losses of $4,200
and $4,157, respectively 363,428 343,923
Accrued interest receivable 2,108 1,744
Foreclosed assets 313 7
Premises and equipment 12,737 12,432
Mortgage servicing rights, net 880 839
Cash surrender value of bank-owned life insurance 4,674 -
Other assets 1,541 595
TOTAL ASSETS $ 494,704 $ 454,974
LIABILITIES
Non-interest-bearing deposits $ 56,653 $ 51,635
Interest-bearing deposits 335,497 306,590
Total deposits 392,150 358,225
Federal Home Loan Bank advances 52,000 52,000
Other borrowings 4,090 8,565
Junior subordinated debentures 7,732 -
Accrued expenses and other liabilities 3,089 2,568
Total liabilities 459,061 421,358
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 28,026 25,281
Accumulated other comprehensive income (loss) (67) 384
Treasury stock, at cost - 174,408 and 167,586 shares, respectively (3,858) (3,608)
Total stockholders' equity 35,643 33,616
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 494,704 $ 454,974