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 JUNE 30, 1998
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 June 30, 1998 was 883,235.
PSB HOLDINGS, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Income, Six Months Ended and Three
Months Ended June 30, 1998 (unaudited)
and June 30, 1997 (unaudited) 1
Condensed Consolidated Balance
Sheets June 30, 1998 (unaudited)
and December 31, 1997 (derived from
audited financial statements) 2
Condensed Consolidated Statements
of Cash Flows Six Months Ended and Three
Months Ended June 30, 1998 (unaudited)
and June 30, 1997 (unaudited) 3
Notes to Condensed Consolidated
Financial Statements 4
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to Vote of
Securities Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on form 8-K 11
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PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ thousands except share
data - unaudited) Six Months Ended Three Months Ended
June 30, June 30
1998 1997 1998 1997
Interest Income
Interest and fees on loans $ 6,883 $ 6,115 $ 3,511 $ 3,121
Interest on investment securities
Taxable 1,139 1,223 556 612
Tax-exempt 303 287 155 145
Other interest income 109 30 66 20
Total interest income 8,434 7,655 4,288 3,898
Interest Expense:
Deposits 4,072 3,825 2,036 1,924
Short-term borrowings 266 194 138 117
Total interest expense 4,338 4,019 2,174 2,041
Net interest income 4,096 3,636 2,114 1,857
Provisions for losses on loans 150 90 75 45
Net interest income after provision
for loan losses 3,946 3,546 2,039 1,812
Other income:
Service fees 290 232 159 115
Insurance commissions 28 35 20 9
Net security gains 36 -0- -0- -0-
Net gain on other real estate 20 -0- 20 -0-
Other operating income 158 92 69 47
Total other income 532 359 268 171
Other Expenses
Salaries and related benefits 1,864 1,278 818 688
Net occupancy expense 399 355 205 167
Computer operations 50 26 26 18
Other operating expense 684 562 324 289
Total other expenses 2,997 2,221 1,373 1,162
Income before income taxes 1,481 1,684 934 821
Provision for income taxes 453 542 296 260
Net income $ 1,028 $ 1,142 $ 638 $ 561
Income per share
Basis: Weighted Average of 883,235 shares in 1998
Weighted Average of 890,099 shares in 1997
Net income per share $ 1.16 $ 1.28 $ .72 $ .63
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PSB HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
($ thousands) June 30, December 31,
1998* 1997*
ASSETS
Cash and cash equivalents $ 8,733 $ 10,623
Interest bearing deposits with banks 383 153
Federal funds sold 7,079 -0-
Investment securities -
Held to maturity
(Market value $13,922 & $12,704 13,801 12,549
at 1998 & 1997 respectively)
Available for sale (at fair market
value, cost $36,352 & $37,422 36,495 37,579
at 1998 & 1997 respectively)
Total loans 147,640 149,317
Allowance for loan losses (1,966) (1,845)
Net loans 145,674 147,472
Bank premises and equipment 4,004 3,746
Other assets 2,199 2,897
TOTAL ASSETS $ 218,368 $ 215,019
LIABILITIES
Noninterest-bearing deposits $ 28,514 $ 27,564
Interest-bearing deposits 158,592 159,038
Total deposits 187,106 186,602
Short-term borrowings 3,619 3,960
Long-term borrowings 6,000 3,000
Other liabilities 1,717 2,239
Total liabilities 198,442 195,801
STOCKHOLDERS' EQUITY
Common stock - no-par value, with a stated value of $2 per share
- 1,000,000 shares authorized
- 902,425 shares issued 1,805 1,805
Additional paid-in capital 7,159 7,159
Retained earnings 11,674 10,956
Net unrealized gain on securities available
for sale, net of tax 91 101
Treasury stock, at cost - 19,190 shares (803) (803)
Total stockholders' equity 19,926 19,218
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $218,368 $ 215,019
<FN>
*The consolidated balance sheet at June 30, 1998 is unaudited. The
December 31, 1997 consolidated balance sheet is derived from audited
financial statements.
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PSB HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
($ thousands - unaudited)
Cash flows from operating activities:
Net income $ 1,028 $ 1,142 $ 638 $ 561
Provision for depreciation, and
net amortization 214 227 118 114
Provisions for loan losses 150 90 75 45
Changes in operating assets and liabilities:
Gain on sale of securities available for sale (36) -0- -0- -0-
Gain on sale of other real estate (20) -0- (20) -0-
Other assets 361 6 155 150
Other liabilities (522) (485) 245 254
Net cash provided by operating activities 1,175 98 1,211 1,124
Cash flows from investing activities:
Proceeds from sale and maturities of:
Held to maturity securities 731 980 466 780
Available for sale securities 11,494 3,957 3,484 980
Payment for purchase of
Held to maturity securities (1,992) (1,417) (1,577) (350)
Available for sale securities (10,360) (2,473) (4,961) (1,978)
Net change in loans 1,648 (3,852) 3,553 (3,630)
Net (increase) decrease in interest-bearing
deposits with banks (230) -0- 198 -0-
Net increase in federal funds sold (7,079) -0- (3,374) -0-
Proceeds from sale of other real estate 356 -0- 356 -0-
Capital expenditures (486) (112) (186) (33)
Net cash used in investing activities (5,918) (2,917) (2,041) (4,231)
Cash flows from financing activities:
Net increase (decrease) in deposits 504 1,473 764 1,599
Net increase (decrease) in short-term borrowings (341) 705 (12) 241
Net increase (decrease) in long-term borrowings 3,000 2,098 -0- 2,696
Dividends paid (310) (310) (310) (310)
Purchase of stock -0- (369) -0- (369)
Net cash provided by financing activities 2,853 3,597 442 3,857
Net increase (decrease) in cash and cash
equivalents (1,890) 1,660 (388) 750
Cash and cash equivalents at beginning
of period 10,623 10,152 9,121 11,062
Cash and cash equivalents at end of period $ 8,733 $ 11,812 $ 8,733 $ 11,812
Supplemental Cash Flow Information:
Cash paid during the period for: Interest 4,339 4,019 2,175 2,041
Income taxes 402 492 402 446
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PSB HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial statements in the opinion of management
reflect all adjustments which are normal and recurring in nature and
which are necessary for a fair statement of the results for the
periods presented. In all regards, the financial statements have
been presented in accordance with generally accepted accounting
principles.
2. Earnings per share of common stock is based on the weighted average
number of common shares outstanding.
3. Refer to notes to the financial statements which appear in the 1997
annual report for the company's accounting policies which are
pertinent to these statements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(All $ amounts are in thousands, except per share amounts)
RESULTS OF OPERATIONS
TOTAL ASSETS
Total assets have increased by $3,349 from December 31, 1997 to June 30,
1998. This is an increase of 1.56%. In 1997, total assets increased
$4,244 or 2.08% in the first six months.
LOANS
Net loans have decreased by $1,798 from December 31, 1997 to June 30,
1998. This is a decrease of 1.22%. Real Estate Loans refinancing in
the secondary market account for much of this decrease. In 1997, loans
increased $3,762 or 2.76% in the first six months.
CASH AND INVESTMENTS
Cash decreased by $1,890 as of June 30, 1998 compared to December 31,
1997. Efforts continue at decreasing this non-earning asset. Fed Funds
Sold increased $7,079 as of June 30, 1998 compared to December 31, 1997.
Investments increased by $168.
DEPOSITS
Deposits increased slightly by $504 from December 31, 1997 to June 30,
1998. In 1997, deposits increased by $1,473 in the first six months.
SHORT TERM BORROWINGS
There were no Fed funds purchased as of June 30, 1998. Repurchase
agreements decreased by $341 from December 31, 1997 to June 30, 1998.
LONG TERM BORROWINGS
An additional advance of $3,000 was taken out at the FHLB Chicago in the
first quarter of 1998.
EQUITY
Equity grew by $708 or 3.68% due to the following: Net income for the
first six months of $1,028, a cash dividend paid of $310, and a decrease
in the "Net unrealized gain on securities available for sale" of $10.
The decrease in the unrealized gain is a result of the market prices of
the investment portfolio dropping as of June 30, 1998. In the first
half of 1997 equity grew by $453 or 2.48%.
OPERATING DATA SUMMARY
GENERAL
Net interest income for the first six months of 1998 is $460 or 12.65%
greater than it was for the same period in 1997.
-5-
NON-INTEREST INCOME
Non-interest income increased by $173 or 48.19% from the period ending
June 30, 1998 compared to the period ending June 30, 1997. This
increase is attributable to the implementation of a profit improvement
project which in many areas increased our service charges and fees for
services.
NON-INTEREST EXPENSE
Non-interest expenses increased 34.94% or $776 for the period ending
June 30, 1998 when compared to the period ending June 30, 1997. An
additional Pension Plan expense of $403 from the termination of our DB
Pension Plan and expenses related to the opening of a supermarket branch
in March of 1998 contributed to this increase.
NET INCOME
Net income for six months of 1998 is 9.98% lower than the same period in
1997 and earnings per share decreased from $1.28 to $1.16, or 9.38%.
Again, the additional expenses outlined above attributed to the lower
first six months results of operations.
YEAR 2000
PSB has conducted a comprehensive review of its computer system to
identify the systems that could be affected by the Year 2000 Issue
and is developing an implementation plan to resolve the issue. The
Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of
PSB's programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could
result in a major system failure or miscalculations. PSB presently
believes that, with modifications to exiting software and conversions
to new software, the Year 2000 problem will not pose significant
operational problems for PSB's computer system as so modified and
converted.
-6-
KEY OPERATING RATIOS
(unaudited) Ended June 30, 1998
Six Month Period Three Month Period
1998 1997 1998 1997
Return on assets (net income
divided by average assets) (1) .95% 1.13% 1.17% 1.10%
Return on Average Equity (net
income divided by average equity) (1) 10.63% 12.37% 12.93% 12.09%
Average Equity to Average Assets 8.93% 9.12% 9.06% 9.12%
Interest Rate Spread (difference
between average yield on interest
earning assets
and average cost of interest
bearing liabilities) (1) 3.23% 3.02% 3.31% 3.06%
Net Interest Margin (net interest
income as a percentage of average
interest earning assets (1) 4.06% 3.75% 4.16% 3.83%
Non-interest Expense to average
assets (1) 2.72% 2.19% 2.52% 2.28%
Allowance for loan losses to
total loans at end of period 1.33% 1.27% 1.33% 1.27%
(1) Annualized
-7-
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at the end of each period,
changes in the allowance for loan losses arising from loans charged off
and recoveries on loans previously charged off, by loan category and
additions to the allowance which have been charged to expense.
Six Months Ended Year Ended
JUNE 30, 1998 DECEMBER 31, 1997
Allowance for loan losses at
beginning of period $1,845,064 $1,924,686
Loans charged off
Commercial & Industrial -0- (155,650)
Agricultural -0- -0-
Real Estate - Mortgage -0- (136,011)
Installment & Other
Consumer Loans (31,265) (58,581)
Total Charge Offs (31,265) (350,242)
Recoveries on loans previously
charged off
Commercial & Industrial 210 17,538
Agricultural -0- -0-
Real Estate - Mortgage -0- 18,582
Installment & Other
Consumer Loans 2,087 4,500
Total Recoveries 2,297 40,620
Net loans charged off (28,968) (309,622)
Additions charged to operations 150,000 230,000
Allowance for loan losses
at end of period $1,966,096 $1,845,064
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AGGREGATE AMOUNT OF NON-PERFORMING LOANS
June 30, December 31,
1998 1997
Loans on a non-accrual basis
Real estate - mortgage $ 322,172 $ 332,655
Installment loans 105,316 54,665
Credit cards & related plans -0- -0-
Commercial & all other loans 683,740 447,554
Total non-accrual $ 1,111,228 $ 834,874
Loans contractually past due
thirty through eighty-nine days
and still accruing
Real estate - mortgage $ 779,850 $ 153,578
Installment loans 438,386 162,243
Credit cards & related plans -0- -0-
Commercial & all other loans 1,301,142 57,268
Total 30 - 89 days $2,519,378 $ 373,089
Loans contractually past due
ninety days or more as to
interest or principal payments
Real estate - mortgage $ -0- $ 7,117
Installment loans -0- -0-
Credit cards & related plans -0- -0-
Commercial & all other loans -0- -0-
Total over 90 days $ -0- $ 7,117
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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
The annual meeting of shareholders of the Company was held on April
21, 1998. The matters voted upon, including the number of votes cast
for, against or withheld, as well as the number of abstentions and
broker non-votes, as to each such matter were as follows:
MATTER SHARES
Broker
For Withheld Against Abstain Non-Vote
Election of Directors
(a) Leonard C. Britten 589,974 1,380 N/A N/A 0
(b) Gordon P. Connor 591,354 N/A N/A 0
(c) Patrick L. Crooks 591,354 N/A N/A 0
(d) William J. Fish 591,354 N/A N/A 0
(e) George L. Geisler 590,094 1,260 N/A N/A 0
(f) Charles A. Ghidorzi 582,534 8,820 N/A N/A 0
(g) Gordon P. Gullickson 591,069 285 N/A N/A 0
(h) Lawrence Hanz, Jr. 591,234 120 N/A N/A 0
(i) Thomas R. Polzer 591,354 N/A N/A 0
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(j) William M. Reif 591,354 N/A N/A 0
(k) Thomas A. Riiser 591,309 45 N/A N/A 0
(l) Eugene Witter 591,024 330 N/A N/A 0
ITEM 5. OTHER INFORMATION
Not Applicable
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Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits required by Item 601 of Regulation S-K.
EXHIBIT (3) - ARTICLES OF INCORPORATION AND BYLAWS
PAGE OR
INCORPORATED
EXHIBIT <dagger>
(i) Restated Articles of Incorporation, as amended ...4(a)(1)
(ii) Bylaws ........................................ 4(b)(1)
EXHIBIT (4) - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS
(a) Articles of Incorporation and Bylaws (see Exhibits 3(a) and (b))
EXHIBIT (10) - MATERIAL CONTRACTS
(a) Bonus Plan of Directors of the Bank* ............. 10(a)(2)
(b) Bonus Plan of Officers and Employees of the Bank* 10(b)(2)
(c) Non-Qualified Retirement Plan for Directors of the
Bank* ............................................ 10(c)(2)
EXHIBIT (21) - SUBSIDIARIES OF THE REGISTRANT ......... 22(2)
EXHIBIT (27) - FINANCIAL DATA SCHEDULE
* Denotes Executive Compensation Plans and Arrangements.
<dagger>Where exhibit has been previously filed and is incorporated
herein by reference, exhibit numbers set forth herein correspond to
the exhibit number where such exhibit can be found in the following
reports of the registrant (Commission File No. 0-26480) filed with
the Securities and Exchange Commission:
(1) Registrant's current report on Form 8-K dated May 30, 1995
(2) Registrant's annual report on Form 10-K for the fiscal year ended
December 31, 1995
(b) Reports on Form 8-K:
None
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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.
August 13, 1998 TODD R. TOPPEN
Todd R. Toppen
Secretary and Controller
(On behalf of the Registrant
and as Principal Financial Officer)
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EXHIBIT INDEX<dagger>
TO
FORM 10Q
OF
PSB HOLDINGS, INC.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d)
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<dagger>Exhibits required by Item 601 of Regulation S-K
which have been previously filed and are incorporated by
reference are set forth in Item 6 of the Form 10-Q to
which this Exhibit Index relates.