EX-99.1 3 psbex99718.htm PSB EXHIBIT 99.1 - PRESS RELEASE Exhibit 99.1  (W0178924.DOC;1)

Exhibit 99.1

PSB Announces Increased Earnings of $.66 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 2008 quarterly earnings of $.66 per share on net income of $1,019,000, up from $.64 per share on net income of $1,008,000 in the June 2007 quarter, and an increase from $.65 per share on net income of $1,002,000 in the March 2008 quarter.  Year to date earnings for the six months ended June 30, 2008 were $1.31 per share on net income of $2,021,000 compared to $1.14 per share on net income of $1,807,000 during 2007, an increase of 15% per share.  Increased earnings were due to greater net interest income on a larger asset base, increased overdraft fees and a lower effective income tax rate while operating expenses were held to inflationary increases.


President Knitt also noted, “Despite significant ongoing turmoil in the financial and equity markets, PSB continues its 44 year tradition of cash dividends to shareholders with a current semi-annual dividend of $.34 per share payable July 31, 2008.  This represents an increase over the $.33 per share paid last year, continuing 23 years of increased cash dividends.”


PSB 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.


Return on average assets was .76% and .81% during the quarters ended June 30, 2008 and 2007, respectively.  Return on average stockholders’ equity was 10.58% and 11.51% during the quarters ended June 30, 2008 and 2007, respectively.  Year to date for the six months ended June 30, return on assets was .76% in 2008 compared to .73% in 2007.  Return on equity was 10.64% in 2008 compared to 10.40% in 2007.  Net book value increased from $21.83 per share at June 30, 2007 to $24.14 per share at June 30, 2008, an increase of 11%.


Assets at June 30, 2008 were $545.0 million compared to $503.0 million at June 30, 2007, an increase of $42 million, or 8%.  Total loans receivable were $401.1 million at June 30, 2008 compared to $384.5 million at June 30, 2007, an increase of $16.6 million, or 4%.  Along with loan growth, investment securities have grown $18.6 million since June 30, 2007, including the purchase of $1 million par value of Federal National Mortgage Association (“FNMA”) preferred stock.  This FNMA preferred stock had a gross unrealized loss of $133,000 at June 30, 2008.  PSB does not intend to sell the FNMA security at a loss and has included the decline with other portfolio unrealized gains and losses as accumulated other comprehensive loss in stockholders’ equity, net of tax.


Total deposits of $402.9 million at June 30, 2008 increased $16.7 million, or 4%, since June 30, 2007.  The majority of deposit growth since June 30, 2007 has been from local depositor balances held in the Peoples Rewards Checking product with a balance totaling $17.0 million at June 30, 2008, up from $1.5 million at June 30, 2007 when the product was introduced.  Peoples Rewards Checking pays a premium interest rate to depositors who meet account usage requirements including minimum debit card purchases, acceptance of electronic account statements and direct deposit activity.  Since December 31, 2007, seasonal and other local deposit run-off from governmental entities has been replaced by brokered time deposits.  Wholesale funding, including brokered deposits, FHLB advances, and other borrowings totaled $155.9 million, $134.1 million, and $136.8 million at June 30, 2008, December 31, 2007, and June 30, 2007, respectively.  Wholesale funding totaled 28.6% of total assets at June 30, 2008 compared 27.2% of total assets at June 30, 2007.  PSB regularly maintains access to wholesale markets to fund loan



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originations and manage local depositor needs on a daily basis as needed.  At June 30, 2008, unused (but available) wholesale funding was approximately $114 million, or 21% of total assets.


PSB’s provision for loan losses was $135,000 in the June 2008 quarter compared to $120,000 in the June 2007 quarter.  Loan loss provisions for the six months ended June 30 were $270,000 and $240,000 in 2008, and 2007, respectively.  Annualized net charge-offs (recoveries) were .04% and (.01%) during the six months ended June 30, 2008 and 2007, respectively.  At June 30, 2008, the allowance for loan losses was 1.24% of total loans ($5,047,000), compared to 1.24% (4,850,000) at December 31, 2007, and 1.21% ($4,728,000) at June 30, 2007.


Nonperforming loans continue to be elevated at June 30, 2008 compared to the prior year.  However, total nonperforming assets of $5.7 million at June 30, 2008 increased just $114,000, or 2% since March 31, 2008.  PSB has experienced an increase in nonperforming assets from a general deterioration of economic conditions in our local market area.  However, PSB does not believe it has any undue geographic, industry, or real estate/land development concentrations which carry significant loss exposure such as those impacting many of the nation’s banks.  Restructured and nonaccrual loans remain classified as nonperforming loans until the uncertainty surrounding the credit is eliminated.  Therefore, some borrowers continue to make substantially all required payments while maintained on non-accrual status.  PSB applies all payments received on nonaccrual loans to principal until the loan is returned to accrual status.  Nonperforming assets are shown in the following table.


Non-Performing Assets as of

June 30,

 

December 31,

(dollars in thousands)

  2008

   2007

 

2007

     

Nonaccrual loans

$  4,402

$  3,077

 

$  3,144

 

Accruing loans past due 90 days or more

–   

–   

 

–   

 

Restructured loans not on nonaccrual

640

657

 

653

 
      

Total nonperforming loans

5,042

3,734

 

3,797

 

Foreclosed assets

680

373

 

653

 
      

Total nonperforming assets

$  5,722

$  4,107

 

$  4,450

 
      

Nonperforming loans as a % of gross loans

1.24%

0.96%

 

0.97%

 

Total nonperforming assets as a % of total assets

1.05%

0.82%

 

0.83%

 


Existing non-performing loans are spread over many different borrowers and industries and are generally well-collateralized.  The top five largest nonaccrual relationships as of June 30, 2008 totaled $1.5 million principal in the aggregate (34.0% of total nonaccrual balances).  Information concerning the collateral, remaining principal (before any specific reserves) and nature of these relationships is summarized below:

·

Purchased participation with out of area commercial and equipment collateral  - $486,000

·

Local single family residential real estate collateral  - $339,000

·

Out of local area (in Wisconsin) equipment fixtures collateral  - $246,000

·

Northern WI vacation resort real estate collateral (single & duplex family units)  - $226,000

·

Local non-owner occupied retail strip mall real estate collateral  - $201,000




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Specific reserves on the top five largest nonaccrual relationships total $150,000 at June 30, 2008.  Significant losses beyond the specific reserves already recorded are not expected.  PSB anticipates nonperforming loans to remain elevated during 2008, with moderately increased net loan charge-offs and provision for loan losses compared to prior years.


At June 30, 2008, PSB held a currently performing $5.5 million loan receivable whose source of future principal and interest payments must come from sale of the recreation/land development collateral or another valuable asset of the borrower under the terms of unlimited individual guarantees.  Based on the terms of a new collateral appraisal and the individual guarantees, PSB believes it will recover all principal due under the loan.  However, PSB expects to enter into a forbearance agreement with the borrower to facilitate repayment of the loan.  Pending negotiation of and performance on the forbearance agreement, the loan may be required to be classified as nonaccrual/nonperforming during quarter ending September 30, 2008.


Tax adjusted net interest income totaled $3,782,000 in the June 2008 quarter compared to $3,757,000 in the June 2007 quarter, an increase of $25,000, or 1.0%.  Tax adjusted net interest margin was 2.99% during the June 2008 quarter compared to 3.05% during the recent March 2008 quarter and 3.22% during the June 2007 quarter.  The most recent decrease by the Federal Reserve to their target federal funds rate of .25% in April 2008 lowered PSB’s yield on adjustable rate loans.  Approximately 1/3 of PSB’s loan portfolio is adjustable rate.  However, due to local competition and increased wholesale funding costs, deposit and funding rates could not be lowered to compensate for the loss of adjustable loan income which resulted in lower net interest margin during the June 2008 quarter.  While the Federal Reserve is not expected to further reduce the target federal funds rate, such a reduction would likely further reduce net interest margin.  In all rate environments, pressure on current net interest margin is expected to continue as wholesale funding spreads remain elevated and PSB expects to utilize such funding for new loan growth.   


Total noninterest income for the quarter ended June 30, 2008 was $1,072,000 compared to $1,001,000 earned during the June 2007 quarter, an increase of $71,000 or 7.1%.  Increased mortgage banking income of $53,000 and increased debit card interchange fees of $44,000 were offset by a decline in retail investment sale commissions of $122,000.  Increased debit card interchange income is a result of Peoples Rewards Checking deposit growth which requires customers to use their debit card to achieve the premium high-yield interest rate.  Retail investment sale commissions are down due to significantly lower sales of variable annuity products compared to 2007.  Separately, an increase in the per item overdraft fee and expansion of PSB’s Overdraft Defender product (which pays customer drafts of insufficient funds in exchange for the overdraft fee) provided $65,000 of the $71,000 total increase in service fees during the June 2008 quarter compared to the prior year.  Overdraft Defender losses from write-off of overdrafted accounts are recorded as other noninterest expense and increased $16,000 during the June 2008 quarter compared to the prior year.


Total noninterest expenses increased $119,000, or 3.9% during the June 2008 quarter to $3,141,000 compared to total noninterest expenses of $3,022,000 during June 2007.  However, the prior year June 2007 quarter included a reduction to expense of $50,000 from reimbursement by the Wisconsin Bankers’ Association of legal expenses incurred by PSB in its Tax Court case concerning its TEFRA interest expense deduction calculation.  If this reimbursement were excluded, June 2008 noninterest expense would have increased $69,000, or 2.3%.  Year to date noninterest expenses of $6,259,000 increased $153,000, or 2.5%, compared to the six months ended June 2007.  For the six months ended June 30, 2008, other noninterest expenses includes an increase in FDIC deposit insurance premiums of $93,000 compared to the prior year due to industry wide FDIC assessment increases.  PSB will incur higher deposit insurance premiums throughout 2008.




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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, 2007.  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,

December 31,

September 30,

June 30,

Earnings and dividends:

2008

2008

2007

2007

2007

      
 

Net income

$      1,019

$      1,002

 

$      1,312

 

$      1,021

 

$      1,008

 

Basic earnings per share(3)

$        0.66

$        0.65

 

$        0.85

 

$        0.66

 

$        0.64

 

Diluted earnings per share(3)

$        0.66

$        0.65

 

$        0.85

 

$        0.66

 

$        0.64

 

Dividends declared per share(3)

$        0.34

$          –   

 

$        0.33

 

$          –   

 

$        0.33

 

Net book value per share

$      24.14

$      25.02

 

$      23.70

 

$      22.90

 

$      21.83

 

Semi-annual dividend payout ratio

26.13%

n/a

 

21.86%

 

n/a

 

28.48%

 

Average common shares outstanding

1,544,982

1,548,855

 

1,544,855

 

1,553,952

 

1,572,679

         

Balance sheet – average balances:

        
         
 

Loans receivable, net of allowances

$  396,635

$  383,456

 

$  384,069

 

$  382,474

 

$  379,084

 

Total assets

$  539,020

$  525,705

 

$  520,098

 

$  509,947

 

$  496,952

 

Deposits

$  397,092

$  392,616

 

$  395,148

 

$  395,508

 

$  384,984

 

Stockholders’ equity

$    38,729

$    37,727

 

$    36,044

 

$    34,636

 

$    35,135

         

Performance ratios:

        
          
 

Return on average assets(1)

0.76%

0.77%

 

1.00%

 

0.79%

 

0.81%

 

Return on avg. stockholders’ equity(1)

10.58%

10.68%

 

14.44%

 

11.70%

 

11.51%

 

Average tangible stockholders’ equity to

        
 

average assets(4)

6.99%

7.02%

 

6.92%

 

6.91%

 

7.11%

 

Net loan charge-offs to average loans(1)

0.05%

0.03%

 

0.10%

 

0.02%

 

0.00%

 

Nonperforming loans to gross loans

1.24%

1.23%

 

0.97%

 

1.13%

 

0.96%

 

Allowance for loan loss to gross loans

1.24%

1.27%

 

1.24%

 

1.25%

 

1.21%

 

Net interest rate margin(1)(2)

2.99%

3.05%

 

3.11%

 

3.05%

 

3.22%

 

Net interest rate spread(1)(2)

2.57%

2.61%

 

2.60%

 

2.53%

 

2.67%

 

Service fee revenue as a percent of

        
 

average demand deposits(1)

3.25%

3.11%

 

2.89%

 

2.75%

 

2.61%

 

Noninterest income as a percent

        
 

of gross revenue

12.57%

11.73%

 

10.35%

 

10.37%

 

11.34%

 

Efficiency ratio(2)

64.71%

65.15%

 

62.21%

 

62.27%

 

63.51%

 

Noninterest expenses to avg. assets(1)

2.34%

2.39%

 

2.27%

 

2.24%

 

2.44%

          

Stock price information:

        
          
 

High

$      26.65

$      26.65

 

$      27.25

 

$      29.00

 

$      29.25

 

Low

$      24.00

$      22.00

 

$      25.05

 

$      27.10

 

$      27.00

 

Market value at quarter-end

$      24.85

$      25.25

 

$      26.00

 

$      27.10

 

$      27.75


(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)

2008

2007

 

2008

2007

    

 

  

Interest and dividend income:

      

Loans, including fees

$    6,245

 

$    6,863

  

$  12,737

 

$  13,430

 

Securities:

         

Taxable

851

 

602

  

1,693

 

1,218

 

Tax-exempt

342

 

322

  

672

 

627

 

Other interest and dividends

18

 

39

  

58

 

168

 
          

Total interest and dividend income

7,456

 

7,826

  

15,160

 

15,443

 
          

Interest expense:

         

Deposits

2,904

 

3,412

  

6,067

 

6,813

 

FHLB advances

633

 

575

  

1,239

 

1,189

 

Other borrowings

237

 

160

  

496

 

224

 

Junior subordinated debentures

114

 

114

  

227

 

227

 
          

Total interest expense

3,888

 

4,261

  

8,029

 

8,453

 
          

Net interest income

3,568

 

3,565

  

7,131

 

6,990

 

Provision for loan losses

135

 

120

  

270

 

240

 
          

Net interest income after provision for loan losses

3,433

 

3,445

  

6,861

 

6,750

 
          

Noninterest income:

         

Service fees

399

 

328

  

763

 

631

 

Mortgage banking

306

 

253

  

608

 

449

 

Investment and insurance sales commissions

84

 

206

  

198

 

330

 

Increase in cash surrender value of life insurance

91

 

66

  

180

 

126

 

Other noninterest income

192

 

148

  

347

 

306

 
          

Total noninterest income

1,072

 

1,001

  

2,096

 

1,842

 
          

Noninterest expense:

         

Salaries and employee benefits

1,721

 

1,774

  

3,461

 

3,511

 

Occupancy and facilities

501

 

471

  

1,012

 

968

 

Data processing and other office operations

260

 

203

  

471

 

420

 

Advertising and promotion

88

 

95

  

175

 

153

 

Other noninterest expenses

571

 

479

  

1,140

 

1,054

 
          

Total noninterest expense

3,141

 

3,022

  

6,259

 

6,106

 
          

Income before provision for income taxes

1,364

 

1,424

  

2,698

 

2,486

 

Provision for income taxes

345

 

416

  

677

 

679

 
          

Net income

$    1,019

 

$    1,008

  

$    2,021

 

$    1,807

 

Basic earnings per share

$      0.66

 

$      0.64

  

$      1.31

 

$      1.14

 

Diluted earnings per share

$      0.66

 

$      0.64

  

$      1.31

 

$      1.14

 



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PSB Holdings, Inc.

  

Consolidated Balance Sheets

  

June 30, 2008 unaudited, December 31, 2007 derived from audited financial statements

   

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

2008

2007

Assets

  
   

Cash and due from banks

$    13,084 

 

$    18,895 

 

Interest-bearing deposits and money market funds

2,456 

 

2,232 

 

Federal funds sold

–    

 

–    

 
     

Cash and cash equivalents

5,540 

 

21,127 

 
     

Securities available for sale (at fair value)

98,420 

 

97,214 

 

Loans held for sale

–    

 

365 

 

Loans receivable, net of allowance for loan losses

401,105 

 

387,130 

 

Accrued interest receivable

2,255 

 

2,383 

 

Foreclosed assets

680 

 

653 

 

Premises and equipment, net

11,143 

 

11,082 

 

Mortgage servicing rights, net

954 

 

889 

 

Federal Home Loan Bank stock (at cost)

3,250 

 

3,017 

 

Cash surrender value of bank-owned life insurance

9,199 

 

8,728 

 

Other assets

2,454 

 

1,597 

 
     

TOTAL ASSETS

$ 545,000 

 

$ 534,185 

 
     

Liabilities

    
     

Non-interest-bearing deposits

$    51,230 

 

$    55,470 

 

Interest-bearing deposits

351,686 

 

346,536 

 
     

Total deposits

402,916 

 

402,006 

 
     

Federal Home Loan Bank advances

65,000 

 

57,000 

 

Other borrowings

27,271 

 

26,407 

 

Junior subordinated debentures

7,732 

 

7,732 

 

Accrued expenses and other liabilities

4,780 

 

4,425 

 
     

Total liabilities

507,699 

 

497,570 

 
     

Stockholders' equity

    
     

Common stock - no par value with a stated value of $1 per share:

    

Authorized – 3,000,000 shares

    

Issued – 1,751,431 shares; Outstanding – 1,548,898 shares

1,751 

   

Issued – 1,887,179 shares; Outstanding – 1,544,982 shares

  

1,887 

 

Additional paid-in capital

5,851 

 

9,493 

 

Retained earnings

35,574 

 

34,081 

 

Accumulated other comprehensive income (loss)

(389)

 

423 

 

Treasury stock, at cost – 202,533 and 342,197 shares, respectively

(5,486)

 

(9,269)

 
     

Total stockholders’ equity

37,301 

 

36,615 

 
     

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 545,000 

 

$ 534,185 

 



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PSB Holdings, Inc.

       

Average Balances and Interest Rates

       

Quarter Ended June 30,

       
        
  

2008

   

2007

 
 

Avg. Bal

Interest

Yield/Rate

 

Avg. Bal

Interest

Yield/Rate

Assets

       

Interest-earning assets:

       

Loans(1)(2)

$401,619 

$6,277

 

6.29%

 

383,745 

$6,889

 

7.20%

Taxable securities

64,616 

857

 

5.33%

 

47,819 

602

 

5.05%

Tax-exempt securities(2)

35,942 

518

 

5.80%

 

32,244 

488

 

6.07%

FHLB stock

3,209 

–   

 

0.00%

 

3,017 

20

 

2.66%

Other

3,176 

18

 

2.28%

 

1,822 

19

 

4.18%

          

Total(2)

508,562 

7,670

 

6.07%

 

468,647 

8,018

 

6.86%

          

Non-interest-earning assets:

         

Cash and due from banks

9,581 

    

9,575 

   

Premises and equipment, net

11,127 

    

11,362 

   

Cash surrender value insurance

9,112 

    

6,764 

   

Other assets

5,622 

    

5,265 

   

Allowance for loan losses

(4,984)

    

(4,661)

   
          

Total

$539,020 

    

$496,952 

   
          

Liabilities & stockholders’ equity

         

Interest-bearing liabilities:

         

Savings and demand deposits

$  83,374 

$   416

 

2.01%

 

$  80,727 

$   600

 

2.98%

Money market deposits

70,358 

382

 

2.18%

 

67,318 

580

 

3.46%

Time deposits

193,926 

2,106

 

4.37%

 

186,463 

2,232

 

4.80%

FHLB borrowings

64,121 

633

 

3.97%

 

51,692 

575

 

4.46%

Other borrowings

26,958 

237

 

3.54%

 

13,531 

160

 

4.74%

Junior subordinated debentures

7,732 

114

 

5.93%

 

7,732 

114

 

5.91%

          

Total

446,469 

3,888

 

3.50%

 

407,463 

4,261

 

4.19%

          

Non-interest-bearing liabilities:

         

Demand deposits

49,434 

    

50,476 

   

Other liabilities

4,388 

    

3,878 

   

Stockholders’ equity

38,729 

    

35,135 

   
          

Total

$539,020 

    

$496,952 

   
          

Net interest income

 

$3,782

    

$3,757

  

Rate spread

  

2.57%

   

2.67%

Net yield on interest-earning assets

  

2.99%

   

3.22%


(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,

      
        
  

2008

   

2007

 
 

Avg. Bal

Interest

Yield/Rate

 

Avg. Bal

Interest

Yield/Rate

Assets

       

Interest-earning assets:

       

Loans(1)(2)

$394,989 

$12,796

 

6.51%

 

$380,381 

$13,482

 

7.15%

Taxable securities

65,032 

1,702

 

5.26%

 

48,527 

1,218

 

5.06%

Tax-exempt securities(2)

35,042 

1,018

 

5.84%

 

31,563 

950

 

6.07%

FHLB stock

3,113 

–    

 

0.00%

 

3,017 

43

 

2.87%

Other

3,752 

58

 

3.11%

 

4,786 

125

 

5.27%

          

Total(2)

501,928 

15,574

 

6.24%

 

468,274 

15,818

 

6.81%

          

Non-interest-earning assets:

         

Cash and due from banks

9,785 

    

10,280 

   

Premises and equipment, net

11,099 

    

11,415 

   

Cash surrender value insurance

8,975 

    

6,568 

   

Other assets

5,999 

    

5,292 

   

Allowance for loan losses

(4,945)

    

(4,597)

   
          

Total

$532,841

    

$497,232 

   
          

Liabilities & stockholders’ equity

         

Interest-bearing liabilities:

         

Savings and demand deposits

$  88,505 

$   1,003

 

2.28%

 

$  82,199 

$   1,236

 

3.03%

Money market deposits

71,582 

879

 

2.47%

 

67,604 

1,144

 

3.41%

Time deposits

186,531 

4,185

 

4.51%

 

187,444 

4,433

 

4.77%

FHLB borrowings

60,769 

1,239

 

4.10%

 

54,160 

1,189

 

4.43%

Other borrowings

26,541 

496

 

3.76%

 

10,010 

224

 

4.51%

Junior subordinated debentures

7,732 

227

 

5.90%

 

7,732 

227

 

5.92%

          

Total

441,660 

8,029

 

3.66%

 

409,149 

8,453

 

4.17%

          

Non-interest-bearing liabilities:

         

Demand deposits

48,235 

    

49,120 

   

Other liabilities

4,734 

    

3,928 

   

Stockholders’ equity

38,212 

    

35,035 

   
          

Total

$532,841 

    

$497,232 

   
          

Net interest income

 

$   7,545

    

$   7,365

  

Rate spread

  

2.58%

   

2.64%

Net yield on interest-earning assets

  

3.02%

   

3.17%


(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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