MAY 23RD, 2007 CONFIDENTIAL
PSB GROUP, INC.
HOLDING COMPANY OF
(PEOPLES STATE BANK LOGO)
Valuation Analysis
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO)
CONFIDENTIAL
(PEOPLES STATE BANK LOGO)
TABLE OF CONTENTS
A. Valuation Summary
B. Comparable Company / Core Deposit Premium Analysis
C. Trading Indication Analysis
D. Discounted Cash Flow Analysis
E. Management Projections
PSB GROUP, INC.
VALUATION SUMMARY
VALUATION TECHNIQUE:
--------------------------------------------------------
COMPARABLE COMPANY
----------------------------------
VALUE CORE TRADING
CONCLUSION BV TBV EPS DEPOSIT INDICATION DCF
---------- ------ ------ ------ ------- ---------- ------
FAIR VALUE INDICATION PER SHARE $21.00 $22.03 $21.76 $16.80 $23.39 $18.22 $21.51
Multiple of 04/30/07 Diluted LTM EPS 21.2 22.3 22.0 17.0 23.7 18.4 21.7
Percentage of 04/30/07 Book Value per Share 145.7% 152.9% 151.0% 116.6% 162.4% 126.5% 149.3%
Percentage of 04/30/07 Tangible Book Value per Share 162.1% 170.0% 168.0% 129.7% 180.6% 140.6% 166.0%
04/30/07 LTM EPS $ 0.99
04/30/07 Book Value per Share $14.41
04/30/07 Tangible Book Value per Share $12.96
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 1
CONFIDENTIAL
(PEOPLES STATE BANK LOGO)
B. COMPARABLE COMPANY / CORE DEPOSIT
PREMIUM ANALYSIS
COMPARABLE COMPANY ANALYSIS
Commercial banks located in the IL, IN, MI, OH with total assets between $250M
and $750M, and LTM ROAE between 6% and 12%.
CLOSING PRICE TO: TRADING
MOST ------------------------ PREMIUM TOTAL
RECENT CLOSING DIVIDEND DIVIDEND TANG. LTM MARKET (BV)/ TOTAL NET
REPORTED PRICE PAYOUT YIELD BOOK BOOK EPS CAP CORE ASSETS LOANS
COMPANY(1) STATE TICKER QUARTER (04/30/2007) (%) (%) (%) (%) (X) ($000) DEPOSITS ($000) ($000)
- ----------- ----- ------ ---------- ------------ -------- -------- ------- ------- ------ ------- -------- ------- -------
American Community
Bancorp, Inc. IN ACBP 03/31/2007 17.50 0.00 0.00 160.4 160.4 18.0 31,170 NA 252,095 213,328
Bancorp of Southern
Indiana IN BCSO 03/31/2007 75.00 14.10 2.27 116.5 116.5 NA 38,697 NA 363,755 NA
ChoiceOne Financial
Services, Inc. MI COFS 03/31/2007 16.85 45.54 4.25 105.0 160.9 15.0 54,653 NA 462,535 323,971
CITBA Financial
Corporation IN CBAF 12/31/2006 52.00 NA 3.46 155.9 156.0 NA 49,050 7.87% 293,731 186,816
Commercial
Bancshares, Inc. OH CMOH 03/31/2007 26.00 66.09 2.92 134.3 134.3 22.6 29,649 3.59% 275,481 184,054
Community Shores
Bank Corporation MI CSHB 03/31/2007 11.25 0.00 0.00 100.7 100.7 14.1 16,525 0.10% 251,549 203,395
Cortland Bancorp OH CLDB 03/31/2007 18.15 88.02 4.93 160.2 160.6 18.3 82,130 NA 480,854 207,019
County Bank Corp MI CBNC 03/31/2007 37.75 41.19 3.16 130.7 130.7 11.9 40,806 NA 269,529 185,952
Croghan Bancshares,
Inc. OH CHBH 03/31/2007 39.89 40.88 3.10 137.4 173.7 13.5 70,764 NA 452,696 346,425
CSB Bancorp, Inc. OH CSBB 03/31/2007 18.00 52.38 4.01 126.9 126.9 14.3 44,333 NA 322,406 233,163
DCB Financial Corp OH DCBF 03/31/2007 24.55 30.98 2.48 152.3 152.3 13.3 91,706 NA 687,864 542,886
Farmers & Merchants
Bancorp, Inc. OH FMAO 03/31/2007 22.35 38.61 2.83 129.4 129.4 14.1 115,021 NA 731,535 508,280
Farmers Bancorp IN FABP 09/30/2006 40.00 66.67 4.46 106.2 106.2 15.2 41,706 1.01% 378,491 237,655
FCN Banc Corp. IN FBVI 12/31/2006 34.00 50.27 2.78 170.4 183.3 NA 51,482 12.02% 259,488 153,973
Fentura Financial,
Inc. MI FETM 03/31/2007 29.50 41.59 3.33 122.0 146.0 12.6 63,875 2.95% 624,952 455,216
First Community
Financial
Partners, Inc. IL FCMP 12/31/2006 14.75 NA 0.00 115.9 115.9 NA 70,938 NA 272,917 166,891
First Ottawa
Bancshares, Inc. IL FOTB 03/31/2007 71.00 84.27 2.82 191.2 223.1 19.9 46,056 10.38% 269,121 156,937
FNBH Bancorp, Inc. MI FNHM 03/31/2007 25.05 53.16 3.50 155.6 155.6 15.9 76,170 NA 463,787 381,247
Foresight Financial
Group, Inc. IL FGFH 03/31/2007 22.25 15.85 1.26 147.2 148.3 13.6 82,546 NA 661,530 473,020
Mackinac Financial
Corporation MI MFNC 03/31/2007 9.45 0.00 0.00 108.2 108.9 14.5 32,401 0.88% 375,644 313,446
NI Bancshares
Corporation IL NIBA 12/31/2006 55.25 10.71 0.72 133.4 144.0 NA 84,396 5.80% 547,506 384,517
O.A.K. Financial
Corporation MI OKFC 03/31/2007 40.50 29.28 2.16 163.1 163.6 15.2 109,487 9.87% 688,634 531,204
Pavilion Bancorp,
Inc. MI PVLN 03/31/2007 45.00 31.95 2.14 115.6 115.6 13.3 32,785 2.75% 293,006 237,305
PSB Group, Inc. MI PSBG 03/31/2007 15.15 71.29 4.75 103.5 114.9 15.0 46,489 NA 504,808 406,338
United Bancorp,
Inc. OH UBCP 03/31/2007 10.51 107.91 4.86 147.4 147.4 22.9 48,325 5.31% 422,131 224,715
United Bancshares,
Inc. OH UBOH 03/31/2007 15.75 41.22 3.61 117.9 NA 12.0 55,644 NA 553,781 337,137
West Shore Bank
Corporation MI WSSH 12/31/2006 27.00 0.00 0.00 144.3 145.2 15.3 39,231 6.35% 314,831 217,060
HIGH 75.00 107.91 4.93 191.17 223.13 22.85 115,021 12.02% 731,535 542,886
MEAN 30.16 40.88 2.59 135.24 143.09 15.47 57,261 5.30% 424,987 300,460
MEDIAN 25.05 41.19 2.83 133.36 145.60 14.77 49,050 5.31% 378,491 237,480
LOW 9.45 0.00 0.00 100.73 100.73 11.87 16,525 0.10% 251,549 153,973
PSB Group, Inc.
(for the LTM
ended April 30,
2007) $ 14.41 $ 12.96 $ 0.99
Median Multiple 133.0% 146.0% 14.77
Indication of Value
(Application of
Median Multiple) 19.16 18.92 14.61
Plus Fair Value
Premium @ 15% 2.87 2.84 2.19
Equity Value per
Share (Fair Value) $ 22.03 $ 21.76 $16.80
(1) Pricing metrics are based on reported data as of April 30, 2007. All other
data displayed is based on results through March 31, 2007 per SNL
Financial.
Source: SNL Financial
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 2
COMPARABLE COMPANY ANALYSIS
Commercial banks located in the IL, IN, MI, OH with total assets between $250M
and $750M, and LTM ROAE between 6% and 12%.
TIER 1 TOTAL
RISK RISK
NONINTEREST BASED BASED LTM
TOTAL CORE TOTAL NPAS/ NONINTEREST INCOME/ CAPITAL CAPITAL LTM LTM LTM EFFICIENCY
DEPOSITS DEPOSITS EQUITY ASSETS INCOME ASSETS RATIO RATIO ROAA ROAE NIM RATIO
COMPANY(1) STATE TICKER ($000) ($000) ($000) (%) ($000) (%) (%) (%) (%) (%) (%) (%)
- ----------- ----- ------ -------- -------- ------ ------ ----------- ----------- ------- ------- ---- ----- ---- ----------
American Community
Bancorp, Inc. IN ACBP 223,381 NA 19,388 0.05 1,487 0.59 11.99 13.93 0.78 9.77 3.36 62.57
Bancorp of Southern
Indiana IN BCSO 292,302 NA 33,228 NA NA NA NA NA 0.88 9.66 3.55 NA
ChoiceOne Financial
Services, Inc. MI COFS 361,587 NA 52,010 1.85 3,820 0.83 NA NA 0.77 7.65 3.31 68.44
CITBA Financial
Corporation IN CBAF 252,767 223,373 31,472 0.01 3,217 1.10 15.07 16.12 0.94 8.45 4.47 72.71
Commercial
Bancshares, Inc. OH CMOH 252,110 208,853 22,147 0.74 2,256 0.82 11.00 NA 0.47 5.99 4.05 80.77
Community Shores
Bank Corporation MI CSHB 217,602 117,836 16,404 0.98 1,650 0.66 NA NA 0.50 7.51 3.79 75.25
Cortland Bancorp OH CLDB 359,478 NA 51,116 NA 2,953 0.61 19.05 19.83 0.97 9.02 3.63 63.86
County Bank Corp MI CBNC 236,002 NA 31,218 NA 3,141 1.17 NA NA 1.29 11.16 4.20 62.39
Croghan Bancshares,
Inc. OH CHBH 367,029 NA 51,520 0.74 3,101 0.69 NA NA 1.17 10.49 4.11 60.56
CSB Bancorp, Inc. OH CSBB 253,531 NA 34,915 0.49 2,724 0.84 NA NA 0.98 9.07 4.41 67.47
DCB Financial Corp OH DCBF 536,439 NA 60,221 0.79 5,714 0.83 10.90 11.80 1.00 11.73 3.47 58.47
Farmers & Merchants
Bancorp, Inc. OH FMAO 577,616 NA 88,882 NA 6,415 0.88 16.07 17.08 1.14 9.50 3.62 60.74
Farmers Bancorp IN FABP 279,977 241,196 39,270 1.63 3,686 0.97 14.10 15.36 0.69 7.34 3.65 76.29
FCN Banc Corp. IN FBVI 210,562 177,072 30,201 0.57 1,091 0.42 19.33 20.54 1.16 9.77 3.68 53.60
Fentura Financial,
Inc. MI FETM 531,349 391,986 52,304 1.04 7,713 1.23 11.22 12.47 0.81 10.08 4.03 70.23
First Community
Financial
Partners, Inc. IL FCMP 210,680 NA 61,199 0.00 261 0.10 15.54 16.79 1.00 6.78 3.44 48.94
First Ottawa
Bancshares, Inc. IL FOTB 238,890 211,417 24,108 NA 2,758 1.02 11.80 12.60 0.82 9.87 3.44 67.73
FNBH Bancorp, Inc. MI FNHM 405,574 NA 49,500 2.95 3,961 0.85 12.10 13.36 1.07 9.86 4.73 56.14
Foresight Financial
Group, Inc. IL FGFH 585,449 NA 55,791 0.32 3,581 0.54 10.89 12.01 0.96 11.54 3.64 58.30
Mackinac Financial
Corporation MI MFNC 304,412 279,937 29,932 1.14 1,211 0.32 9.16 10.41 0.63 8.03 3.58 89.40
NI Bancshares
Corporation IL NIBA 480,800 363,587 63,291 0.21 7,419 1.36 13.44 14.17 1.07 9.15 3.30 63.98
O.A.K. Financial
Corporation MI OKFC 563,446 429,009 67,123 0.29 7,106 1.03 11.52 12.77 1.10 11.15 3.86 63.11
Pavilion Bancorp,
Inc. MI PVLN 247,763 161,463 28,340 1.07 3,047 1.04 11.03 12.10 0.84 9.04 4.36 72.45
PSB Group, Inc. MI PSBG 449,764 NA 44,910 1.62 5,103 1.01 NA NA 0.61 6.96 3.95 74.96
United Bancorp,
Inc. OH UBCP 337,971 292,984 32,773 0.79 2,659 0.63 14.90 15.82 0.50 6.52 3.11 72.41
United Bancshares,
Inc. OH UBOH 385,259 NA 47,204 0.59 3,064 0.55 NA NA 0.86 10.51 3.55 66.15
West Shore Bank
Corporation MI WSSH 248,090 189,755 27,185 0.40 1,615 0.51 13.34 14.53 0.83 9.80 3.33 64.74
HIGH 585,449 429,009 88,882 2.95 7,713.00 1.36 19.33 20.54 1.29 11.73 4.73 89.40
MEAN 348,512 252,959 42,432 0.83 3,490.50 0.79 13.29 14.54 0.88 9.13 3.76 66.60
MEDIAN 304,412 223,373 39,270 0.74 3,082.50 0.83 12.10 14.05 0.88 9.50 3.64 65.45
LOW 210,562 117,836 16,404 0.00 261.00 0.10 9.16 10.41 0.47 5.99 3.11 48.94
(1) Pricing metrics are based on reported data as of April 30, 2007. All other
data displayed is based on results through March 31, 2007 per SNL
Financial.
Source: SNL Financial
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 3
PSB GROUP, INC.
CORE DEPOSIT PREMIUM ANALYSIS
($'S IN 000S, EXCEPT PER SHARE DATA)
Per Share
Indication
----------
PSB Group, Inc. Core Deposits (4/30/07) (See calculation below) $ 343,047 $111.79
Median Comp. Company Trading Premium (BV) to Core Deposits 5.31% 5.31%
---------- -------
Dollar Premium to Book Value 18,210 $ 5.93
PSB Group, Inc. Book Value (4/30/07) 44,213 $ 14.41
Plus: Dollar Premium to Book Value 18,210 $ 5.93
---------- -------
Indication of Value $ 62,423 $ 20.34
Shares Outstanding (4/30/07) 3,068,552
PER SHARE VALUATION INDICATION $ 20.34
Plus: Fair Value Premium @ 15% $ 3.05
----------
PER SHARE - FAIR VALUE INDICATION $ 23.39
==========
CORE DEPOSITS CALCULATION
Total Deposits $445,557
Less: Time Deposits > $100k (98,671)
Less: IRAs > $100k (3,839)
---------
TOTAL $343,047
=========
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 4
CONFIDENTIAL
(PEOPLES STATE BANK LOGO)
C. TRADING INDICATION ANALYSIS
PSB GROUP, INC
2006/2007 TRADING HISTORY
Weighted Average Trading Price for 2006 $16.66
Multiplied by Fair Value Premium 15.0%
------
Fair Value Indication $19.16
======
Weighted Average Trading Price for 2007 (through 4/30/07) $15.72
Multiplied by Fair Value Premium 15.0%
------
Fair Value Indication $18.08
======
Current Trading Price (4/30/07) $15.15
Multiplied by Fair Value Premium 15.0%
------
Fair Value Indication $17.42
======
AVERAGE OF THE TRADING INDICATIONS $18.22
------
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 5
CONFIDENTIAL
(PEOPLES STATE BANK LOGO)
D. DISCOUNTED CASH FLOW ANALYSIS
PSB GROUP, INC.
DISCOUNTED CASH FLOW MODEL
VALUATION DATE: MAY 1, 2007
(In $000's, except per share data)
PROJECTED
For the Years Ending December 31,
-----------------------------------------------------------------
2011
2007(1) (2008) (2009) (2010) (2011) Residual
---------- -------- -------- -------- -------- --------
Net Interest Income After Provision $ 18,246 $ 19,832 $ 21,954 $ 24,493 $ 27,224
Non-interest Income 6,156 7,080 7,788 8,567 9,423
---------- -------- -------- -------- --------
24,402 26,912 29,742 33,060 36,647
Depreciation (1,500) (2,171) (2,275) (2,366) (2,445)
General & Administrative Expenses (16,932) (18,477) (20,137) (21,923) (23,842)
---------- -------- -------- -------- --------
Total Other Expenses (18,432) (20,648) (22,412) (24,289) (26,287)
---------- -------- -------- -------- --------
Income Before Taxes 5,971 6,264 7,330 8,771 10,360
Taxes (1,690) (1,773) (2,075) (2,483) (2,933)
---------- -------- -------- -------- --------
Net Income 4,281 4,491 5,255 6,288 7,427
Special Dividend Payout / Share
(to solve for 7.5% Tier 1 Capital ratio) $ 1.77 $ 0.15 $ 0.00 $ 0.10 $ 0.20
Dividend Payout $ 5,440 $ 461 $ 0 $ 308 $ 616
Present Value Factor @ 12% 0.9627 0.8757 0.7819 0.6981 0.6233
---------- -------- -------- -------- --------
Present Value of Free Cash Flows $ 5,237 $ 404 $ 0 $ 215 $ 384
---------- -------- -------- -------- --------
Total Present Value of Cash Flows
(Years 1 to 5) $ 6,240
Plus: Residual Cash Flow Value $ 59,756
----------
Equity Value (Fair Value) $ 65,996
----------
Shares Outstanding as of April 30, 2007
(per management) 3,068,552
----------
Equity Value Per Share (Fair Value) $ 21.51
----------
2011 Tangible Book Value $ 60,590
2011 Price/TBV Multiple(2) 145.6%
--------
Residual Cash Flow Value $ 88,220
Plus Fair Value Premium 15.0%
--------
Residual Cash Flow Value (Premium) $101,453
Present Value Factor @ 12% 0.5890
--------
Present Value of Residual Cash Flow $ 59,756
--------
Footnotes:
(1) The actual dividends distributed for the four month period ended April 30,
2007 were subtracted from 2007 projections.
(2) DPP estimate based on the current median multiple of the comparable company
analysis.
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 6
CONFIDENTIAL
(PEOPLES STATE BANK LOGO)
E. MANAGEMENT PROJECTIONS
PSB GROUP, INC.
ASSUMPTIONS
(In $000's, except percentages)
PROJECTIONS: 2007 2008 2009 2010 2011
- ------------ --------- --------- --------- --------- ---------
Balance Sheet:
New Loan Composition:
Commercial Loans 78.1% 79.5% 80.8% 82.1% 83.2%
Retail Loans 8.4% 8.2% 8.0% 7.7% 7.5%
Mortgage Loans 13.5% 12.3% 11.2% 10.2% 9.3%
New Loan Growth:
Commercial Loans 21.4% 15.0% 15.0% 15.0% 15.0%
Retail Loans 15.1% 10.0% 10.0% 10.0% 10.0%
Mortgage Loans -27.3% 3.0% 3.0% 3.0% 3.0%
GROSS LOAN GROWTH 10.8% 13.0% 13.1% 13.3% 13.4%
Loan loss reserve $ 4,557 $ 5,245 $ 6,121 $ 7,146 $ 8,344
Net premises & equipment $ 14,350 $ 15,179 $ 15,903 $ 16,538 $ 17,092
Net intangible assets $ 0 $ 0 $ 0 $ 0 $ 0
Loans held for sale growth -43.2% 5.0% 5.0% 5.0% 5.0%
Investment securities growth -5.5% 10.0% 10.0% 10.0% 10.0%
Non-interest bearing deposit growth 14.2% 10.0% 10.0% 8.0% 8.0%
Interest-bearing deposit growth 11.3% 14.0% 13.0% 13.0% 13.0%
Income Statement:
Yield on investment securities 4.28% 4.28% 4.28% 4.28% 4.28%
Yield on Commercial Loans 7.97% 7.97% 7.97% 7.97% 7.97%
Yield on Retail Loans 6.88% 7.25% 7.50% 7.75% 7.75%
Yield on Mortgage Loans 5.90% 6.15% 6.25% 6.35% 6.45%
Cost of notes payable & other borrowings 5.05% 5.05% 5.05% 5.05% 5.05%
Cost of Interest-Bearing Deposits 3.75% 3.85% 3.95% 4.05% 4.15%
Total Non-interest income $ 6,156 $ 7,080 $ 7,788 $ 8,567 $ 9,423
Non-interest income growth 23.1% 15.0% 10.0% 10.0% 10.0%
Operating expenses (less depr. and MSR amort) ($16,932) ($18,477) ($20,137) ($21,923) ($23,842)
Operating expense growth 0.4% 9.1% 9.0% 8.9% 8.8%
Dividend payout / share $ 1.95 $ 0.15 $ 0.00 $ 0.10 $ 0.20
Dividend payout ratio 140.0% 10.3% 0.0% 4.9% 8.3%
Tax rate 28.3% 28.0% 28.0% 28.0% 28.0%
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 7
PSB GROUP, INC.
LOAN LOSS RESERVE
(In $000's, except percentages)
HISTORICAL PROJECTED
FOR THE YEARS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------------------- ----------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011
------- ------- ------- ------- ------- ------- ------- -------
Balance at January 1 $ 3,887 $ 3,394 $ 3,670 $4,257 $ 4,557 $ 5,245 $ 6,121 $ 7,146
Provision for loan losses 1,200 1,554 1,839 1,117 1,865 2,207 2,531 2,906
Net charge offs (1,693) (1,278) (1,252) (817) (1,177) (1,331) (1,506) (1,707)
------- ------- ------- ------ ------- ------- ------- -------
Balance at December 31 $ 3,394 $ 3,670 $ 4,257 $4,557 $ 5,245 $ 6,121 $ 7,146 $ 8,344
======= ======= ======= ====== ======= ======= ======= =======
Allowance for loan losses/total loans 1.00% 1.00% 1.07% 1.03% 1.05% 1.08% 1.12% 1.15%
Net charge offs/average loans 0.36% 0.33% 0.19% 0.25% 0.25% 0.25% 0.25%
PSB GROUP, INC.
PREMISES/EQUIPMENT & INTANGIBLE AMORTIZATION
HISTORICAL PROJECTED
FOR THE YEARS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------------------- ----------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011
-------- -------- -------- -------- -------- -------- -------- --------
Gross premises and equipment $ 21,238 $ 23,926 $ 24,930 $ 28,050 $ 31,050 $ 34,050 $ 37,050 $ 40,050
Accumulated depreciation (10,620) (11,263) (12,199) (13,700) (15,871) (18,147) (20,512) (22,958)
-------- -------- -------- -------- -------- -------- -------- --------
Net premises and equipment $ 10,618 $ 12,663 $ 12,731 $ 14,350 $ 15,179 $ 15,903 $ 16,538 $ 17,092
======== ======== ======== ======== ======== ======== ======== ========
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 8
PSB GROUP, INC.
PROJECTED DEPRECIATION / CAPITAL EXPENDITURE DETAIL
Historical
2004 2005 2006
------- ------- -------
Depreciation $ 1,238 $ 1,320 $ 1,392
Net Fixed Assets 10,618 12,663 12,731
Less: Nondepreciable Asset (Land) (2,323) (2,323) (2,129)
------- ------- -------
Adjusted Net Fixed Assets 8,295 10,340 10,602
Depr. / Adjusted Net Fixed Assets (%) 14.9% 12.8% 13.1%
Projected
2007 2008 2009 2010 2011
------- ------- ------- ------- -------
Capital Expenditures $ 3,500 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Capital Expenditures $ 3,500 $ 3,000 $ 3,000 $ 3,000 $ 3,000
Net Fixed Assets, Beginning 12,731 14,350 15,179 15,903 16,538
------- ------- ------- ------- -------
Adjusted Net Fixed Assets $16,231 $17,350 $18,179 $18,903 $19,538
Depreciation Expense (as % of NFA) 12.5% 1,500 2,171 2,275 2,366 2,445
------- ------- ------- ------- -------
Net Fixed Assets, Ending $14,350 $15,179 $15,903 $16,538 $17,092
Depr. (as % of NFA) 9.2% 12.5% 12.5% 12.5% 12.5%
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 9
PSB GROUP, INC.
BALANCE SHEET
(In $000's)
HISTORICAL PROJECTED
FOR THE YEARS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------------------- APRIL 30, ----------------------------------------------------
2004 2005 2006 2007 2007 2008 2009 2010 2011
-------- --------- -------- --------- -------- -------- -------- -------- --------
ASSETS:
Cash and due from banks $ 14,253 $ 12,261 $ 13,950 $ 14,206 9,217 $ 14,425 $ 16,427 $ 16,408 $ 15,493
Securities - Available
for sale 91,125 93,645 63,748 62,956 60,271 66,298 72,928 80,221 88,243
Loans held for sale 2,388 6,235 3,693 n/a 2,097 2,202 2,312 2,427 2,549
LOAN PORTFOLIO:
Commercial Loans 207,464 243,465 284,494 n/a 345,321 397,119 456,687 525,190 603,969
Retail Loans 36,989 33,513 32,293 n/a 37,153 40,869 44,956 49,451 54,396
Mortgage Loans 94,898 88,733 82,165 n/a 59,731 61,523 63,369 65,270 67,228
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total loans receivable 339,351 365,711 398,952 414,113 442,206 499,511 565,011 639,911 725,593
Allowance for loan losses (3,394) (3,670) (4,257) (4,315) (4,557) (5,245) (6,121) (7,146) (8,344)
Deferred costs, net (1) (677) (618) (608) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total loans receivable,
net 335,280 361,423 394,087 409,798 437,649 494,266 558,890 632,765 717,249
Premises and equipment 21,238 23,926 24,930 n/a 28,050 31,050 34,050 37,050 40,050
Accumulated depreciation (10,620) (11,263) (12,199) n/a (13,700) (15,871) (18,147) (20,512) (22,958)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net premises and equipment 10,618 12,663 12,731 12,247 14,350 15,179 15,903 16,538 17,092
Goodwill 4,100 4,458 4,458 4,458 4,458 4,458 4,458 4,458 4,458
Interest receivable & other
assets 3,578 4,326 4,567 4,478 4,200 4,744 5,366 6,078 6,892
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL ASSETS: $461,342 $495,011 $497,234 $508,143 $532,242 $601,572 $676,285 $758,894 $851,975
======== ======== ======== ======== ======== ======== ======== ======== ========
LIABILITIES & EQUITY:
Non-interest bearing deposits $ 57,479 $ 54,445 $ 59,320 n/a $ 67,732 $ 74,505 $ 81,956 $ 88,512 $ 95,593
Interest-bearing deposits 353,653 370,213 374,640 n/a 416,971 475,347 537,142 606,970 685,876
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total deposits 411,132 424,658 433,960 445,557 484,703 549,852 619,097 695,482 781,469
Notes payable & other
short-term borrowings 5,000 26,210 17,619 15,659 2,473 2,473 2,473 2,473 2,473
Accrued payables, accrued
expenses & other 2,229 963 1,409 2,713 1,860 2,062 2,329 2,634 2,983
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total liabilities 418,361 451,831 452,988 463,929 489,036 554,386 623,899 700,589 786,926
Trust Preferred stock -- -- -- -- -- -- -- -- --
Common stock 17,560 20,406 20,496 n/a 31,049 31,049 31,049 31,049 31,049
Retained earnings 25,331 24,357 25,062 n/a 12,656 16,686 21,941 27,921 34,731
Other 90 (1,583) (1,312) n/a (500) (550) (605) (666) (732)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total common equity 42,981 43,180 44,246 44,213 43,205 47,185 52,385 58,304 65,048
TOTAL LIABILITIES & EQUITY $461,342 $495,011 $497,234 $508,143 $532,241 $601,571 $676,284 $758,894 $851,974
======== ======== ======== ======== ======== ======== ======== ======== ========
FOOTNOTE:
(1) For the projected years deferred costs are contemplated in the net loans.
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 10
PSB GROUP, INC.
INCOME STATEMENT
(In $000's, except share and per share data)
HISTORICAL PROJECTED
FOR THE YEARS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
---------------------------------- ----------------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Interest income $ 22,633 $ 27,518 $ 32,059 $ 34,346 $ 38,979 $ 44,260 $ 50,291 $ 57,052
Interest expense (5,831) (9,369) (13,191) (14,983) (17,282) (20,099) (23,268) (26,923)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 16,802 18,149 18,868 19,363 21,697 24,161 27,024 30,129
Provision for loan losses (1,200) (1,554) (1,839) (1,117) (1,865) (2,207) (2,531) (2,906)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision 15,602 16,595 17,029 18,246 19,832 21,954 24,493 27,224
Non-interest income 5,826 6,289 5,003 6,156 7,080 7,788 8,567 9,423
Depreciation (1,238) (1,320) (1,392) (1,500) (2,171) (2,275) (2,366) (2,445)
General & administrative expenses (14,409) (16,052) (16,858) (16,932) (18,477) (20,137) (21,923) (23,842)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total non-interest expenses (15,647) (17,372) (18,250) (18,432) (20,648) (22,412) (24,289) (26,287)
Income before taxes 5,781 5,512 3,782 5,971 6,264 7,330 8,771 10,360
Federal income taxes (1,563) (1,507) (894) (1,690) (1,773) (2,075) (2,483) (2,933)
Extraordinary items -- -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 4,218 $ 4,005 $ 2,888 $ 4,281 $ 4,491 $ 5,255 $ 6,288 $ 7,427
========== ========== ========== ========== ========== ========== ========== ==========
Shares outstanding end of period 2,885,073 3,029,152 3,034,152 3,068,552 3,072,835 3,082,460 3,082,460 3,082,460
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average shares outstanding 3,029,152 3,025,727 3,031,618 3,068,552 3,070,694 3,077,648 3,082,460 3,082,460
Weighted average diluted shares
outstanding end of period 3,029,152 3,025,727 3,031,618 3,068,552 3,072,835 3,082,460 3,082,460 3,082,460
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share $ 1.39 $ 1.32 $ 0.95 $ 1.39 $ 1.46 $ 1.71 $ 2.04 $ 2.41
Diluted earnings per share $ 1.39 $ 1.32 $ 0.95 $ 1.39 $ 1.46 $ 1.70 $ 2.04 $ 2.41
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 11
PSB GROUP, INC.
RATIO ANALYSIS
(In $000's, except percentages and per share data)
HISTORICAL PROJECTED
FOR THE YEARS ENDED DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31,
-------------------------------- --------------------------------------
2005 2006 2007 2008 2009 2010 2011
-------- -------- -------- -------- -------- -------- --------
Average assets $478,177 $496,123 $514,738 $566,907 $638,928 $717,589 $805,435
Average equity 43,081 43,713 43,726 45,195 49,785 55,345 61,676
Average investment securities 92,385 78,697 62,010 63,285 69,613 76,574 84,232
Average commercial loans 225,465 263,980 314,908 371,220 426,903 490,939 564,580
Average retail loans 35,251 32,903 34,723 39,011 42,912 47,203 51,924
Average mortgage loans 91,816 85,449 70,948 60,627 62,446 64,319 66,249
Average total loans 352,531 382,332 420,579 470,858 532,261 602,461 682,752
Average loans held for sale 4,312 4,964 2,895 2,149 2,257 2,369 2,488
Average notes payable & other borrowings 15,605 21,915 10,046 2,473 2,473 2,473 2,473
Average interest bearing deposits 361,933 372,427 395,805 446,159 506,244 572,056 646,423
Average preferred stock -- -- -- -- -- -- --
Efficiency ratio 71.09% 76.45% 72.23% 71.75% 70.15% 68.24% 66.46%
Net interest margin 4.08% 4.09% 3.99% 4.05% 4.00% 3.97% 3.92%
Noninterest expense/average assets 3.63% 3.68% 3.58% 3.64% 3.51% 3.38% 3.26%
Noninterest income/average assets 1.32% 1.01% 1.20% 1.25% 1.22% 1.19% 1.17%
Core Return on average assets 0.84% 0.58% 0.83% 0.79% 0.82% 0.88% 0.92%
Core Return on average equity 9.30% 6.61% 9.79% 9.94% 10.56% 11.36% 12.04%
Total asset growth 7.30% 0.45% 7.04% 13.03% 12.42% 12.22% 12.27%
Net income growth -5.05% -27.89% 48.22% 4.91% 17.02% 19.66% 18.11%
Book value per share $ 14.25 $ 14.58 $ 14.08 $ 15.36 $ 16.99 $ 18.91 $ 21.10
Tangible book value per share $ 12.78 $ 13.11 $ 12.63 $ 13.90 $ 15.55 $ 17.47 $ 19.66
Average assets $478,177 $496,123 $514,738 $566,907 $638,928 $717,589 $805,435
Risk-weighted assets @ 77% of total assets 381,158 382,870 409,826 463,210 520,739 584,349 656,021
Tier 1 capital 38,722 39,788 38,747 42,727 47,927 53,846 60,590
Tier 2 capital 3,670 4,257 4,557 5,245 6,121 7,146 8,200
-------- -------- -------- -------- -------- -------- --------
Total capital $ 42,392 $ 44,045 $ 43,304 $ 47,972 $ 54,048 $ 60,992 $ 68,791
Std.
Minimum
Tier 1 capital to average assets 5.0% 8.10% 8.02% 7.53% 7.54% 7.50% 7.50% 7.52%
Tier 1 capital to risk-weighted assets 6.0% 10.16% 10.39% 9.45% 9.22% 9.20% 9.21% 9.24%
Total capital to risk-weighted assets 10.0% 11.12% 11.50% 10.57% 10.36% 10.38% 10.44% 10.49%
(DONNELLY PENMAN & PARTNERS INVESTMENT BANKING LOGO) Page 12