EX-99.1 4 psbex99.txt PSB HOLDINGS, INC. EXHIBIT 99.1 FOR FORM 8-K Exhibit 99.1 PSB Announces 3rd Quarter Earnings of $.63 Per Share Wausau, Wisconsin - October 24, 2003 Highlights circle Net income for the third quarter September 2003 was $1.235 million compared to $1.051 million in September 2002, an increase of 17.5 percent. Year to date net income was $3.516 million in 2003 compared to $3.033 million in 2002. circle Quarterly 2003 diluted earnings per share of $.74, up from $.63 in 2002. circle Quarterly 2003 return on assets of 1.26% compared to 1.17% in 2002. circle Quarterly 2003 return on stockholders' equity of 15.76% compared to 15.00% in 2002. PSB Holdings, Inc. (OTCBB:PSBQ.OB), parent company of Peoples State Bank of Wausau, Wisconsin today reported third quarter September 2003 earnings of $.74 per share (basic earnings of $.75 per share) compared to $.63 per share during the third quarter of 2002. Net book value increased to $19.02 per share, compared to $16.83 at September 2002. A 2 for 1 stock split was effective November 19, 2002. All per share information has been updated to reflect the split. Financial performance is expressed in thousands, except per share data. Peoples State Bank is headquartered in Wausau, Wisconsin with seven retail locations serving north central Wisconsin in Marathon, Lincoln, Oneida, and Vilas counties. In addition to traditional retail and commercial loan and deposit products, the Bank provides investments, commercial property and casualty insurance, retirement planning and long-term fixed rate residential mortgages. Net income for the quarter ended September 30, 2003 was $1,235 compared to $1,057 in the second quarter of 2003 and $1,051 in September 2002. Operating results for the third quarter 2003 generated an annualized return on average assets (ROA) and return on average equity (ROE) of 1.26% and 15.76%, respectively. Comparable ratios for the same quarter in 2002 were ROA of 1.17% and ROE of 15.00%. Year to date ROA and ROE for 2003 are 1.25% and 15.40%, respectively. ROA and ROE were 1.18% and 15.07% during the nine months ended September 30, 2002, respectively. Net Interest Income Net interest income increased $50 from $3,256 for the quarter ended September 30, 2002 to $3,306 for the current quarter ended September 30, 2003 due to increased earning assets held, although margin on those assets has declined. Tax-adjusted net interest margin as a percent of average interest earning assets decreased from the year earlier quarter to 3.67% from 3.95%. Net interest margin for all of calendar year 2002 was 3.95%. The Company has experienced compressed interest rate margins as existing prime rate adjustable and other maturing term loans and securities are repriced at today's significantly lower rates. However, deposit costs are already near their floor and unable to fully recover decreasing earning asset yields. Compared to the year earlier quarter, earning assets yields have decreased 95 basis points from 6.68% at September 2002 to 5.73% at September 2003. However, the cost of liabilities declined only 73 basis points from 3.25% at September 2002 to 2.52% at September 2003. The Company continues to seek net interest income growth by originating and funding assets with terms in line with proactive asset-liability management. The Company's balance sheet is "asset sensitive" and therefore margins would improve in a rising interest rate environment. Management expects the net interest margin to stabilize during the fourth quarter of 2003 as longer-term market interest rates rise on new earning assets to be originated during the quarter while some existing large fixed rate funding sources reprice to today's significantly lower short-term rates. The Company saw growth in total average loans of $38,757, or 15.5% over the comparable year-ago quarter. The majority of this growth came from additional owner-occupied commercial real estate loans. A significant amount of these new loans were originated by the Company's new Rhinelander, Wisconsin branch location which opened during August 2002. Total assets increased to $397,018 at September 30, 2003 compared to $360,305 at September 30, 2002. Service Fee and Noninterest Income Noninterest Income grew $302 in the third quarter 2003 to $1,143 compared to $841 in 2002. Virtually all of this growth ($328) was from an increase of income from the sale of long-term fixed rate mortgage loans, net of servicing right amortization and provision for impairment. The majority of loans sold to outside investors continue to be serviced by the Bank directly with the customer. Gain on sale and servicing of such loans during the quarter was $655 in September 2003 compared to $327 during September 2002. For the nine months ended September 30, gain on sale and servicing fixed rate mortgages was $1,499 and $678 in 2003 and 2002, respectively. During June 2003, additional expense from a change in accounting estimate related to accounting for mortgage servicing rights of $236 was recorded which reduced second quarter diluted earnings by approximately $.09 per share. The Company serviced $148,738 of mortgage principal for other investors at September 30, 2003 compared to $64,780 at September 30, 2002. Through September 30, 2003, the gain on sale and servicing of loans is more than double the prior year's activity through September 30, 2002, and has substantially enhanced income as interest margins declined during 2003. Management does not expect the current level of mortgage refinancing income to continue during the fourth quarter 2003. The Company intends to replace this fee income with ongoing servicing fees of the existing mortgage portfolio and additional investment and insurance sales income. During 2003, the Bank increased the number of commissioned investment sales professionals on staff. Investment and insurance sales commissions were $303 during the nine months ended September 2003 compared to $189 in the same period ended September 2002. On September 1, 2003, the Company announced formation of Peoples Insurance Services LLC, a commercial property and casualty insurance agency and brokerage. Mr. Jeff Cole has been named President of Peoples Insurance Services. President David K. Kopperud said "Jeff brings a wealth of relationships and technical expertise that gives us a competitive advantage in our markets. We are excited about the future of this new product for our commercial customers and the additional fee income it brings to the Company." Operating Expenses Noninterest operating expenses increased $238 to $2,335 in September 2003 compared to $2,097 during September 2002, an increase of 11.3%. Increases in employee salaries and benefits totaled $188 during the quarter, as bank employees were granted inflationary and merit increases effective January 1, 2003 averaging 6.1%. In addition, the Company hired additional lenders in our Rhinelander market and investment and insurance sales representatives during 2003 that have had a significant impact. Operating expenses as a percent of average assets increased slightly to 2.38% during the third quarter September 2003 compared to 2.34% during September 2002. Year to date, additional operating costs have been offset by increased revenue, as the expense efficiency ratio improved to 52.11% for the nine months ended September 2003 compared to 52.30% in the prior year. Market Expansion In addition to formation of Peoples Insurance Services LLC mentioned previously, the Company continues work on construction of a new bank and financial services office and administrative headquarters located on property adjacent to the existing Wausau, Wisconsin main office location. Construction of the 32,000 square foot office and drive-through canopy began in August with completion anticipated by the end of the second quarter 2004. The existing Wausau main office which has been used since the Bank opened in 1962 and as most recently expanded during 1992 will be razed. Building project costs including necessary furniture, fixtures, and equipment are estimated to be $4.4 million. Annual depreciation expense after this investment in fixed assets and equipment is estimated to increase $165 ($100 after income tax benefits). President David Kopperud commented "The project continues on schedule and within budget. As the project takes shape both our employees and friends in our community are sharing in the excitement of our future growth and service capability." Credit Quality and Capitalization The Company ceases to accrue interest on loans which are 90 days past due and considers them nonperforming loans until the borrower has made up any late payments and is able to continue required payments in the future. Nonperforming loans also include restructured loans until 6 consecutive monthly payments are received under the new loan terms. The Company continues to aggressively manage past due customers and lowered the level of nonperforming loans to gross loans from 1.74% at September 2002 to 1.09% at September 2003. The Company also tracks delinquencies on a contractual basis quarter to quarter. Loans contractually delinquent 30 days or more as a percentage of gross loans were 1.02% at September 2003 compared to .87% at December 2002 and 1.24% at September 2002. The allowance for loan losses was 1.23% of gross loans at September 2003 compared to 1.33% at September 2002. Management reviews the activity in identified problem loans weekly and recognizes adequate and reasonable loan loss reserves as required. Average tangible stockholder's equity was 7.70% during the quarter ended September 2003 compared to 7.61% in the prior year quarter. Management believes the Company to be well capitalized at September 30, 2003 and to remain well capitalized during the remainder of 2003 based on planned asset growth. During the quarter ended September 30, 2003, the Company completed its annual buyback program of purchasing up to 1% of outstanding shares by repurchasing an additional 400 shares at an average price of $34.00 per share. For all of 2003, 16,700 shares were repurchased at an average price of $33.10 per share. For the remainder of 2003, management anticipates retaining capital to support asset growth while continuing a cash dividend to shareholders. Effective with the $.30 dividend declared June 17, 2003, the Company intends to equalize the amounts of the semi-annual cash dividends. Accordingly, under the dividend policy, the Company expects that the dividend to be paid in January, 2004 may be less than the January 2003 dividend, but that the total dividends to be paid in July 2003 and January 2004 will exceed the $.565 per share total dividends paid in July 2002 and January 2003. The Company also reaffirmed its goal of increasing its shareholder dividend on an annual basis subject to operating results and financial condition of the Company. Forward Looking Statements Certain matters discussed in this news release, including those relating to the growth of the Company 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, 2002. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. (tables follow)
PSB HOLDINGS, INC. (Unaudited) (Audited) FINANCIAL HIGHLIGHTS Three months ended Nine months ended Calendar (dollars in thousands, September 30, September 30, Year except per share data) 2003 2002 2003 2002 2002 EARNINGS Net income $1,235 $1,051 $3,516 $3,033 $4,365 Diluted earnings per share 0.74 0.63 2.10 1.81 2.60 Net book value per share 19.02 16.83 19.02 16.83 17.59 PERIOD END BALANCE SHEET Gross loans receivable $301,347 $255,680 $301,347 $255,680 $259,173 Total assets 397,018 360,305 397,018 360,305 371,468 Deposits 310,105 288,592 310,105 288,592 297,831 Borrowings 53,483 41,514 53,483 41,514 41,302 KEY EARNINGS RATIOS (ANNUALIZED AND TAX ADJUSTED) Return on average assets 1.26% 1.17% 1.25% 1.18% 1.25% Return on stockholders' equity 15.76% 15.00% 15.40% 15.07% 15.97% Net interest margin 3.67% 3.95% 3.79% 3.97% 3.95% Efficiency ratio 50.94% 49.52% 52.11% 52.30% 50.68% CREDIT QUALITY AND CAPITALIZATION Allowance for loan losses to gross loans 1.23% 1.33% 1.23% 1.33% 1.22% Net loans charge-offs to average loans 0.02% 0.12% 0.06% 0.15% 0.37% Average tangible stockholders' equity to average assets 7.70% 7.61% 7.79% 7.65% 7.66% SHARE PRICE INFORMATION High $34.24 $21.05 $34.24 $21.05 $25.00 Low 33.00 19.18 23.75 16.63 16.63 Market value at period end 33.50 20.58 33.50 20.58 25.00
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) 2003 2002 2003 2002 Interest income: Interest and fees on loans $4,594 $4,627 $13,466 $13,466 Interest on securities: Taxable 359 665 1,475 2,033 Tax-exempt 232 223 676 674 Other interest and dividends 56 86 175 203 Total interest income 5,241 5,601 15,792 16,376 Interest expense: Deposits 1,368 1,733 4,312 5,195 FHLB advances 506 577 1,520 1,712 Other borrowings 61 35 154 115 Total interest expense 1,935 2,345 5,986 7,022 Net interest income 3,306 3,256 9,806 9,354 Provision for loan losses 240 450 705 810 Net interest income after provision for loan losses 3,066 2,806 9,101 8,544 Noninterest income: Service fees 323 334 951 890 Gain on sale of loans 718 310 1,871 642 Mortgage loan servicing, net (63) 17 (372) 36 Investment and insurance sales commissions 115 93 303 189 Net loss on sale of securities (19) - (19) - Other noninterest income 69 87 257 251 Total noninterest income 1,143 841 2,991 2,008 Noninterest expense: Salaries and employee benefits 1,508 1,320 4,343 3,735 Occupancy 286 267 859 832 Data processing and other office operations 131 153 418 413 Advertising and promotion 45 63 133 254 Other noninterest expenses 365 294 1,119 921 Total noninterest expense 2,335 2,097 6,872 6,155 Income before provision for income taxes 1,874 1,550 5,220 4,397 Provision for income taxes 639 499 1,704 1,364 Net income $1,235 $1,051 $3,516 $3,033 Basic earnings per share $ 0.75 $ 0.63 $ 2.12 $ 1.81 Diluted earnings per share $ 0.74 $ 0.63 $ 2.10 $ 1.81
PSB HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (September 30, 2003 unaudited, December 31, 2002 derived from audited financial statements) SEPT. 30, December 31, (dollars in thousands, except per share data) 2003 2002 ASSETS Cash and due from banks $12,377 $15,890 Interest-bearing deposits and money market funds 4,669 5,490 Federal funds sold - 172 Cash and cash equivalents 17,046 21,552 Securities available for sale (at fair value) 69,988 81,056 Federal Home Loan Bank stock (at cost) 2,402 2,264 Loans held for sale 179 949 Loans receivable, net of allowance for loan losses of $3,692 and $3,158, respectively 297,655 256,015 Accrued interest receivable 1,700 1,732 Foreclosed assets, net 183 573 Premises and equipment 6,481 6,158 Mortgage servicing rights, net 749 697 Other assets 635 472 TOTAL ASSETS $397,018 $371,468 LIABILITIES Non-interest-bearing deposits $ 46,700 $ 45,458 Interest-bearing deposits 263,405 252,373 Total deposits 310,105 297,831 Federal Home Loan Bank advances 43,000 38,000 Other borrowings 10,483 3,302 Accrued expenses and other liabilities 2,030 3,033 Total liabilities 365,618 342,166 STOCKHOLDERS' EQUITY Common stock - no par value with a stated value of $1 per share: Authorized - 3,000,000 shares Issued - 1,804,850 shares 1,805 1,805 Additional paid-in capital 7,150 7,150 Retained earnings 24,627 21,607 Unrealized gain on securities available for sale, net of tax 891 1,306 Treasury stock, at cost - 153,781 and 138,748 shares, respectively (3,073) (2,566) Total stockholders' equity 31,400 29,302 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $397,018 $371,468