EX-99.1 3 psbex99.htm PSB EXHIBIT 99.1 - NEWS RELEASE PSB Exhibit 99.1  (00144369.DOC;1)

Exhibit 99.1


PSB Announces 2nd Quarter Earnings of $.64 Per Share


Wausau, Wisconsin [OTCBB:PSBQ.OB] – Peter W. Knitt, President and CEO of PSB Holdings, Inc. (“PSB”) and Peoples State Bank (“Peoples”) announced June 2007 quarterly earnings per share of $.64 on net income of $1,008,000, up from $.50 per share on net income of $799,000 in the recent March 2007 quarter, and up from $.50 per share on net income of $851,000 in the second quarter of 2006.  Year to date earnings per share through June 2007 were $1.14 on net income of $1,807,000 compared to $.93 per share on net income of $1,589,000 through June 2006.


Prior year earnings during the six months ended June 2006 were reduced from recording an interest rate swap at fair value without the ability to offset the liability against the hedged certificate of deposit.  The $10 million variable rate swap liability was prepaid in the March 2007 quarter with a final payment of $115,000.  Year to date earnings per share before the impact of marking the swap to fair value and all related swap settlement payment expense would have been $1.13 and $1.05 in 2007 and 2006, respectively.  


Return on average assets based on net income for the quarter and six months ended June 30, 2007 was .81% and .73%, respectively.  Return on average assets based on net income for the quarter and six months ended June 30, 2006 was .68% and .64%, respectively.


Return on average stockholders’ equity based on net income for the quarter and six months ended June 30, 2007 was 11.51% and 10.40%, respectively.  Return on equity based on net income for the quarter and six months ended June 30, 2006 was 9.58% and 8.96%, respectively.  Book value per share was $21.83 at June 30, 2007 compared to $20.29 for the same date a year ago, an increase of 7.6%.


Assets at June 30, 2007 were $503.0 million, compared to $501.8 million at December 31, 2006, and $503.7 million at June 30, 2006.  Total loans receivable were $384.5 million at June 30, 2007 compared to $369.7 million at December 31, 2006 and $380.3 million at June 30, 2006.  Loan growth of $14.8 million since December 31, 2006 was funded by a decrease in cash and cash equivalents of $14.8 million during the six months ended June 30, 2007.


Total deposits of $386.2 million at June 30, 2007 decreased $5.2 million from December 31, 2006, and have decreased $8.6 million since June 30, 2006.  The decrease since June 2006 was led by a decline in brokered deposits occurring before December 2006.  However, the decline since December 2006 has been seen across the retail and commercial product line up as competition for local deposits grew.  The deposit decline since December 2006 was offset by a $7 million increase in other borrowings in the form of a structured repurchase agreement.  


During June 2007, PSB introduced a new retail interest-bearing checking account named Rewards Checking as part of a long-term program to attract local depositors and cross-sell other retail products.  Rewards Checking pays an above market interest rate of 6.01% annual percentage yield on the first $25,000 to customers meeting account usage requirements including debit card usage, e-banking, and ACH deposit or payment.  Debit card interchange income,



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overdraft fee income, and increased technology efficiencies lower the overall net cost of the deposit to levels less than equivalent wholesale funding.  Rewards Checking is expected to become a significant funding source for PSB going forward.


PSB’s provision for loan losses was $120,000 in the second quarter of both 2007 and 2006.  Year to date provision for loan losses was $240,000 and $255,000 for the six months ended June 30, 2007 and 2006, respectively.  Annualized net charge-offs were .00% and .24% during the June 2007 and 2006 quarters, respectively.  Year to date annualized net charge-offs (recoveries) were (.01%) and .12% for June 2007 and 2006, respectively.


At June 30, 2007, the allowance for loan losses was 1.21% of total loans ($4,728,000), compared to 1.09% a year earlier ($4,210,000).  Nonperforming loans were .96% of total loans at June 30, 2007, 1.14% at December 31, 2006, and .57% at June 30, 2006.  Existing nonaccrual loans are spread over many unrelated borrowers, with the largest nonaccrual customer balance totaling less than $300,000.  PSB applies all payments received on nonaccrual loans to principal until the loan is returned to accrual status.  The following table summarizes non-performing assets as of period end:


Non-Performing Assets as of

June 30,

 

Dec. 31,

(dollars in thousands)

2007

2006

 

2006

      

Nonaccrual loans

$  3,077

 

$  2,175

  

$  4,281

 

Accruing loans past due 90 days or more

–   

 

–   

  

–   

 

Restructured loans not on nonaccrual

657

 

26

  

–   

 
        

Total nonperforming loans

3,734

 

2,201

  

4,281

 

Foreclosed assets

373

 

1,422

  

464

 
        

Total nonperforming assets

$  4,107

 

$  3,623

  

$  4,745

 
        

Nonperforming loans as a % of gross loans

0.96%

 

0.57%

  

1.14%

 

Total nonperforming assets as a % of total assets

0.82%

 

0.72%

  

0.95%

 


Tax adjusted net interest margin was 3.22% during the June 2007 quarter compared to 3.13% in the March 2007 quarter and 3.06% during the June 2006 quarter.  Year to date net margin was 3.17% through June 2007 compared to 3.08% through the six months ended June 2006.  Increases in net margin have been driven primarily by an increase in loan yields compared to funding cost increases in recent quarters.  Loan yield in the quarter ended June 30, 2007 was 7.20% compared to 6.69% a year ago, an increase of 51 basis points.  The rate paid on interest-bearing deposits was 4.09% during the second quarter 2007 compared to 3.64% a year ago, an increase of 45 basis points.  


Loan yields during the June 2007 quarter benefited by a total of $104,000 collected on a large loan prepayment penalty as well as deferred interest income upon repayment of a separate large nonaccrual loan.  Quarterly June 2007 loan yield would have been 7.09% and net interest margin



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would have been 3.13% before these special items.  These levels are the same as the linked March 2007 quarter.  With the introduction of the new high yield Rewards Checking product and some existing lower rate customers transferring into this account as well as expected greater use of wholesale funding to support loan growth, PSB expects net interest margin to decline slightly during the remainder of the year from the year to date average of 3.17% seen through June 2007.


PSB entered into a $10 million interest rate swap (receive fixed, pay variable payments) to hedge the interest rate risk inherent in a fixed rate certificate of deposit that was later determined to not qualify for hedge accounting.  Eliminating the application of fair value hedge accounting in March 2006 caused PSB to mark the swap liability to fair value and generated a charge against noninterest income.  Following a decline in interest rates (which lowered the swap liability), this swap was prepaid in the March 2007 quarter with a final payment of $115,000 (swap final maturity was in October 2008).  Changes in the fair value of the swap liability and the monthly settlement payments were recorded as reductions to noninterest income.  The table below summarizes swap expense for the periods ended June 30 before income tax benefits:


Interest Rate Swap Net Expense

Three months ended

 

Six months ended

(dollars in thousands)

June 30,

 

June 30,

 

2007

2006

 

2007

2006

      

Net monthly settlement expense

$    –   

 

$    20

  

$    15 

 

$    28

 

Net change in unrealized fair value liability

–   

 

97

  

(32)

 

302

 
          

Total swap (income) expense during the period

$    –   

 

$   117

  

$   (17)

 

$   330

 


Total noninterest income for the quarter ended June 30, was $1,001,000 and $877,000 in 2007 and 2006, respectively.  If the impact to noninterset income from the swap was excluded, noninterest income would have been $1,001,000 in the June 2007 quarter and $994,000 in the June 2006 quarter.  Similarly, total noninterest income for the six months ended June 30, was $1,842,000 and $1,499,000 in 2007 and 2006, respectively.  If the impact to noninterset income from the swap was excluded, noninterest income would have been $1,825,000 through June 2007 compared to $1,829,000 through June 2006.  Prior year June 2006 quarterly noninterest income included a nonrecurring gain on sale of the student loan portfolio totaling $69,000.


Salaries and employee benefits expense continues to run at levels less than the prior year, totaling $1,774,000 and $3,511,000 for the quarter and six months ended June 30, 2007 respectively, compared to $1,792,000 and $3,606,000 for the same periods in the prior year.  Lower employee health insurance expense has been a significant driver to lower costs, with year to date savings through June 2007 of $103,000 compared to 2006.  Benefits savings were achieved from more active management of self-funded plan expenses, moderately higher benefit deductibles, and a lower number of employee claims.  This level of savings is not expected to continue for the remainder of 2007.


Expenses other than salaries and benefits totaled $1,248,000 in the June 2007 quarter compared to $1,252,000 in the June 2006 quarter, a decrease of $4,000.  Year to date expenses other than



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salaries and benefits totaled $2,595,000 through June 2007 compared to $2,380,000 through June 2006, an increase of $215,000.  


The June 2007 quarter benefited from reimbursement of legal fees on PSB’s ongoing income tax issue regarding TEFRA interest deductibility currently under Tax Court review totaling $50,000.  These fees were expensed in the March 2007 quarter, but reimbursed to PSB by the Wisconsin Bankers’ Association (WBA) who had raised member funds and organized reimbursement of legal defense costs since late 2005.  PSB may incur further legal fees on its tax case, and there is no guarantee that future expenses to defend the case will be reimbursed by the WBA.  Separate from this credit to legal expenses, quarterly operating expenses before wages and benefits increased $46,000.  The increase over the June 2006 quarter was due to approximately $40,000 of consulting costs related to compliance with Section 404 of the Sarbanes-Oxley Act (“SOX 404”).  There were no significant SOX 404 costs in the June 2006 quarter.


Year to date consulting costs relative to compliance with SOX 404 have totaled $109,000 through June 2007.  In addition, PSB recorded a long-term donation commitment for a qualifying community reinvestment project during March 2007 totaling $44,000.  All other changes in other operating expenses totaled $62,000 which was driven by marketing and technology costs including costs to create and rollout the new Rewards Checking product.


At the April 17, 2007 annual stockholders’ meeting, PSB announced its intent to repurchase 40,000 shares (approximately 2.5% of outstanding shares) from time to time during the remainder of 2007 at current market prices.  During the June 2007 quarter, 25,000 shares were repurchased at an average price of $28.75 per share.


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 and insurance annuities, retirement planning, commercial treasury management services, and long-term fixed rate residential mortgages.


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 “Forward - Looking Statements” in Item 1 and “Risk Factors” in Item 1A of PSB’s Form 10-K for the year ended December 31, 2006.  PSB assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.



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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:

2007   

2007    

2006   

2006   

2006  

      

Net income

$       1,008

$          799

$          873

$          965

$          851

Basic earnings per share(3)

$         0.64

$         0.50

$         0.55

$         0.60

$         0.50

Diluted earnings per share(3)

$         0.64

$         0.50

$         0.54

$         0.60

$         0.50

Dividends declared per share(3)

$         0.33

$           –   

$         0.32

$           –      

$         0.32

Net book value per share

$       21.83

$       22.14

$       21.67

$       21.42

$       20.29

Semi-annual dividend payout ratio

28.48%

n/a  

27.68%

n/a  

32.22%

Average common shares outstanding

1,572,679

1,589,980

1,593,320

1,600,364

1,685,166

      

Balance sheet – average balances:

     
      

Loans receivable, net of allowances

$   379,084

$   372,448

$   370,256

$   377,528

$   382,138

Total assets

$   496,952

$   497,349

$   497,502

$   503,209

$   505,586

Deposits

$   384,984

$   387,803

$   388,299

$   393,093

$   394,075

Stockholders’ equity

$     35,135

$     34,692

$     34,463

$     33,363

$     35,626

      

Performance ratios:

     
      

Return on average assets(1)

0.81%

0.65%

0.70%

0.76%

0.68%

Return on avg. stockholders’ equity(1)

11.51%

9.34%

10.05%

11.48%

9.58%

Average tangible stockholders’ equity to

     

average assets(4)

7.11%

7.02%

6.96%

6.79%

7.20%

Net loan charge-offs to average loans(1)

0.00%

-0.01%

0.01%

-0.04%

0.24%

Nonperforming loans to gross loans

0.96%

0.96%

1.14%

1.15%

0.57%

Allowance for loan loss to gross loans

1.21%

1.22%

1.20%

1.17%

1.09%

Net interest rate margin(1)(2)

3.22%

3.13%

3.06%

2.99%

3.06%

Net interest rate spread(1)(2)

2.67%

2.62%

2.52%

2.47%

2.56%

Service fee revenue as a percent of

     

average demand deposits(1)

2.61%

2.57%

2.39%

2.71%

2.66%

Noninterest income as a percent

     

of gross revenue

11.34%

9.94%

10.25%

10.85%

10.64%

Efficiency ratio(2)

63.51%

69.32%

65.68%

62.28%

67.51%

Noninterest expenses to average assets(1)

2.44%

2.51%

2.34%

2.19%

2.41%

      

Stock price information:

     
      

High

$       29.25

$       30.35

$       30.75

$       32.65

$       34.00

Low

$       27.00

$       28.00

$       30.15

$       30.00

$       30.60

Market value at quarter-end

$       27.75

$       28.50

$       30.25

$       30.35

$       32.50


(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.

(4)Tangible stockholders' equity excludes the impact of cumulative other comprehensive income (loss).



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PSB Holdings, Inc.

     

Consolidated Statements of Income

     
 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(dollars in thousands, except per share data – unaudited)

2007

2006

 

2007

2006

   

 

  

Interest and dividend income:

     

Loans, including fees

$   6,863

 

$   6,421 

  

$  13,430

 

$  12,532 

 

Securities:

         

Taxable

602

 

648 

  

1,218

 

1,252 

 

Tax-exempt

322

 

249 

  

627

 

503 

 

Other interest and dividends

39

 

51 

  

168

 

158 

 
          

Total interest and dividend income

7,826

 

7,369 

  

15,443

 

14,445 

 
          

Interest expense:

         

Deposits

3,412

 

3,086 

  

6,813

 

6,022 

 

FHLB advances

575

 

623 

  

1,189

 

1,157 

 

Other borrowings

160

 

63 

  

224

 

91 

 

Junior subordinated debentures

114

 

114 

  

227

 

227 

 
          

Total interest expense

4,261

 

3,886 

  

8,453

 

7,497 

 
          

Net interest income

3,565

 

3,483 

  

6,990

 

6,948 

 

Provision for loan losses

120

 

120 

  

240

 

255 

 
          

Net interest income after provision for loan losses

3,445

 

3,363 

  

6,750

 

6,693 

 
          

Noninterest income:

         

Service fees

328

 

358 

  

631

 

653 

 

Mortgage banking

253

 

226 

  

449

 

433 

 

Investment and insurance sales commissions

206

 

145 

  

330

 

280 

 

Increase in cash surrender value of life insurance

66

 

45 

  

126

 

91 

 

Change in fair value of interest rate swap

–   

 

(97)

  

32

 

(302)

 

Other noninterest income

148

 

200 

  

274

 

344 

 
          

Total noninterest income

1,001

 

877 

  

1,842

 

1,499 

 
          

Noninterest expense:

         

Salaries and employee benefits

1,774

 

1,792 

  

3,511

 

3,606 

 

Occupancy and facilities

471

 

453 

  

968

 

925 

 

Data processing and other office operations

203

 

201 

  

420

 

381 

 

Advertising and promotion

95

 

79 

  

153

 

122 

 

Other noninterest expenses

479

 

519 

  

1,054

 

952 

 
          

Total noninterest expense

3,022

 

3,044 

  

6,106

 

5,986 

 
          

Income before provision for income taxes

1,424

 

1,196 

  

2,486

 

2,206 

 

Provision for income taxes

416

 

345 

  

679

 

617 

 
          

Net income

$   1,008

 

$      851 

  

$   1,807

 

$   1,589 

 

Basic earnings per share

$     0.64

 

$     0.50 

  

$     1.14

 

$     0.94 

 

Diluted earnings per share

$     0.64

 

$     0.50 

  

$     1.14

 

$     0.93 

 



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PSB Holdings, Inc.

  

Consolidated Balance Sheets

  

June 30, 2007 unaudited, December 31, 2006 derived from audited financial statements

   

(dollars in thousands, except per share data – unaudited)

2007

2006

Assets

  
   

Cash and due from banks

$     10,259 

 

$     14,738 

 

Interest-bearing deposits and money market funds

522 

 

1,048 

 

Federal funds sold

–   

 

9,756 

 
     

Cash and cash equivalents

10,781 

 

25,542 

 
     

Securities available for sale (at fair value)

79,794 

 

80,009 

 

Loans held for sale

951 

 

1,001 

 

Loans receivable, net of allowance for loan losses

384,507 

 

369,749 

 

Accrued interest receivable

2,544 

 

2,464 

 

Foreclosed assets

373 

 

464 

 

Premises and equipment, net

11,275 

 

11,469 

 

Mortgage servicing rights, net

892 

 

908 

 

Federal Home Loan Bank stock (at cost)

3,017 

 

3,017 

 

Cash surrender value of bank-owned life insurance

6,806 

 

5,900 

 

Other assets

2,023 

 

1,317 

 
     

TOTAL ASSETS

$   502,963 

 

$   501,840 

 
     

Liabilities

    
     

Non-interest-bearing deposits

$     52,186 

 

$     55,083 

 

Interest-bearing deposits

334,005 

 

336,332 

 
     

Total deposits

386,191 

 

391,415 

 
     

Federal Home Loan Bank advances

60,000 

 

60,000 

 

Other borrowings

10,750 

 

3,995 

 

Junior subordinated debentures

7,732 

 

7,732 

 

Accrued expenses and other liabilities

4,234 

 

4,251 

 
     

Total liabilities

468,907 

 

467,393 

 
     

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

9,593 

 

9,645 

 

Retained earnings

32,259 

 

30,967 

 

Accumulated other comprehensive loss

(850)

 

(105)

 

Treasury stock, at cost – 327,441 and 297,223 shares, respectively

(8,833)

 

(7,947)

 
     

Total stockholders’ equity

34,056 

 

34,447 

 
     

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$   502,963 

 

$   501,840 

 



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PSB Holdings, Inc.

      

Average Balances and Interest Rates

      

Quarter Ended June 30,

       
        
  

2007

   

2006

 
 

Avg Bal

Interest

Yield/Rate

 

Avg Bal

Interest

Yield/Rate

Assets

       

Interest-earning assets:

       

Loans(1)(2)

$ 383,745 

$ 6,889

 

7.20%

  

$ 386,391 

$ 6,442

 

6.69%

 

Taxable securities

47,819 

602

 

5.05%

  

58,949 

648

 

4.41%

 

Tax-exempt securities(2)

32,244 

488

 

6.07%

  

24,789 

377

 

6.10%

 

FHLB stock

3,017 

20

 

2.66%

  

3,017 

23

 

3.06%

 

Other

1,822 

19

 

4.18%

  

2,310 

28

 

4.86%

 
            

Total(2)

468,647 

8,018

 

6.86%

  

475,456 

7,518

 

6.34%

 
            

Non-interest-earning assets:

           

Cash and due from banks

9,575 

     

11,022 

    

Premises and equipment, net

11,362 

     

12,371 

    

Cash surrender value insurance

6,764 

     

4,868 

    

Other assets

5,265 

     

6,122 

    

Allowance for loan losses

(4,661)

     

(4,253)

    
            

Total

$ 496,952 

     

$ 505,586 

    
            

Liabilities & stockholders’ equity

          

Interest-bearing liabilities:

           

Savings and demand deposits

$   80,727 

$    600

 

2.98%

  

$   78,479 

$    542

 

2.77%

 

Money market deposits

67,318 

580

 

3.46%

  

66,015 

490

 

2.98%

 

Time deposits

186,463 

2,232

 

4.80%

  

195,501 

2,054

 

4.21%

 

FHLB borrowings

51,692 

575

 

4.46%

  

57,934 

623

 

4.31%

 

Other borrowings

13,531 

160

 

4.74%

  

6,514 

63

 

3.88%

 

Junior subordinated debentures

7,732 

114

 

5.91%

  

7,732 

114

 

5.91%

 
            

Total

407,463 

4,261

 

4.19%

  

412,175 

3,886

 

3.78%

 
            

Non-interest-bearing liabilities:

           

Demand deposits

50,476 

     

54,080 

    

Other liabilities

3,878 

     

3,705 

    

Stockholders’ equity

35,135 

     

35,626 

    
            

Total

$ 496,952 

     

$ 505,586 

    
            

Net interest income

 

$ 3,757

     

$ 3,632

   

Rate spread

   

2.67%

     

2.56%

 

Net yield on interest-earning assets

   

3.22%

     

3.06%

 


(1)Nonaccrual loans are included in the daily average loan balances outstanding.

(2)The yield on tax-exempt loans and securities is computed on a tax-equivalent basis using a tax rate of 34%.



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PSB Holdings, Inc.

      

Average Balances and Interest Rates

      

Six Months Ended June 30,

      
  

2007

   

2006

 
 

Avg Bal

Interest

Yield/Rate

 

Avg Bal

Interest

Yield/Rate

Assets

       

Interest-earning assets:

       

Loans(1)(2)

$ 380,381 

$ 13,482

 

7.15%

  

$ 382,929 

$ 12,573

 

6.62%

 

Taxable securities

48,527 

1,218

 

5.06%

  

57,710 

1,252

 

4.37%

 

Tax-exempt securities(2)

31,563 

950

 

6.07%

  

25,287 

762

 

6.08%

 

FHLB stock

3,017 

43

 

2.87%

  

3,017 

42

 

2.81%

 

Other

4,786 

125

 

5.27%

  

5,094 

116

 

4.59%

 
            

Total(2)

468,274 

15,818

 

6.81%

  

474,037

14,745

 

6.27%

 
            

Non-interest-earning assets:

           

Cash and due from banks

10,280 

     

11,169 

    

Premises and equipment, net

11,415 

     

12,462 

    

Cash surrender value insurance

6,568 

     

4,845 

    

Other assets

5,292 

     

5,638 

    

Allowance for loan losses

(4,597)

     

(4,251)

    
            

Total

$ 497,232 

     

$ 503,900 

    
            

Liabilities & stockholders’ equity

           

Interest-bearing liabilities:

           

Savings and demand deposits

$   82,199 

$   1,236

 

3.03%

  

$   83,091 

$   1,137

 

2.76%

 

Money market deposits

67,604 

1,144

 

3.41%

  

66,282 

923

 

2.81%

 

Time deposits

187,444 

4,433

 

4.77%

  

193,790 

3,962

 

4.12%

 

FHLB borrowings

54,160 

1,189

 

4.43%

  

55,249 

1,157

 

4.22%

 

Other borrowings

10,010 

224

 

4.51%

  

5,228 

91

 

3.51%

 

Junior subordinated debentures

7,732 

227

 

5.92%

  

7,732 

227

 

5.92%

 
            

Total

409,149 

8,453

 

4.17%

  

411,372 

7,497

 

3.68%

 
            

Non-interest-bearing liabilities:

           

Demand deposits

49,120 

     

53,202

    

Other liabilities

3,928 

     

3,582

    

Stockholders’ equity

35,035 

     

35,744

    
            

Total

$ 497,232 

     

$ 503,900

    
            

Net interest income

 

$   7,365

    

 

$   7,248

   

Rate spread

  

2.64%

  

 

 

2.59%

 

Net yield on interest-earning assets

  

3.17%

  

 

 

3.08%

 


(1)Nonaccrual loans are included in the daily average loan balances outstanding.

(2)The yield on tax-exempt loans and securities is computed on a tax-equivalent basis using a tax rate of 34%.




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