Back to GetFilings.com
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
COMMISSION FILE NO. 0-26480
PSB HOLDINGS, INC.
(Exact name of registrant as specified in charter)
1905 W. STEWART AVENUE WISCONSIN
WAUSAU, WI 54401 (State of incorporation)
39-1804877
(Address of principal executive office) (I.R.S. Employer
Identification Number)
Registrant's telephone number, including area code: 715-842-2191
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(Title of each class)
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such report), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
As of March 9, 2000, the aggregate market value of the common stock
held by non-affiliates was $26,415,900.
As of March 15, 2000, 872,967 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PROXY STATEMENT DATED MARCH 31, 2000 (TO THE EXTENT NOTED HEREIN):
PART III
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business 1
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk 23
Item 8. Financial Statements and Supplementary Data 24
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 52
PART III
Item 10. Directors and Executive Officers of Registrant 53
Item 11. Executive Compensation 53
Item 12. Security Ownership of Certain Beneficial Owners
and Management 53
Item 13. Certain Relationships and Related Transactions 53
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 54
-i-
PART I
ITEM 1. BUSINESS.
FORMATION
PSB Holdings, Inc., a Wisconsin corporation (the "Company"), is a
one-bank holding company formed in 1995. The Company owns 100% of the
common stock of Peoples State Bank, Wausau, Wisconsin (the "Bank").
BUSINESS OF THE COMPANY
The Company is a one-bank holding company regulated by the Board of
Governors of the Federal Reserve System (the "FRB") under the authority
of the Bank Holding Company Act of 1956, as amended (the "BHCA"). The
Company's sole business is the ownership and management of the Bank.
BUSINESS OF THE BANK
The Bank was organized as a state banking corporation under the
laws of the state of Wisconsin in 1962. In addition to its main office
in Wausau, the Bank operates branch offices in the city of Wausau, Rib
Mountain Township, Marathon City, and the city of Rhinelander
Wisconsin. The Bank offers personal and commercial deposit services,
including checking and savings accounts of various kinds, IRA and other
deposit instruments, ATM service and night depository and safety
deposit box services. The Bank also engages in consumer and commercial
lending, including secured and unsecured term loans and real estate
financing. New services are frequently added to the Bank's retail
banking business. The Bank offers discount brokerage services at its
Wausau branch location, including the sale of annuities, mutual funds
and other investments to Bank customers and the general public. The
Bank maintains an investment subsidiary in Nevada to manage, hold and
trade cash and securities.
PRINCIPAL SOURCES OF REVENUE
The table below shows the amount and percentages of the Bank's
total consolidated operating revenues resulting from interest on loans
and leases and interest on investment securities for each of the last
three years:
-1-
($ in thousands)
Interest on loans and Interest on Investment
LEASES SECURITIES
Percent Percent
of Total of Total
Year Ended Operating Operating
DECEMBER 31 AMOUNT REVENUES AMOUNT REVENUES
1999 $14,065 74.3% $3,471 18.3%
1998 13,404 73.8 3,020 16.6
1997 12,688 76.9 2,951 17.9
BANK MARKET AREA AND COMPETITION
The Bank's primary trade area consists of the greater Wausau,
Wisconsin area, Marathon County, and Rhinelander, Wisconsin in Oneida
County. There is a mix of retail, manufacturing, agricultural and
service businesses in the areas served by the Bank.
Commercial and retail banking in the state of Wisconsin, and in the
Wausau area in particular, is highly competitive with respect to price
and services. "Price" includes interest rates paid on deposits,
interest rates charged on borrowings and fees charged for fiduciary
services, while "services" includes the types of loan, deposit and
other products offered, convenience of banking locations and the
quality of service rendered to customers. In addition to competition
from other commercial banks, the Bank faces significant competition
from savings and loan associations, credit unions and other financial
institutions or financial service companies within its market area.
Credit union deposits constitute a substantial portion of all financial
institution deposits within the state of Wisconsin and these
associations compete aggressively with commercial banks in the
important area of consumer lending and interest-bearing checking
accounts.
The Bank is subject to direct competition in its trade area from
nine commercial banks which offer a full line of competitive bank
services, loan production offices of banks located outside of the
region, and numerous savings and loan associations and credit unions.
Several of the financial institutions with which the Bank competes are
subsidiaries of the three largest state-wide multi-bank holding
companies and many of the other financial institutions are also
significantly larger and have more resources than the Bank. In its
primary trade area, the Bank has approximately 12% of total financial
institution assets, deposits and loans.
In addition to competition, the business of the Bank will be
affected by general economic conditions, including the level of
interest rates and the monetary policies of the FRB (see "Regulation
and Supervision - Monetary Policy").
-2-
EMPLOYEES
The Company has no employees. Officers of the Company serve as
full time employees of the Bank.
As of December 31, 1999, the Bank had 106 employees, including 26
employed on a part-time basis. All officers, supervisors and full-time
employees are salaried and all part-time employees are paid on an
hourly basis. The Bank considers its relations with its employees to
be excellent. None of the Bank's employees is covered by a collective
bargaining agreement.
REGULATION AND SUPERVISION
REGULATION
The Company and the Bank are subject to regulation under both
federal and state law. The Company is a registered bank holding
company and is subject to regulation and examination by FRB pursuant
to the BHCA. The Bank is subject to regulation and examination by the
Federal Deposit Insurance Corporation ("FDIC") and, as a Wisconsin
chartered bank, by the Wisconsin Department of Financial Institutions.
The FRB expects a bank holding company to be a source of strength
for its subsidiary banks. As such, the Company may be required to take
certain actions or commit certain resources to the bank when it might
otherwise choose not to do so. Under federal and state banking laws,
the Company and the Bank are also subject to regulations which govern
the Company's and the Bank's capital adequacy, loans and loan policies
(including the extension of credit to affiliates), deposits, payment of
dividends, establishment of branch offices, mergers and other
acquistions, investments in or the conduct of other lines of business,
management personnel, interlocking directorates and other aspects of
the operation of the Company and the Bank. Bank regulators having
jurisdiction over the Company and the Bank generally have the authority
to impose civil fines or penalties and to impose regulatory control for
noncompliance with applicable banking regulations and policies. In
particular, the FDIC has broad authority to take corrective action if
the Bank fails to maintain required captial. Information concerning
the Company's compliance with applicable capital requirements is set
forth in Note 15 of the Notes to Consolidated Financial Statements.
The Gramm-Leach-Bliley Act of 1999 (the "Act") will eliminate many
of the legal barriers to affiliations among banks and securities firms,
insurance companies and other financial service companies. Under the
Act, a financial holding company may engage in a broad list of
"financial activities," and any non-financial activity that the FRB
determines is "complementary" to a financial activity and poses no
substantial risk to the safety and soundness of depository institutions
or the financial system.
-3-
The Act also contains a number of other provisions that will affect
the Company's operations and the operations of all financial
institutions. One of the new provisions relates to the financial
privacy of consumers, authorizing federal banking regulators to adopt
rules that will limit the ability of banks and other financial entities
to disclose non-public information about consumers to non-affiliated
entities. These limitations will likely require more disclosure to
consumers, and in some circumstances, will require consent by the
consumer before information is allowed to be provided to a third party.
The changes in the rules governing the affiliation of banks and
securities firms and insurance companies became effective March 11,
2000. While certain other provisions of the Act became effective on
November 12, 1999, other provisions are subject to delayed effective
dates, and in some cases, will be implemented only upon the adoption by
federal regulatory agencies of rules prescribed by the Act.
The Act specifies certain activities that are deemed to be
financial in nature, including lending, exchanging, transferring,
investing for others, or safeguarding money or securities; underwriting
and selling insurance; providing financial, investment, or economic
advisory services; underwriting, dealing in or making a market in,
securities; and any activity currently permitted for bank holding
companies by the FRB under Section 4(c)(8) of BHCA. The overall effect
of the new law is expected to give consumers greater choice for
banking, and insurance services and securities transactions. While the
effect of the new law will likely be an increase in competition from
larger financial institutions, the Company cannot predict whether the
Act will adversely affect its business, financial condition or results
of operations. Banking laws and regulations have undergone periodic
revisions that often have a direct effect on the Bank's operations and
its competitive environment. From time to time various formal or
informal proposals, including new legislation, relating to, among other
things, changes with respect to deposit insurance, permitted bank
activities and restructuring of the federal regulatory scheme have been
made and may be made in the future. The Gramm-Leach-Bliley Act is an
example of legislation which affects the operation of the Company's
business. Depending on the scope and timing of future regulatory
changes, it is possible that additional legislation may have a material
adverse effect on the Company's consolidated financial condition,
liquidity or results of operations.
MONETARY POLICY
The earnings and growth of the Bank, and therefore the Company, are
affected by the monetary and fiscal policies of the federal government
and governmental agencies. The FRB has broad power to expand and
contract the supply of money and credit and to regulate the rates which
its member banks can pay on time and savings deposits. These broad
powers are used to influence inflation and the growth of the economy
and directly affect the growth of bank loans, investments and deposits,
and may also affect the interest rates charged by banks on loans paid
by banks in respect of deposits. Governmental and FRB monetary
-4-
policies have had a significant effect on the operating results of
commercial banks in the past and are expected to do so in the future.
Management of the Company is not able to anticipate the future impact
of such policies and practices on the growth or profitability of the
Company.
EXECUTIVE OFFICERS
The executive officers of the Company as of March 18, 2000, their
ages and principal occupations during the last five years are set forth
below.
David K. Kopperud, 54 President of the Company and the Bank since
July, 1999; previously Executive Vice
President of the Bank (1994-1999) and
Vice President of the Bank (1991-1994).
Kenneth M. Selner, 53 Vice President & Secretary of the Company;
Executive Vice President of the Bank.
Todd R. Toppen, 41 Treasurer of the Company; Vice President of
the Bank since 1994, Assistant Vice President
1988 to 1993.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). In addition, certain statements in future filings by the Company
with the Securities and Exchange Commission, reports to shareholders,
press releases, and in other oral and written statements made by or
with the approval of the Company which are not statements of historical
fact will constitute forward-looking statements within the meaning of
the Act.
Examples of forward-looking statements include, but are not limited
to: (i) expectations concerning financial performance of the Company,
(ii) expectations concerning the payment of dividends, (iii) statements
of plans and objectives of the Company, (iv) statements of future
economic performance and (v) statements of assumptions underlying such
statements. Words such as "believes", "anticipates", "expects",
"intends", "targeted" and similar expressions are intended to identify
forward-looking statements but are not the exclusive means of
identifying such statements. In making forward-looking statements
within the meaning of the Reform Act, the Company undertakes no
obligation to publicly update or revise any such statement.
Forward-looking statements of the Company are based on information
available to the Company as of the date of such statements and reflect
the Company's expectations as of such date, but are subject to risks
and uncertainties that may cause actual results to vary materially. In
-5-
addition to specific factors which may be described in connection with
any of the Company's forward-looking statements, factors which could
cause actual results to differ materially from those discussed in the
forward-looking statements include, but are not limited to the
following: (i) the strength of the U.S. economy in general and the
strength of the local economies in the markets served by the bank; (ii)
the effects of and changes in government policies, including interest
rate policies of the FRB; (iii) inflation, interest rate, market and
monetary fluctuations; (iv) the timely development of and acceptance of
new products and services, (v) changes in consumer spending, borrowing
and saving habits; (vi) increased competition in the Company's
principal market area; (vii) technological changes; (viii)
acquisitions; (ix) the effect of changes in laws and regulations, (x)
the effect of changes in accounting policies and practices, and (xi) the
costs and effects of litigation and of unexpected or adverse outcomes
in such litigation.
ITEM 2. PROPERTIES.
The Company shares office space with the Bank. The Bank operates a
total of five office locations. The Bank owns four of the buildings in
which it conducts operations and each building is occupied solely by
the Bank. All four buildings are designed for commercial banking
operations and are suitable for current operations and anticipated
future needs. Each facility contains teller and loan facilities and
drive-up teller stations. One location occupies leased space within a
supermarket. The leased space is designed for commerical banking
operations containing teller and loan facilities.
ITEM 3. LEGAL PROCEEDINGS.
As of December 31, 1999, the Company was not involved in any legal
proceedings, nor was it aware of any threatened litigation.
In the ordinary course of its business, the Bank is engaged from
time to time in legal actions as both a plaintiff and a defendant. In
some cases, claims for significant compensatory or punitive damages, or
unspecified damages, may be made against the Bank. As of the date of
this report, the Bank was not a party to any legal or administrative
proceedings which, in the opinion of Bank management, would have a
material adverse effect on the financial condition of the Bank. As of
the date of this report, no director, officer, affiliate of the Bank,
or any associate of any such person, is an adverse party in any legal
proceedings involving the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of 1999.
-6-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
MARKET
There is no active public market for the Company's common stock.
Transactions in the Company's common stock are sporadic and limited and
prices have been determined by the buyer and seller. No data regarding
the prices at which trades are made was published or otherwise publicly
available until price quotations for the stock began on the OTC
Bulletin Board under the symbol "PSBQ" on January 10, 2000. Management
is not advised as to the terms of all transactions in the common stock.
HOLDERS
As of December 31, 1999 there were approximately 990 holders of
record of the Company's common stock.
DIVIDENDS
Per share dividends declared by the Company in its two most recent
fiscal years were:
1998 1999
Second Quarter $.35 $.38
Fourth Quarter $.58 $.62
The Company's source of funds for the payment of dividends is
dividends paid by the Bank. The payment of future dividends to
shareholders of the Company is within the discretion of the Company's
Board of Directors and will depend on various factors, including the
Company's earnings, capital requirements, and the financial condition
of the Company.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents consolidated financial data of the
Company and its subsidiary. This information and the following
discussion and analysis should be read in conjunction with other
financial information presented elsewhere in this report.
-7-
YEARS ENDED DECEMBER 31
($ in thousands, except per share amounts)
1999 1998 1997 1996 1995
CONSOLIDATED SUMMARY OF EARNINGS:
Total interest income $ 17,671 $ 16,746 $ 15,744 $ 14,824 $ 13,653
Total interest expense 8,598 8,722 8,253 7,769 7,055
Provision for loan and
lease losses 460 300 230 180 180
Net interest income after
provision for loan and
lease losses 8,613 7,724 7,261 6,875 6,418
Total other income 1,265 1,408 745 990 683
Total other expense (except
income taxes) 6,221 6,115 4,932 4,715 4,190
Net income $ 2,589 $ 2,089 $ 2,103 $ 2,156 $ 2,020
Per Share:
Basic and diluted
Earnings per share $ 2.93 $ 2.36 $ 2.37 $ 2.39 $ 2.24
Common dividends declared 1.00 .93 .90 .85 .82
Other significant data:
Return on average
shareholders equity 12.31% 10.62% 11.15% 11.98% 12.15%
Return on average assets 1.08% .96 1.02 1.10 1.13
Dividend payout ratio 34.12 39.33 37.85 35.40 36.63
Average equity to average
assets ratio 8.75% 9.06 9.15 9.16 9.27
1999 1998 1997 1996 1995
CONSOLIDATED SUMMARY
BALANCE SHEETS
Total assets $ 259,889 $ 233,491 $ 215,019 $ 204,158 $ 190,781
Total deposits 202,354 199,800 186,603 178,129 160,444
Short-term borrowings 21,215 4,549 3,960 5,766 11,099
Long-term borrowings 13,000 6,000 3,000 0 0
Stockholders' equity 21,046 20,556 19,217 18,289 17,453
Other significant data:
Book value per share
at year end $ 23.83 $ 23.27 $ 21.76 $ 20.42 $ 19.34
Average common shares
outstanding 883,235 883,235 887,988 900,641 902,425
Shareholders of record
at year end 990 975 974 974 940
Employees at year end (FTE) 91 87 78 70 62
Historically reported
credit quality ratios:
Net loan and lease charge-offs
to average loans and leases .19% .14% .22% .03% .04%
Allowance for loan and
lease losses to
End of period loans
and leases 1.15 1.27 1.24 1.39 1.42
-8-
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion relates to Company and the Bank. Unless
noted, references to the "Company" mean the Company and the Bank on a
consolidated basis.
Management's discussion and analysis contains forward-looking
statements that are provided to assist in the understanding of
anticipated future financial performance. However, such performance
involves risks and uncertainties which may cause actual results to
differ materially from those in such statements. For a discussion of
certain factors that may cause such forward-looking statements to
differ materially from actual results see Item 1, "- Cautionary
Statement Regarding Forward-Looking Information."
RESULTS OF OPERATIONS
The Company's consolidated net income for 1999 was $2,588,982
compared with $2,088,577 in 1998, and $2,102,709 in 1997. Net income
increased 23.96% in 1999 from 1998 and decreased .7% in 1998 from 1997.
Results for 1998 included a pre-tax expense of $405,891 relating to the
termination of our defined benefit pension plan.
Return on average common stockholders' equity amounted to 12.31% in
1999 compared to 10.62% in 1998, and 11.15% in 1997.
Return on average assets for 1999 amounted to 1.08% compared to
.96% for 1998 and 1.02% in 1997.
Net income per share amounted to $2.93 in 1999, compared to $2.36
in 1998 and $2.37 in 1997. Cash dividend declared in 1999 were $1.00
per share, compared to $.93 in 1998 and $.90 in 1997. The per share
ratio of dividends to shareholders to net income was 34.12% in 1999,
compared to 39.33% in 1998 and 37.85% in 1997.
NET INTEREST INCOME
The following table shows how net interest income is impacted by
the change in volume and interest rates. 1999 and 1998 data shows a
favorable spread due to increased volume. Growth in net interest
income will continue to be moderate and interest margins will need to
be managed carefully during 2000.
-9-
INTEREST INCOME & EXPENSE VOLUME & RATE CHANGE
1999 compared to 1998 1998 compared to 1997
increase (decrease) increase (decrease)
due to (1) due to (1)
($ in thousands) VOLUME RATE NET VOLUME RATE NET
Interest earned on:
Loans (2) $ 1,362 (696) 666 $ 706 10 716
Taxable investment securities 445 (18) 427 110 (86) 24
Non-taxable investment
securities (2) 58 (21) 37 88 (20) 68
Other interest income (183) (5) (188) 436 (217) 219
Total 1,682 (740) 942 1,340 (313) 1,027
Interest paid on:
Savings and demand deposits 509 (178) 331 335 179 514
Time deposits (440) (482) (922) (108) (102) (210)
Short-term borrowings 465 (62) 403 (71) (35) (106)
Long-term borrowings 87 (23) 64 265 6 271
Total 621 (745) (124) 421 48 469
Net interest earnings $ 1,061 5 1,066 $ 919 (361) 558
(1)The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of change in each.
(2)The amount of interest income on non-taxable loans and investment
securities has been adjusted to its fully taxable equivalent using a 34%
tax rate.
The following table demonstrates how the changing interest rate
environment affected the net yield on earning assets (on fully tax
equivalent basis) for the three-year period ending December 31, 1999.
Year Ended December 31, 1999 1998 1997
Yield Change Yield Change Yield Change
Yield on earning assets 7.96% - .31% 8.27% - .09% 8.36% .09%
Effective rate on all
liabilities as a %
of earning assets 3.80 - .43 4.23 - .06 4.29 .04
Net yield on earning assets 4.16 .12 4.04 - .03 4.07 .05
-10-
The 1999 figures as a percent of average earning assets reflects a
decrease in interest rates during 1999. The Company will focus on
increasing net interest income in 2000 through continued control of
interest expense, maintaining the level of interest rates on loans, and
managing rates on the investment portfolio.
Average earning assets increased 9.49% to $226,082 in 1999, from
$206,480 in 1998. Included in this increase was a 10.16% increase in
average loans to $163,929 in 1999, up from $148,806 in 1998, and an
18.82% increase in average taxable investments to $47,091 in 1999, up
from $39,631 in 1998. Federal funds sold decreased an average of
82.45% in 1999 from 1998.
The following table sets forth average consolidated balance sheet
data and average rate data on a tax equivalent basis for the periods,
indicated.
-11-
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
INTEREST RATES AND DIFFERENTIALS
1999 1998 1997
Average Yield/ Average Yield/ Average Yield/
($ IN THOUSANDS) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
Assets
Interest earning
assets:
Loans (1)(2)(3) $163,929 $14,065 8.58% $148,806 $13,404 9.01% $140,962 $12,692 9.00%
Taxable investment
securities 47,091 2,912 6.18% 39,631 2,470 6.23% 37,877 2,427 6.41%
Nontaxable investment
securities(2) 14,251 985 6.91% 13,423 947 7.06% 12,197 879 7.21%
Federal funds sold 811 44 5.43% 4,620 248 5.37% 890 48 5.39%
Total (2) 226,082 18,006 7.96% 206,480 17,069 8.27% 191,926 16,046 8.36%
Non-interesting earning
assets:
Cash and due from
banks 8,694 8,497 8,347
Premises & equip. - net 3,892 3,949 3,660
Other assets 3,843 3,578 3,981
Less: allow. loan loss (2,085) (1,929) (1,846)
Total 240,426 220,575 206,068
Liabilities &
Stockholders' Equity
Interest bearing
liabilities:
Savings and demand
deposits 74,835 2,712 3.62% 61,657 2,381 3.86% 52,265 1,867 3.57%
Time deposits 93,069 4,873 5.24% 100,713 5,795 5.75% 102,566 6,005 5.85%
Short-term borrowings 11,661 640 5.49% 3,803 237 6.23% 5,556 343 6.18%
Long-term borrowings 7,168 373 5.20% 5,724 309 5.40% 638 38 5.96%
Total 186,733 8,598 4.60% 171,897 8,722 5.07% 161,025 8,253 5.13%
Non-interest bearing
liabilities:
Demand deposits 30,616 26,827 24,403
Other liabilities 2,039 1,875 1,788
Stockholders' equity 21,038 19,976 18,852
Total 240,426 220,575 206,068
Net interest income 9,408 8,347 7,793
Rate spread 3.36% 3.20% 3.23%
Net yield on interest
earnings assets 4.16% 4.04% 4.07%
(1)For purposes of these computations, non-accruing loans are included in the
daily average loan amounts outstanding.
(2)The amount of interest income on non-taxable investment securities and
loans has been adjusted to its fully taxable equivalent, using a federal tax
rate of 34%.
(3)Loan fees are included in total interest income as follows: 1999-$172,
1998-$155, 1997-$164, 1996-$80, 1995-$55.
-12-
The preceding table shows a 1999 increase of .12% in net yield on
interest earning assets. The average rate on taxable investment
securities decreased .5% in 1999 to 6.18%, down from 6.23% in 1998.
Time deposits rates decreased by .51% while funds shifted into the more
liquid Money Market deposit accounts, which the Company continued to
offer throughout 1999 in an effort to retain deposits to support loan
demand. Total deposits at December 31, 1999 showed an increase of
$2,554 increasing to $202,354 from 199,800 at December 31, 1998.
Average borrowing increased $9,302 increasing from $9,527 in 1998 to
$18,829 in 1999. The average rate on all interest bearing liabilities
decreased by .47% in 1999 to 4.60% down from 5.07% in 1998.
Loan growth is expected to increase again 2000 due to the increase
in fixed rate and in- house home equity loan products being offered and
promoted. The sale of additional real estate loans in the secondary
market will also provide increased loan fee income.
Year Ended December 31, 1999 1998 1997 1996 1995
Item of income
Interest and fees on loans
and short-term borrowings 74.3% 73.8% 76.9% 74.3% 75.2%
Interest on securities 18.3% 16.6% 17.9% 18.2% 18.8%
Total operating income 18,936 18,153 16,489 15,814 14,336
(000's omitted)
The bank does not have any foreign deposits or operations
NON-INTEREST INCOME
The following table shows the major components of non-interest income.
($ in thousands)
1999 1998 1997
Noninterest income:
Service fees $709 $699 $484
Net realized gain on sale of
securities available for sale 36 3
Gain on sale of loans 223 332 46
Gain on sale of other real estate 21 4
Investment sales commissions 138 147 74
Other operating income 174 189 138
Total noninterest income 1,265 1,407 745
-13-
Service fees continued to increase to $709 in 1999, compared to $699
in 1998 primarily due to profit improvement initiative implemented back
in 1998.
-13-
NON-INTEREST EXPENSE
The following table shows the major components of non-interest
expense.
($ in thousands)
1999 1998 1997
Salaries and employee benefits $3,621 $3,331 $2,948
Loss on settlement on pension plan 406
Occupancy 859 828 728
Data processing and other office operations 441 421 319
Advertising and promotion 222 202 166
Director compensation and benefits 170 142 180
Other operating 908 785 591
Total noninterest expense $6,221 $6,115 $4,932
Salaries increased $290 primarily due to the increased number of
employees. The number of full-time equivalent employees at the end of
1999 was 91 compared to 87 at the end of 1998.
Occupancy expense increased in 1999 due various remodeling projects
increasing office space. Data processing costs increased by 4.8% in
1999 compared to 1998 as a result of additional computer systems added
to the in-house system and Y2K costs. Other operating expense
increased in 1999 due to an increase in educational, marketing, and
charitable contribution expense.
PROVISIONS FOR LOAN LOSSES
Management determines the adequacy of the allowance for loan losses
based on past loan experience, current economic conditions, composition
of the loan portfolio, and the potential for future loss. Accordingly,
the amount charged to expense is based on management's evaluation of
the loan portfolio. It is the Company's policy that when available
information confirms that specific loans, or portions thereof,
including impaired loans, are uncollectible, these amounts are promptly
charged off against the allowance. The provision for loan losses was
$460,000 in 1999; compared to $300,000 in 1998 and $230,000 in 1997.
The allowance for loan losses as a percentage of gross loans
outstanding was 1.15% at December 31, 1999; 1.27% at December 31, 1998;
and 1.24% at December 31, 1997. The increased provision in 1999 is
intended to provide adequate reserves for potential losses.
Charge-offs as a percentage of average loans outstanding were .19% in
1999; .13% in 1998; and .22% in 1997. Charge-offs have not been
concentrated in any industry or business segment as reflected in the
schedule below.
-14-
Management feels the allowance for loan losses is adequate as of
December 31, 1999.
The allowance for loan losses shown in the following table
represents a general allowance available to absorb future losses
within the entire portfolio.
($ in thousands)
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
Average balance of loans
for period $163,929 $148,806 $140,962 $130,783 $119,657
Allowance for loan losses at
beginning of period $ 1,947 $ 1,845 $ 1,925 $ 1,781 $ 1,644
Loans charged off
Commercial & Industrial (322) (138) (156) (48) (54)
Agriculture 0 0 0 0 0
Real Estate - Mortgage (72) 0 (136) 0 0
Installment & Other
Consumer Loans (38) (69) (59) (25) (15)
Total Charge Offs (432) (207) (351) (73) (69)
Recoveries on loans previously
charged off
Commercial & Industrial 67 0 17 33 22
Agricultural 0 0 0 0 0
Real Estate - Mortgage 7 0 19 0 0
Installment & Other
Consumer Loans 50 9 5 4 4
Total Recoveries $124 $9 $41 $37 $26
Net loans charged off ($308) ($198) ($310) ($36) ($43)
Additions charged to
operations 460 300 230 180 180
Allowance for loan losses
at end of period $ 2,099 $ 1,947 $ 1,845 $ 1,925 $ 1,781
Ratio of net charge offs
during period to average
loans outstanding 0.19% 0.13% 0.22% 0.03% 0.04%
Ratio of allowance for loan
losses to total loans
receivable at end of period 1.15% 1.27% 1.24% 1.39% 1.42%
-15-
LIQUIDITY AND INTEREST SENSITIVITY
The Company's Asset Liability Management process provides an
approach to management of liquidity, capital and interest rate risk,
and to provide adequate funds to support the borrowing requirements and
deposit flow of its customers. Management views liquidity as the
ability to raise cash at a reasonable cost or with a minimum of loss
and as a measure of balance sheet flexibility to react to market-place,
regulatory, and competitive changes. The primary sources of the
Company's liquidity are marketable assets maturing within one year.
The Company attempts, when possible to match relative maturities of
assets and liabilities, while maintaining the desired net interest
margin. Management believes liquidity is adequate.
Management's overall strategy is to coordinate the volume of
rate sensitive assets and liabilities to minimize the impact of
interest rate movement on the net interest margin. From time to time,
the Bank develops special term deposit products that will attract
present and potential customers. A significant portion of consumer
deposits do not reprice or mature on a contractual basis. These
deposit balances and rates are considered to be core deposits since
these balances are generally not susceptible to significant interest
rate changes. The Bank's Asset Liability Committee distributes these
deposits over a number of periods to reflect those portions of such
accounts that are expected to reprice fully with market rates over the
simulation period. The assumptions are based on historical experience
with the Bank's individual markets and customers and include
projections for how management expects to continue to price in response
to marketplace and market changes. However, markets and consumer
behavior do change, and adjustments are necessary as customer
preferences, competitive market conditions, liquidity, loan growth
rates, and mix change. Management considers that an acceptable ratio
for the rate sensitive assets to rate sensitive liabilities during
periods of extended and less volatile rate increases or decreases
between .75 and 1.25. The Bank is to generally maintain a one-year
ratio of 1.00 - i.e., balanced ratio. At December 31, 1999 and 1998
the Company was within the ratio limits.
-16-
INVESTMENT PORTFOLIO
The following table shows the relative maturities of the
investment portfolio as of December 31, 1999. Weighted average yields
on tax-exempt securities have been calculated on a tax equivalent basis
using a tax rate of 34%. Yields on securities available for sale are
calculated based on amortized cost.
After one After two After five
Within but within but within but within Over
ONE YEAR TWO YEARS FIVE YEARS TEN YEARS TEN YEARS
($ in thousands)
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
U.S. Treasury $ -- -- $ 497 4.60% $ -- -- $ -- -- $ -- --
U.S. Government
agencies and
corporations 3,310 5.94% 3,458 5.95% 10,600 6.03% 16,022 6.18% 11,855 6.20%
State and political
subdivisions
(domestic) 1,291 7.54% 755 6.83% 3,230 7.01% 8,567 6.73% -- --
Other equity
securities 747 6.30% -- -- -- -- -- -- -- --
Total $ 5,348 6.39% $ 4,710 5.95% $13,830 6.25% $24,589 6.36% $11,855 6.20%
The Company follows Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities"
(SFAS 115), which specifies the accounting for investments in
securities that have readily determinable fair values. The Bank
classifies all U.S. Treasury and other U.S. Government Agencies &
Corporations as available-for-sale. State and Political subdivisions
were classified as held-to maturity.
At December 31, 1999 the net unrealized loss on securities available
for sale, recorded as a separate component of stockholder's equity, was
$1,043,128, net of deferred income taxes of $460,774.
Securities with an approximate carrying value of $20,207,957 and
$9,168,461, at December 31, 1999 and 1998 respectively, were pledged
primarily to secure public deposits and for repurchase agreements.
-17-
The following table sets forth the distribution of investment
securities as of the dates indicated.
($ in thousands)
DECEMBER 31
1999 1998 1997
U.S. Treasury and
other U.S. Government
agencies and corporations $ 45,742 $ 47,185 $ 36,932
State and political
subdivisions (domestic) 13,843 14,068 12,549
Other equity securities 747 701 647
Total $ 60,332 $ 61,954 $ 50,128
An investment subsidiary, PSB Investments, Inc. currently holds
approximately $40,195,524 in securities. Income tax expense was approximately
$117,000 lower as a result of holding these securities at the subsidiary.
LOAN PORTFOLIO
The following table sets forth the approximate maturities of the loan
portfolios and the sensitivity of loans to interest changes as of December 31,
1999.
MATURITY
Over one
($ in thousands) One year year thru Over
OR LESS FIVE YEARS FIVE YEARS
Commercial, industrial, and financial $ 25,459 $ 22,476 $ 869
Agricultural 1,145 1,102 2
Real estate mortgage 43,464 72,760 1,971
Installment & other consumer loans 3,135 7,680 2,560
Total $ 73,203 $104,018 $ 5,402
INTEREST SENSITIVITY
Amounts of loans due after one year with: Fixed Variable
($ in thousands) RATE RATE
Commercial, industrial, and financial $ 23,345 $ 0
Agriculture 1,104 0
Real estate mortgage 66,608 8,123
Installment & other consumer loans 10,240 0
Total $101,297 $ 8,123
-18-
Loan growth for the year ended December 31, 1999 was 18.86%;
increasing from $153,649,105 at December 31, 1998 to $182,623,354 at
December 31, 1999. The composition of loans outstanding as of the dates
indicated are as follows:
($ in thousands)
DECEMBER 31 1999 1998 1997 1996 1995
Commercial, industrial
and financial $ 48,804 $ 38,852 $ 31,314 $ 28,531 $ 27,291
Agricultural 2,249 1,662 2,488 1,820 2,356
Real estate mortgage 118,195 101,380 103,253 93,450 84,221
Installment and other
consumer loans 13,375 11,755 12,262 14,210 11,457
Total $182,623 $153,649 $149,317 $138,011 $125,325
There were no loans held for sale as of December 31, 1999 compared
to $3,120,450 on December 31, 1998.
The composition of loans in the loan portfolio shows an increase in
installment and other consumer loans. All other loan categories have
been steadily increasing every year. The Company has no foreign loans
outstanding.
The Company's process for monitoring loan quality includes monthly
analysis of delinquencies, risk element loans and potential problem
loans. The Company's policy is to place loans on a non-accrual status
when they become contractually past due 90 days or more as to interest
or principal payments. All interest accrued (including applicable
impaired loans) but not collected for loans that are placed on
nonaccrual or charged off is reversed to interest income. The interest
on these loans is accounted for on the cash basis until qualifying for
return to accrual. Loans are returned to accrual status when all the
principal and interest amounts contractually due have been collected
and there is reasonable assurance that repayment will continue within a
reasonable time frame.
A loan is impaired when, based on current information, it is
probable that the Company will not collect all amounts due in
accordance with the contractual terms of the loan agreement.
Impairment is based on discounted cash flows of expected future
payments using the loan's initial effective interest rate or the fair
value of the collateral if the loan is collateral dependent.
-19-
An analysis of impaired loans follows:
($ in thousands)
AT DECEMBER 31, 1999 1998 1997
Nonaccrual $ 510 $ 564 $ 484
Accruing income 1,696 406 640
Total impaired loans 2,206 970 1,124
Less - Allowance for loan losses 297 328 178
Net investment in impaired loans $1,909 $642 $ 946
($ in thousands)
YEARS ENDED DECEMBER 31, 1999 1998 1997
Average recorded investment,
net of allowance for loan losses $1,874 $ 820 $1,191
Interest income recognized $ 118 $ 40 $ 83
The Company maintained generally high loan quality during 1999.
The following table sets forth the amount of risk element loans as
of the dates indicated.
($ in thousands)
DECEMBER 31
1999 1998 1997 1996 1995
Loans on a non-accrual basis $ 620 $ 582 $ 835 $ 247 $ 376
Loans contractually past due
ninety days or more as to
interest or principal payments $ 0 $ 0 $ 7 $ 275 $ 0
-20-
DEPOSITS
The average balances of deposits and the average rate paid on these
deposits during the years ended December 31, 1999, 1998, and 1997 are:
($ in thousands)
1999 1998 1997
BALANCE RATE BALANCE RATE BALANCE RATE
Non-interest bearing
demand deposits $ 30,616 $ 26,827 $ 24,403
Interest bearing demand and
savings deposits 74,835 3.62% 61,657 3.86% 52,265 3.57%
Time deposits 93,069 5.24% 100,713 5.75% 102,566 5.85%
Total $198,520 $189,197 $ 179,234
The amount of time certificates of deposit issued in amounts of
$100,000 or more and outstanding as of December 31, 1999 is
approximately $29,127,000. Their maturity distribution as of December
31, 1999 and 1998 is as follows:
(in thousands)
1999 1998
- three months or less $ 10,346 $ 11,420
- over three months through six months $ 12,324 $ 11,001
- over six months through twelve months $ 5,381 $ 4,804
- over one year through five years $ 1,076 $ 1,663
- over five years $ 0 $ 0
The Bank does not have any deposits in foreign banking offices.
SHORT-TERM BORROWINGS
Information related to the Bank's funds purchased and security
repurchase agreements for the last three years is as follows:
($ in thousands)
1999 1998 1997
Amount outstanding at year end $21,215 $ 4,550 $ 3,960
Average amount outstanding during the year 11,661 3,803 5,556
Maximum amount outstanding at any month's end 21,215 5,220 11,983
Weighted average interest rate at year end 5.90% 5.63% 6.14%
Weighted average interest rate during the year 5.49% 6.23% 6.18%
-21-
SUMMARY QUARTERLY FINANCIAL INFORMATION
The following is a summary of the quarterly results of operations
for the years ended December 31, 1999, 1998 and 1997.
Three months ended
March 31 June 30 September 30 December 31
($ in thousands, except per share data)
1999
Interest income $4,179 $4,281 $4,547 $4,664
Interest expense $2,050 $2,093 $2,208 $2,247
Net interest income $2,129 $2,188 $2,339 $2,417
Provision for loan losses $75 $75 $105 $205
Net income applicable to common stock $635 $722 $759 $473
Earnings per common share $0.72 $0.82 $0.86 $0.53
1998
Interest income $4,146 $4,288 $4,252 $4,060
Interest expense $2,164 $2,174 $2,205 $2,179
Net interest income $1,982 $2,114 $2,047 $1,882
Provision for loan losses $75 $75 $75 $75
Net income applicable to common stock $390 $638 $719 $342
Earnings per common share $0.44 $0.72 $0.81 $0.39
1997
Interest income $3,757 $3,898 $3,977 $4,112
Interest expense $1,978 $2,041 $2,088 $2,146
Net interest income $1,779 $1,857 $1,889 $1,966
Provision for loan losses $45 $45 $65 $75
Net income applicable to common stock $581 $561 $626 $335
Earnings per common share $0.65 $0.63 $0.70 $0.39
STOCK REPURCHASE
On December 21, 1999, the Company authorized the repurchase of up
to 45,000 shares of its common stock. As of December 31, 1999, no
shares had been purchased under the authorization.
YEAR 2000 DISCLOSURE
YEAR 2000
The Company's Year 2000 Project was intended to address Year 2000
problems and prevent major interruptions in its business due to
problems related to the Company's computerized financial and
-22-
information systems. As part of its program, the Company's Year 2000
Project Committee conducted an assessment of its financial and
information systems, third party vendors, and customers.
The Company did not experience any significant disruption as a
result of Year 2000 problems. As of March 21, 2000, neither the
Company nor any of its key vendors or customers have experienced any
material adverse effects related to Year 2000 problems. Based on its
experience in the Year 2000 transition and its business operations
through such date, the Company does not expect to encounter any year
2000 problems that would have a material adverse effect on the results
of operations, liquidity and financial condition of the Company.
The costs of achieving year 2000 readiness were approximately
$13,573 and $11,476 in 1999 and 1998 respectively, exclusive of
internal costs. Internal costs for Year 2000 readiness were not
tracked, but principally related to payroll costs of Company personnel.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss from adverse changes in market
prices and rates. The Company's market risk arises primarily from
interest-rate risk inherent in its lending and deposit taking
activities. Management actively monitors and manages its interest-rate
risk exposure. The measurement of the market risk associated with
financial instruments is meaningful only when all related and
offsetting on- and off-balance sheet transactions are aggregated,
and the resulting net positions are identified. Disclosures about the
fair value of financial instruments at December 31, 1999, which reflect
changes in market prices and rates, can be found in footnote 17 of
the Notes to Consolidated Financial Statements.
The Company's primary objective in managing interest-rate risk is
to minimize the adverse impact of changes in interest rates on the
Company's net interest income and capital, while adjusting the
Company's asset-liability structure to obtain the maximum yield-cost
spread on that structure. The Company relies primarily on its
asset-liability structure to control interest-rate risk. However, a
sudden and substantial increase in interest rates may adversely impact
the Company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same
extent, or on the same basis. The Company does not engage in trading
activities. The Company believes that it does not have a material
exposure to interest-rate risk.
Additional information required by this Item 7A is set forth in
Item 6, "Selected Financial Data" and under subcaptions "Results of
Operations", "Net Interest Income", "Provision for Loan Losses",
"Liquidity and Interest Sensitivity", "Investment Portfolio", and
"Deposits" under Item 7, Management's Discussion and Analysis of
Financial Conditions.
-23-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITOR'S REPORT
Board of Directors
PSB Holdings, Inc.
Wausau, Wisconsin
We have audited the accompanying consolidated balance sheets of PSB
HOLDINGS, INC. and Subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of income, changes in stockholders'
equity, and cash flows for the three years ended December 31, 1999.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PSB
HOLDINGS, INC. and Subsidiary at December 31, 1999 and 1998, and the
results of their operations and their cash flows for the three years
ended December 31, 1999 in conformity with generally accepted
accounting principles.
WIPFLI ULLRICH BERTELSON LLP
Wipfli Ullrich Bertelson LLP
January 21, 2000
Wausau, Wisconsin
-24-
PSB HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
ASSETS
Cash and due from banks $ 11,925,985 $ 8,751,763
Interest-bearing deposits and money market funds 61,779 740,993
Federal funds sold 3,934,000
Securities:
Held to maturity (fair values of $13,472,511
and $14,345,897, respectively) 13,843,068 14,068,362
Available for sale (at fair value) 46,489,186 47,886,132
Loans held for sale 3,120,450
Loans receivable, net of allowance for loan losses of
$2,099,241 and $1,946,864 in 1999 and 1998, respectively 180,524,113 148,581,791
Accrued interest receivable 1,746,038 1,725,343
Premises and equipment 3,897,223 3,885,986
Other assets 1,401,641 796,671
TOTAL ASSETS $ 259,889,033 $ 233,491,491
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $ 33,657,598 $ 33,149,909
Interest-bearing deposits 168,696,643 166,649,988
Total deposits 202,354,241 199,799,897
Short-term borrowings 21,214,890 4,549,508
Long-term borrowings 13,000,000 6,000,000
Other liabilities 2,273,485 2,585,871
Total liabilities 238,842,616 212,935,276
Stockholders' equity:
Common stock - No-par value with a stated value of $2
per share:
Authorized - 1,000,000 shares
Issued - 902,425 shares 1,804,850 1,804,850
Additional paid-in capital 7,158,505 7,158,505
Retained earnings 13,928,790 12,223,043
Accumulated other comprehensive income (loss),
net of tax (1,043,128) 172,417
Treasury stock, at cost - 19,190 shares (802,600) (802,600)
Total stockholders' equity 21,046,417 20,556,215
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 259,889,033 $ 233,491,491
See accompanying notes to consolidated financial statements.
-25-
PSB HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
Interest income:
Interest and fees on loans $ 14,065,041 $ 13,403,646 $ 12,688,023
Interest on securities:
Taxable 2,821,551 2,394,816 2,370,859
Tax-exempt 649,901 625,427 580,323
Other interest and dividends 134,512 322,546 104,758
Total interest income 17,671,005 16,746,435 15,743,963
Interest expense:
Deposits 7,584,588 8,175,617 7,871,730
Short-term borrowings 639,760 237,059 343,207
Long-term borrowings 373,416 308,913 37,981
Total interest expense 8,597,764 8,721,589 8,252,918
Net interest income 9,073,241 8,024,846 7,491,045
Provision for loan losses 460,000 300,000 230,000
Net interest income after provision for loan losses 8,613,241 7,724,846 7,261,045
Noninterest income:
Service fees 708,794 699,145 483,756
Net realized gain on sale of securities available for sale 35,867 3,120
Gain of sale of loans 223,002 332,027 45,588
Investment sales commissions 137,621 146,756 73,873
Other operating income 195,230 192,903 138,367
Total noninterest income 1,264,647 1,406,698 744,704
Noninterest expenses:
Salaries and employee benefits 3,621,239 3,330,964 2,948,292
Loss on settlement of pension plan 405,891
Occupancy 858,719 827,558 727,583
Data processing and other office operations 440,588 421,488 319,453
Advertising and promotion 222,435 201,754 166,415
Director compensation and benefits 169,820 141,671 179,800
Other operating 908,605 785,641 590,497
Total noninterest expenses 6,221,406 6,114,967 4,932,040
Income before income taxes 3,656,482 3,016,577 3,073,709
Provision for income taxes 1,067,500 928,000 971,000
Net income $ 2,588,982 $ 2,088,577 $ 2,102,709
Basic and diluted earnings per share $ 2.93 $ 2.36 $ 2.37
Weighted average shares outstanding 883,235 883,235 887,988
See accompanying notes to consolidated financial statements.
-26-
PSB HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1999, 1998, and 1997
Accumulated
Additional Other
Common Paid-In Retained Comprehensive Treasury
STOCK CAPITAL EARNINGS INCOME (LOSS) STOCK TOTALS
Balance, January 1, 1997 $1,804,850 $ 7,158,505 $ 9,649,112 $ (8,543) $ (315,000) $18,288,924
Comprehensive income:
Net income 2,102,709 2,102,709
Unrealized gain on securities
available for sale, net of tax 109,086 109,086
Total comprehensive income 2,211,795
Purchase of treasury stock (487,600) (487,600)
Cash dividends declared
$.90 per share (795,944) (795,944)
Balance, December 31, 1997 1,804,850 7,158,505 10,955,877 100,543 (802,600) 19,217,175
Comprehensive income:
Net income 2,088,577 2,088,577
Unrealized gain on securities
available for sale, net of tax 71,874 71,874
Total comprehensive income 2,160,451
Cash dividends declared
$.93 per share (821,411) (821,411)
Balance, December 31, 1998 1,804,850 7,158,505 12,223,043 172,417 (802,600) 20,556,215
Comprehensive income:
Net income 2,588,982 2,588,982
Unrealized loss on securities
available for sale, net of tax (1,215,545) (1,215,545)
Total comprehensive income 1,373,437
Cash dividends declared
$1.00 per share (883,235) (883,235)
Balance, December 31, 1999 $1,804,850 $ 7,158,505 $ 13,928,790 $(1,043,128) $ (802,600) $21,046,417
See accompanying notes to consolidated financial statements.
-27-
PSB HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
Cash flows from operating activities:
Net income $ 2,588,982 $ 2,088,577 $ 2,102,709
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and net amortization 554,059 520,981 482,664
Benefit from deferred income taxes (70,000) (169,900) (108,900)
Provision for loan losses 460,000 300,000 230,000
Proceeds from sales of loans held for sale 21,214,462 26,186,442 4,369,580
Originations of loans held for sale (17,871,010) (28,674,365) (4,344,817)
Gain on sale of loans (223,002) (332,027) (45,588)
Net gain on sale of other real estate (21,461) (4,134)
Net gain on sale of securities available for sale (35,867) (3,120)
Changes in operating assets and liabilities:
Accrued interest receivable (20,695) 12,150 53,412
Other assets (109,686) (25,811) (285,484)
Other liabilities 239,166 346,744 265,173
Net cash provided by operating activities 6,262,483 212,790 2,715,629
Cash flows from investing activities:
Proceeds from sale and maturities of:
Held to maturity securities 2,865,000 1,340,000 2,366,913
Available for sale securities 13,262,495 17,470,126 10,953,084
Payment for purchase of:
Held to maturity securities (2,664,188) (2,881,464) (3,221,710)
Available for sale securities (13,653,389) (27,616,227) (8,496,561)
Net increase in loans (32,402,322) (1,709,893) (11,595,126)
Net (increase) decrease in interest-bearing
deposits and money market funds 679,214 (587,722) 16,032
Net decrease (increase) in federal funds sold 3,934,000 (3,934,000)
Capital expenditures (522,284) (633,488) (482,177)
Proceeds from sale of other real estate 76,722 503,667
Net cash used in investing activities (28,424,752) (18,049,001) (10,459,545)
Cash flows from financing activities:
Net increase (decrease) in noninterest-bearing deposits 507,689 5,585,407 (921,753)
Net increase in interest-bearing deposits 2,046,655 7,611,785 9,395,555
Net increase (decrease) in short-term borrowings 16,665,382 589,466 (1,806,589)
Proceeds from issuance of long-term borrowings 10,000,000 3,000,000 3,000,000
Repayments of long-term borrowings (3,000,000)
Dividends paid (883,235) (821,411) (795,944)
Purchase of treasury stock (487,600)
Net cash provided by financing activities 25,336,491 15,965,247 8,383,669
Net increase (decrease) in cash and due from banks 3,174,222 (1,870,964) 639,753
Cash and due from banks at beginning 8,751,763 10,622,727 9,982,974
Cash and due from banks at end $ 11,925,985 $ 8,751,763 $ 10,622,727
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 8,738,300 $ 8,734,905 $ 8,101,757
Income taxes 1,416,524 877,563 1,008,124
Noncash investing and financing activities:
Loans charged off 432,444 207,450 350,242
Loans transferred to other real estate 79,457 198,544 300,989
See accompanying notes to consolidated financial statements.
-28-
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPAL BUSINESS ACTIVITY
PSB Holdings, Inc. and Subsidiary (the "Company"), operates Peoples
State Bank (the "Bank"), a full service financial institution with a
primary marketing area including, but not limited to, the greater
Wausau, Wisconsin area and Marathon County, and Rhinelander, Wisconsin
in Oneida County. It provides a variety of banking products including
investment product sales and long-term fixed rate residential
mortgages.
PRINCIPLES OF CONSOLIDATION
All significant intercompany balances and transactions have been
eliminated. The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to the general
practices within the banking industry.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
CASH EQUIVALENTS
For the purpose of presentation in the consolidated statements of cash
flows, cash and cash equivalents are defined as those amounts included
in the balance sheet caption "cash and due from banks." Cash and due
from banks includes cash on hand and non-interest-bearing deposits at
correspondent banks.
SECURITIES
Investment securities are assigned an appropriate classification at the
time of purchase in accordance with management's intent. Securities
held to maturity represent those securities for which the Company has
the positive intent and ability to hold to maturity. Accordingly,
these securities are carried at cost adjusted for amortization of
premium and accretion of discount calculated using the effective yield
method. Unrealized gains and losses on securities held to maturity are
not recognized in the financial statements.
Trading securities include those securities bought and held principally
for the purpose of selling them in the near future. The Company has no
trading securities.
Securities not classified as either securities held to maturity or
trading securities are considered available for sale and reported at
fair value determined from estimates of brokers or other sources.
Unrealized gains and losses are excluded from earnings but are reported
as other comprehensive income, net of income tax effects, in a separate
component of stockholders' equity.
Any gains and losses on sales of securities are recognized at the time
of sale using the specific identification method.
-29-
INTEREST AND FEES ON LOANS
Interest on loans is credited to income as earned. Interest income is
not accrued on loans where management has determined collection of such
interest doubtful. When a loan is placed on nonaccrual status,
previously accrued but unpaid interest deemed uncollectible is reversed
and charged against current income. Fees received on loans are
credited to income when received. After being placed on nonaccrued
status, additional income is recorded only to the extent that payments
are received or the collection of principal becomes reasonably assured.
Interest income recognition on impaired loans is consistent with the
recognition on all other loans (as detailed above).
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the
collectibility of principal is unlikely. Management believes the
allowance for loan losses is adequate to cover probable credit losses
relating to specifically identified loans, as well as probable credit
losses inherent in the balance of the loan portfolio. In accordance
with current accounting standards, the allowance is provided for
losses that have been incurred as of the balance sheet date. The
allowance is based on past events and current economic conditions, and
does not include the effects of expected losses on specific loans or
groups of loans that are related to future events or expected changes
in economic conditions. While management uses the best information
available to make its evaluation, future adjustments to the allowance
may be necessary if there are significant changes in economic
conditions. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments
due in accordance with terms of loan agreement. Impaired loans are
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, at the loanss observable market price or the fair value of
the collateral if the loan is collateral dependent.
In addition, various regulatory agencies periodically review the
allowance for loan losses. These agencies may require the subsidiary
Bank to make additions to the allowance for loan losses based on their
judgments of collectibility based on information available to them at
the time of their examination.
LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market
are carried at the lower of cost or estimated market value in the
aggregate. Net unrealized losses are recognized through a valuation
allowance by charges to income. Gains and losses on the sale of loans
held for sale are determined using the specific identification method
using quoted market prices. Mortgage servicing rights are not
retained.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost. Maintenance and repair
costs are charged to expense as incurred. Gains or losses on
disposition of property and equipment are reflected in income.
Depreciation is computed principally on the straight-line method and
is based on the estimated useful lives of the assets varying from 5 to
40 years on buildings, 5 to 20 years on equipment, and 3 years on
software.
FORECLOSED REAL ESTATE
Real estate properties acquired through, or in lieu of, loan
foreclosure are to be sold and are initially recorded at fair
value at the date of foreclosure, establishing a new cost basis.
Costs related to development and improvement of property are
capitalized, whereas costs related to holding property are expensed.
After foreclosure, valuations are periodically performed by management
and the real estate is carried at the lower of carrying amount or fair
-30-
value less estimated costs to sell. Revenue and expenses from
operations and changes in any valuation allowance are included in loss
on foreclosed real estate.
RETIREMENT PLANS
The Company maintains a defined contribution 401(k) profit-sharing plan
which covers substantially all full-time employees.
INCOME TAXES
Deferred income taxes have been provided under the liability method.
Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in
effect when these differences are expected to reverse. Deferred tax
expense is the result of changes in the deferred tax asset and
liability.
ADVERTISING AND PROMOTIONAL COSTS
Costs relating to Company advertising and promotion are generally
expensed when paid.
EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of shares
outstanding.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to
current year presentation.
-31-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income."
Under this SFAS, the Company reports those items defined as
comprehensive income in the statement of changes in stockholders'
equity. The adoption of SFAS No. 130 did not have an impact on the
Company's financial condition or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement
Benefits," which was issued in February 1998. This statement revises
employers' disclosures about pension and other postretirement benefit
plans. It did not change the measurement or recognition of those
plans. It standardized the disclosure requirement and required
additional information on changes in benefit obligations and fair value
of plan assets, and eliminated certain disclosures which were no longer
considered useful. The disclosure requirements had no impact on the
Company's financial position or results of operations.
NOTE 3 - CASH AND DUE FROM BANKS
Cash and due from banks in the amount of $916,000 was restricted at
December 31, 1999 to meet the reserve requirements of the Federal
Reserve System.
In the normal course of business, the Company and its subsidiary
maintain cash and due from bank balances with correspondent banks.
Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company and its subsidiary
also maintain cash balances in money market funds. Such balances are
not insured. Total uninsured balances at December 31, 1999 were
$8,014,558.
-32-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - SECURITIES
The amortized cost and estimated fair value of investment securities
are as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
COST GAINS LOSSES VALUE
DECEMBER 31, 1999
Securities held to maturity:
Obligations of states and
political subdivisions $ 13,843,068 $ 17,904 $ 388,461 $ 13,472,511
Securities available for sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 47,245,814 $ 13,398 $1,517,300 $ 45,741,912
Other equity securities 747,274 747,274
Totals $ 47,993,088 $ 13,398 $1,517,300 $ 46,489,186
DECEMBER 31, 1998
Securities held to maturity:
Obligations of states and
political subdivisions $ 14,068,362 $ 278,490 $ 955 $ 14,345,897
Securities available for sale:
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies $ 46,920,044 $ 342,097 $ 76,687 $ 47,185,454
Other equity securities 700,678 700,678
Totals $ 47,620,722 $ 342,097 $ 76,687 $ 47,886,132
The amortized cost and estimated fair value of debt securities held to
maturity and securities available for sale at December 31, 1999, by
contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
-33-
Estimated
Amortized Fair
SECURITIES HELD TO MATURITY COST VALUE
Due in one year or less $ 1,290,960 $ 1,297,543
Due after one year through five years 3,984,718 3,976,350
Due after five years through ten years 8,567,390 8,198,618
Totals $ 13,843,068 $13,472,511
SECURITIES AVAILABLE FOR SALE
Due in one year or less $ 3,319,446 $ 3,310,390
Due after one year through five years 6,507,241 6,183,651
Due after five years through ten years 16,970,976 16,332,265
Mortgage-backed securities 20,448,151 19,915,606
Totals $ 47,245,814 $ 45,741,912
Securities with an approximate carrying value of $20,207,957 and
$9,168,461 at December 31, 1999 and 1998, respectively, were pledged
to secure public deposits, short-term borrowings, and for other
purposes required by law.
No securities were sold in 1999. Proceeds from securities sales in
1998 were $1,533,300. Gross gains of $35,867 were realized on those
sales. During 1997, proceeds from security sales were $2,351,230.
Gross gains and losses on those sales were $17,656 and $14,536,
respectively.
As a member of the Federal Home Loan Bank (FHLB) system, the Bank is
required to hold stock in the FHLB based on asset size. This stock is
recorded at cost which approximates fair value. Transfer of the stock
is substantially restricted. Equity securities include $699,600 and
$655,300 of FHLB stock at December 31, 1999 and 1998, respectively.
NOTE 5 - LOANS
The composition of loans is as follows:
1999 1998
Commercial $ 51,053,737 $ 40,513,628
Real estate 118,195,029 98,259,990
Consumer 13,374,588 11,755,037
Subtotals 182,623,354 150,528,655
Allowance for loan losses (2,099,241) (1,946,864)
Net loans $ 180,524,113 $148,581,791
The Company, in the ordinary course of business, grants loans to its
executive officers and directors, including their families and firms in
which they are principal owners. All loans to executive officers and
directors are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
-34-
transactions with others and, in the opinion of management, did not
involve more than the normal risk of collectibility or present other
unfavorable features. Activity in such loans is summarized below:
1999 1998
Loans outstanding, January 1 $ 5,038,511 $ 7,792,986
New loans 3,411,051 6,612,687
Repayment (4,104,883) (9,367,162)
Loans outstanding, December 31 $ 4,344,679 $ 5,038,511
The allowance for loan losses includes specific allowances related to
commercial loans which have been judged to be impaired as defined by
current accounting standards. A loan is impaired when, based on
current information, it is probable that the Company will not collect
all amounts due in accordance with the contractual terms of the loan
agreement. These specific allowances are based on discounted cash
flows of expected future payments using the loan's initial effective
interest rate or the fair value of the collateral if the loan is
collateral dependent.
An analysis of impaired loans follows:
AT DECEMBER 31, 1999 1998
Nonaccrual $ 509,971 $ 564,414
Accruing income 1,696,412 406,000
Total impaired loans 2,206,383 970,414
Less - Allowance for loan losses 297,009 328,511
Net investment in impaired loans $ 1,909,374 $ 641,903
YEARS ENDED DECEMBER 31, 1999 1998 1997
Average recorded investment, net of
allowance for loan losses $ 1,874,008 $ 819,630 $ 1,191,098
Interest income recognized $ 118,162 $ 39,569 $ 83,195
The allowance for loan losses (including impaired loans) is maintained
at a level which management believes is adequate for possible loan
losses. Management periodically evaluates the adequacy of the
allowance using the Company's past loan loss experience, known and
inherent risks in the portfolio, composition of the portfolio, current
economic conditions, and other relevant factors. This evaluation is
inherently subjective since it requires material estimates that may be
susceptible to significant change.
-35-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
An analysis of the allowance for loan losses for the three years ended
December 31, follows:
1999 1998 1997
Balance, January 1 $ 1,946,864 $ 1,845,064 $ 1,924,686
Provision charged to operating expense 460,000 300,000 230,000
Recoveries on loans 124,821 9,250 40,620
Loans charged off (432,444) (207,450) (350,242)
Balance, December 31 $ 2,099,241 $ 1,946,864 $ 1,845,064
NOTE 6 - PREMISES AND EQUIPMENT
An analysis of premises and equipment follows:
1999 1998
Land $ 709,117 $ 627,345
Buildings and improvements 3,466,588 3,455,946
Furniture and equipment 3,196,731 2,947,739
Construction in progress 162,947
Total cost 7,535,383 7,031,030
Accumulated depreciation and amortization 3,638,160 3,145,044
Net book value $ 3,897,223 $3,885,986
Depreciation and amortization charged to operating expenses amounted to
$511,047 in 1999, $493,934 in 1998, and $436,933 in 1997.
NOTE 7 - DEPOSITS
At December 31, 1999, certificate and IRA accounts have scheduled
maturity dates as follows:
2000 $ 75,381,840
2001 10,632,861
2002 1,583,012
2003 287,183
2004 2,050
Total $ 87,886,946
Certificate of deposit accounts with individual balances greater than
$100,000 totaled $24,760,217 and $24,688,356 at December 31, 1999 and
1998, respectively.
Deposits from Company directors, officers, and related parties at
December 31, 1999 and 1998 totaled $5,772,331 and $7,983,980,
respectively.
-36-
NOTE 8 - SHORT-TERM BORROWINGS
Short-term borrowings consist of the following at December 31:
1999 1998
Securities sold under repurchase agreements $ 10,737,890 $ 4,549,508
Federal funds purchased 10,477,000
Totals $ 21,214,890 $ 4,549,508
The book value of securities pledged under repurchase agreements
totaled $15,378,207 and $4,801,348 at December 31, 1999 and 1998,
respectively.
Repurchase agreements with Company directors, officers, and related
parties at December 31, 1999 and 1998 totaled $6,122,705 and $500,000,
respectively.
The following information relates to federal funds purchased and
securities sold under repurchase agreements for the years ended
December 31:
1999 1998 1997
As of end of year:
Weighted average rate 5.90% 5.63% 6.14%
For the year:
Highest month-end balance $ 21,214,890 $ 5,220,455 $11,983,134
Daily average balance 11,660,602 3,803,415 5,555,857
Weighted average rate 5.49% 6.23% 6.18%
-37-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - LONG-TERM BORROWINGS
Long-term borrowings at December 31, consist of the following:
1999 1998
Note payable to the FHLB, monthly interest payments only at 5.07%,
due February, 2008, callable beginning February 2001 $ 3,000,000 $ 3,000,000
Note payable to the FHLB, monthly interest payments only at 4.97%,
due August, 2009, callable beginning February 2000 3,000,000
Note payable to the FHLB, monthly interest payments only at 5.15%,
due October 2009, callable beginning April 2000 4,000,000
Note payable to the FHLB, monthly interest payments only at 4.98%,
due July 2009, callable beginning July 2000 3,000,000
5.70% - 5.90% FHLB advances, interest payable monthly,
principal repaid during 1999 3,000,000
Totals $ 13,000,000 $ 6,000,000
The FHLB advances are secured by a blanket lien consisting principally
of one-to-four family real estate loans totaling in excess of
$22,000,000 and $10,000,000 at December 31, 1999 and 1998,
respectively. As a member of the FHLB system, the Company may draw on
a line of credit totaling $35,327,000. At December 31, 1999, the
Company's available and unused portion of this line of credit
totaled $22,327,000.
-38-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company has established a 401(k) profit-sharing contribution
pension plan for its employees. The Company matches 50% of employees'
salary deferrals up to the first 4% of pay deferred. The Company also
may declare a discretionary profit-sharing contribution. The expense
recognized for contributions to the plan for the years ended December
31, 1999, 1998, and 1997 was $173,858, $159,014, and $143,940,
respectively.
The Company also maintains an unfunded retirement plan for its
directors. The plan pays directors who have at least 15 years of
service at retirement 50% of the fees received during their final five
years as a director. Currently, five directors are eligible for
benefits. Details regarding the actuarial benefit obligation and
related disclosures are not available. The liability recognized in the
financial statements for this plan was $156,285 at December 31, 1999
and 1998. There was no provision for plan expense during 1999 or 1998.
The plan expense totaled $46,000 December 31, 1997.
The Company also maintains an unfunded postretirement health care
benefit plan which covers the officers of the Company. After
retirement, the Company will pay between 25% and 50% of the health
insurance premiums for former Company officers. To qualify, an officer
must have at least 15 years of service, be employed by the Company at
retirement, and must be 62 years of age at retirement. The actual
amount paid is based upon years of service to the Company.
Effective January 1, 1997, the Company terminated its defined benefit
pension plan. The Company received regulatory approval to distribute
participants' vested defined benefit pension plan balances to
participants or into the Company's 401(k) profit-sharing plan. During
January 1998, the Company settled the defined benefit pension plan
obligation by transferring existing plan assets of $1,857,740, plus an
additional cash payment of $202,738 to qualified retirement plans or
directly to the plan participants.
-39-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables provide a reconciliation of changes in the
postretirement health care benefit plan and the defined benefit
pension plan obligations and the fair value of assets for the years
ended December 31, 1999 and 1998:
Defined
Postretirement Benefit
Health Care Pension
BENEFIT PLAN PLAN
1999 1998 1998
Reconciliation of benefit obligations:
Obligations at January 1 $ 167,930 $ 136,179 $ 1,666,759
Service cost 13,134 11,176
Interest cost 19,314 16,658 9,723
Benefit payments (6,137) (3,479) (5,820)
Net amortization of prior service costs 7,396 7,396 (16,075)
Loss on settlement of plan due to applicable
benefit payout interest rates at time of
settlement 405,891
Liquidating distributions to qualified
retirement plans (2,042,103)
Liquidating distributions to plan
participants (18,375)
Obligation at December 31 $ 201,637 $ 167,930 $
Reconciliation of fair value of plan assets:
Fair value of plan assets at January 1 $ 1,855,500
Return on plan assets, net of
administrative expenses 8,060
Benefit payments (5,820)
Liquidating distributions to qualified
Retirement plans (1,857,740)
Fair value of plan assets at December 31 $
-40-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides the components of net periodic benefit cost
(income) of the plans for the years ended December 31, 1999, 1998, and 1997:
Postretirement
Health Care Defined Benefit
BENEFIT PLAN PENSION PLAN
1999 1998 1997 1998 1997
Service cost $ 13,134 $ 11,176 $ 7,778 $ $
Interest cost 19,314 16,658 14,233 9,723 110,308
Return on plan assets (8,060) (87,256)
Net amortization transition
and prior service costs (income) 7,396 7,396 7,396 (16,075) (23,068)
Net periodic pension cost
(income) 39,844 35,230 29,407 (14,412) (16)
Settlement loss 405,891
Net periodic benefit cost
(income)after settlement $ 39,844 $ 35,230 $ 29,407 $ 391,479 $ (16)
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
Postretirement
Health Care Defined Benefit
BENEFIT PLAN PENSION PLAN
1999 1998 1997 1998 1997
Discount rate 7.50% 7.50% 7.50% N/A 7.00%
Expected return on plan assets N/A N/A N/A N/A 5.79%
Health care cost trend rate 7.50% 7.25% 7.50% N/A N/A
Rate of compensation increases N/A N/A N/A N/A 0.00%
The health care cost trend rate is anticipated to be 7.50% in 2000,
grading down 0.25% per year to 5.0%.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care benefit plan. A 1% increase in
assumed health care cost trend rates would have the following effects:
1999 1998 1997
Effect on service and interest cost $ 8,011 $ 5,681 $ 847
Effect on accumulated benefit obligation at December 31 59,971 43,082 8,362
-41-
NOTE 11 -SELF-FUNDED HEALTH INSURANCE PLAN
The Company has established an employee medical benefit plan to
self-insure claims up to $10,000 per year for each individual with a
$281,097 stop-loss per year for participants in the aggregate. The
Company and its covered employees contribute to the fund to pay the
claims and stop-loss premiums. Medical benefit plan costs are expensed
as incurred. As of December 31, 1999, management believes adequate
provision to expense has been made for claims incurred but not yet
reported that are not covered by the stop-loss. Health insurance
expense recorded in 1999, 1998, and 1997 was $168,564, $143,969, and
$126,237, respectively.
NOTE 12 - INCOME TAXES
The components of the income tax provision are as follows:
1999 1998 1997
Current income tax provision:
Federal $ 1,016,000 $ 991,400 $ 965,900
State 121,500 106,500 114,000
Total current 1,137,500 1,097,900 1,079,900
Deferred income tax benefit:
Federal (60,000) (142,400) (85,900)
State (10,000) (27,500) (23,000)
Total deferred (70,000) (169,900) (108,900)
Total provision for income taxes $ 1,067,500 $ 928,000 $ 971,000
-42-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities. The major components of the net
deferred tax assets are as follows:
1999 1998
Deferred tax assets:
Allowance for loan losses $ 708,800 $ 653,800
Deferred compensation 68,800 69,300
State net operating loss 13,000 9,500
Post-retirement health care benefits 73,500 64,300
Employee pension plan 41,000 42,800
Unrealized loss on securities available for sale 560,774
Other 2,600
Less - Valuation allowance (113,000) (9,500)
Gross deferred tax assets 1,352,874 832,800
Deferred tax liabilities:
Unrealized gain on securities available for sale 92,992
Premises and equipment 138,500 155,000
Employee pension plan 5,800
Gross deferred tax liabilities 144,300 247,992
Net deferred tax assets $ 1,208,574 $ 584,808
The Company, and its subsidiary, pay state income taxes on individual,
unconsolidated net earnings. At December 31, 1999, tax net operating
loss carryforwards at the parent company of approximately $250,000
existed to offset future state taxable income. These net operating
losses will begin to expire in 2012. A valuation allowance has been
recognized to adjust deferred tax assets to the amount of tax ne
t operating losses expected to be utilized to offset future income. A
valuation allowance of $100,000 has also been recognized to offset
deferred tax assets related to unrealized capital losses of
approximately $295,000. If realized, the tax benefit for these items
will reduce current tax expense for the period in which they are
realized.
-43-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the source of differences between income taxes at the
federal statutory rate and the provision for income taxes for the years
ended December 31, follows:
1999 1998 1997
Percent of Percent of Percent of
Pretax Pretax Pretax
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
Tax expense at statutory rate $ 1,243,000 34.0% $ 1,026,000 34.0% $ 1,045,000 34.0%
Increase (decrease) in taxes
resulting from:
Tax-exempt interest (221,900) (6.1) (194,000) (6.4) (174,500) (5.7)
State income tax 73,600 2.0 52,000 1.7 60,000 2.0
Other (27,200) (0.7) 44,000 1.5 40,500 1.3
Provision for income taxes $ 1,067,500 29.2% $ 928,000 30.8% $ 971,000 31.6%
NOTE 13 - LEASES
The Company leases various pieces of equipment under cancelable leases
and space for a branch location under a noncancelable lease. All
leases are classified as operating. Future minimum payments under the
noncancelable lease are as follows:
2000 $25,540
2001 26,389
2002 27,252
2003 2,277
Total $81,458
Rental expense for all operating leases was $39,104, $32,462, and
$12,735 for the years ended December 31, 1999, 1998, and 1997,
respectively.
NOTE 14 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
CREDIT RISK
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheets.
-44-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Company uses the same credit policies
in making commitments and conditional obligations as it does for
on-balance sheet instruments. These commitments at December 31 are
as follows:
1999 1998
Commitments to extend credit:
Fixed rate $ 10,525,503 $ 7,473,927
Variable rate 15,915,386 11,301,151
Letters of credit - variable rate 845,952 1,470,887
Credit card commitments - fixed rate 2,667,512 2,278,144
Totals $ 29,954,353 $ 22,524,109
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary upon extension of credit, is
based on management's credit evaluation of the party. Collateral held
varies but may include accounts receivable, inventory, property, plant,
and equipment, and income-producing commercial properties.
Letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.
Collateral held varies as specified above and is required in instances
which the Company deems necessary. The commitments are structured to
allow for 100% collateralization on all letters of credit.
Credit card commitments are commitments on credit cards issued by the
Company and serviced by Elan Financial Services. These commitments are
unsecured.
CONCENTRATION OF CREDIT RISK
The Company grants residential mortgage, commercial and consumer loans
predominantly in the greater Wausau area, Marathon County, and
Rhinelander, Wisconsin in Oneida County. There are no significant
concentrations of credit to any one debtor or industry group. It is
felt that the diversity of the local economy will prevent significant
losses in the event of an economic downturn.
-45-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTINGENCIES
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management, any liability
resulting from such proceedings would not have a material adverse
effect on the consolidated financial statements.
Under the most recent provisions approved by the Company's Board of
Directors, up to 45,000 shares may be repurchased from shareholders
from time to time at the prevailing market price. Prior to the
issuance of the 1999 financial statements, various shareholders holding
approximately 4,100 shares elected to have the Company repurchase their
shares in transactions to be completed during 2000.
INTEREST RATE RISK
The Company originates and holds adjustable rate mortgage loans with
variable rates of interest. The rate of interest on these loans is
capped over the life of the loan. At December 31, 1999, none of the
approximately $9,113,000 of variable rate loans had reached the
interest rate cap.
NOTE 15 - CAPITAL REQUIREMENTS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory-and
possibly additional discretionary-actions by regulators that, if
undertaken, could have a direct material effect on the Company's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the bank must meet
specific capital guidelines that involve quantitative measures of the
bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1999, that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
-46-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's and the Bank's actual capital amounts and ratios are also
presented in the table.
To Be Well
Capitalized Under
For Capital Prompt Corrective
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
As of December 31, 1999:
Total capital (to risk
weighted assets):
Consolidated $ 24,189,000 13.4% $ 14,402,000 8.0% N/A
Subsidiary bank $ 23,965,000 13.3% $ 14,401,000 8.0% $ 18,001,000 10.0%
Tier I capital (to risk
weighted assets):
Consolidated $ 22,090,000 12.3% $ 7,201,000 4.0% N/A
Subsidiary bank $ 21,866,000 12.1% $ 7,200,000 4.0% $ 10,800,000 6.0%
Tier I capital (to average
assets):
Consolidated $ 22,090,000 8.7% $ 10,128,000 4.0% N/A
Subsidiary bank $ 21,866,000 8.6% $ 10,128,000 4.0% $ 12,660,000 5.0%
As of December 31, 1998:
Total capital (to risk
weighted assets):
Consolidated $ 22,304,000 14.5% $ 12,303,000 8.0% N/A
Subsidiary bank $ 22,059,000 14.4% $ 12,284,000 8.0% $ 15,355,000 10.0%
Tier I capital (to risk
weighted assets):
Consolidated $ 20,384,000 13.3% $ 6,152,000 4.0% N/A
Subsidiary bank $ 20,139,000 13.1% $ 6,142,000 4.0% $ 9,213,000 6.0%
Tier I capital (to average
assets):
Consolidated $ 20,384,000 8.9% $ 9,126,000 4.0% N/A
Subsidiary bank $ 20,139,000 8.8% $ 9,117,000 4.0% $ 11,396,000 5.0%
-47-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - RESTRICTIONS ON RETAINED EARNINGS
The Bank is restricted by banking regulations from making dividend
distributions above prescribed amounts and is limited in making loans
and advances to the Company. At December 31, 1999, the retained
earnings of the subsidiary available for distribution as dividends
without regulatory approval was approximately $8,301,000.
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments"
requires that the Company disclose estimated fair values for its
financial instruments. The fair value estimates, methods, and
assumptions regarding the Company's financial instruments are shown
below.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial statements:
Cash and Short-term Investments: The carrying amounts reported in the
balance sheets for cash and due from banks, interest-bearing deposits
and money market funds, and federal funds sold approximate the fair
value of these assets.
Securities: Fair values for investment securities are based on quoted
market prices.
Loans: For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
values. The fair value for other loans is estimated using discounted
cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. In
addition, for impaired loans, marketability and appraisal values were
considered in the fair value determination. The carrying amount of
accrued interest approximates its fair value.
Deposit Liabilities: The fair value of deposits with no stated
maturity, such as demand deposits, NOW accounts, savings and money
market accounts, is equal to the amount payable on demand at the
reporting date. Fair value for fixed rate certificates of deposit is
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected maturities on time deposits.
Short-Term Borrowings: The fair value of short-term borrowings with no
stated maturity, such as federal funds purchased, is equal to the
amount payable on demand at the reporting date. Fair value for fixed
rate repurchase agreements is estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
repurchase agreements to a schedule of aggregated expected maturities
on the existing agreements.
Long-Term Borrowings: The fair value of the Company's long-term
borrowings (other than deposits) is estimated using discounted cash
flow analyses based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements.
Off-Balance-Sheet Instruments: The fair value of commitments would be
estimated using the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements,
the current interest rates, and the present credit worthiness of the
counter parties. Since this amount is immaterial, no amounts for fair
value are presented.
The carrying amounts and fair values of the Company's financial
instruments consisted of the following at December 31:
-48-
1999 1998
Carrying Estimated Carrying Estimated
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Financial assets:
Cash and short-term investments $ 11,987,763 $ 11,987,763 $ 13,426,756 $ 13,426,756
Securities 60,332,254 59,961,697 61,954,494 62,232,029
Net loans 180,524,112 180,032,781 151,702,241 152,613,525
Financial liabilities:
Deposits 202,354,241 202,400,590 199,799,897 200,190,127
Short-term borrowings 21,214,890 21,200,651 4,549,508 4,549,508
Long-term borrowings 13,000,000 12,907,246 6,000,000 6,008,439
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates do not reflect any premium or discount
that could result from offering for sale at one time the Company's
entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Company's financial
instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors.
These estimates are subjective in nature and involve uncertainties
and matters of significant judgement and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates. Fair value estimates are based on existing on- and
off-balance sheet financial instruments without attempting to estimate
the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. Significant
assets, and liabilities that are not considered financial assets or
liabilities include premises and equipment, other assets, and other
liabilities. In addition, the tax ramifications related to the
realization of the unrealized gains or losses can have a
significant effect on fair value estimates and have not been considered
in the estimates.
-49-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company acquired an option to
purchase real estate in the amount of $450,000 in Rhinelander,
Wisconsin to be used as a branch bank location.
Subsequent to December 31, 1999, the Company approved formation of
an employee stock ownership plan (ESOP) subject to a feasibility study
of its benefits. The Company anticipates ESOP shares will be purchased
on the open market from existing shareholders at the prevailing market
price to be funded with a portion of the Company's profit-sharing
contributions.
NOTE 19 - CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following condensed balance sheets as of December 31, 1999 and
1998, and condensed statements of income and cash flows for the years
ended December 31, 1999, 1998, and 1997 for PSB Holdings, Inc. should
be read in conjunction with the consolidated financial statements and
footnotes.
BALANCE SHEETS
December 31, 1999 and 1998
ASSETS
1999 1998
Cash and due from banks $ 752,995 $ 725,715
Investment in subsidiary 20,823,276 20,311,399
Other assets 35,573 47,482
Total assets $ 21,611,844 $ 21,084,596
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued dividends payable $ 565,427 $ 528,381
Total stockholders' equity 21,046,417 20,556,215
Total liabilities and stockholders' equity $ 21,611,844 $ 21,084,596
-50-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STATEMENTS OF INCOME
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
Income:
Dividends from subsidiary $ 909,000 $ 967,000 $ 1,311,000
Interest 8,148 2,383 2,893
Total income 917,148 969,383 1,313,893
Expenses:
Interest 6,782
Other 77,589 54,418 58,360
Total expenses 77,589 54,418 65,142
Income before income taxes and equity in
undistributed net income of subsidiary 839,559 914,965 1,248,751
Income tax benefit 22,000 17,000 20,000
Net income before equity in undistributed
net income of subsidiary 861,559 931,965 1,268,751
Equity in undistributed net income of subsidiary 1,727,423 1,156,612 833,958
Net income $ 2,588,982 $ 2,088,577 $ 2,102,709
-51-
PSB HOLDINGS, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
Cash flows from operating activities:
Net income $ 2,588,982 $ 2,088,577 $ 2,102,709
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in net income of subsidiary (2,636,423) (2,123,612) (2,144,958)
Net amortization 21,517 21,517 21,517
(Increase) decrease in other assets (9,607) 28,002 (20,003)
Increase in other liabilities 37,046 30,157 19,393
Net cash provided by (used in) operating activities 1,515 44,641 (21,342)
Cash flows from investing activities -
Dividends received from subsidiary 909,000 967,000 1,311,000
Cash flows from financing activities:
Dividends paid (883,235) (821,411) (795,944)
Purchase of treasury stock (487,600)
Net cash used in financing activities (883,235) (821,411) (1,283,544)
Net increase in cash and due from banks 27,280 190,230 6,114
Cash and due from banks at beginning 725,715 535,485 529,371
Cash and due from banks at end $ 752,995 $ 725,715 $ 535,485
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
-52-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
Information relating to directors of the Company is incorporated
into this Form 10-K by this reference to the material set forth in the
table under the caption "Election of Directors", pages 2 through 4, of
the Company's proxy statement dated March 31, 2000 (the "2000 Proxy
Statement"). Information relating to executive officers is found in
Part I of this Form 10-K, page 6. Information required under Rule 405
of Regulation S-K is incorporated into this Form 10-K by this reference
to the material set forth under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 6 of the 2000 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to director compensation is incorporated into
this Form 10-K by this reference to the 2000 Proxy Statement under the
subcaption "Compensation of Directors", page 5. Information relating
to the compensation of executive officers is incorporated into this
Form 10-K by this reference to (1) the material set forth under the
subcaption "Summary Compensation Table," page 8, and (2) the material
set forth under the subcaption "Compensation Committee and Board
Interlocks and Insider Participation," page 8 in the 2000 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information relating to security ownership of certain beneficial
owners and management is incorporated into this Form 10-K by this
reference to the material set forth under the caption "Beneficial
Ownership of Common Stock," pages 5 and 6, in the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to transactions with management is
incorporated into this Form 10-K by this reference to the material
set forth under the caption "Certain Relationships and Related
Transactions," page 9, in the 2000 Proxy Statement.
-53-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a) Documents filed as part of this report.
(1) The financial statements filed as part of this report are set
forth on pages 24-52 herein.
(2) No financial statement schedules are required by Item 14(d).
(3) Exhibits.
The following exhibits required by Item 601 of Regulation S-K are filed
with the Securities and Exchange Commission as part of this report.
Exhibit
NUMBER DESCRIPTION
3.1 Restated Articles of Incorporation, as amended (incorporated
by reference to Exhibit 4(a) to the Company's Current Report
on Form 8-K dated May 30, 1995)
3.2 Bylaws (incorporated by reference to Exhibit 4(b) to the
Company's Current Report on Form 8-K dated May 30, 1995)
4.1 Articles of Incorporation and Bylaws (see Exhibits 3.1 and
3.2)
10.1 Bonus Plan of Directors of the Bank (incorporated by reference
to Exhibit 10(a) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995)*
10.2 Bonus Plan of Officers and Employees of the Bank*
(incorporated by reference to Exhibit 10(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995)*
10.3 Non-Qualified Retirement Plan for Directors of the Bank
(incorporated by reference to Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995)*
21.1 Subsidiaries of the Company (incorporated by reference to
Exhibit 22 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995)
-54-
27.1 Financial Data Schedule (filed electronically only)
*Denotes Executive Compensation Plans and Arrangements.
(b) Reports on Form 8-K.
None.
-55-
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PSB Holdings, Inc.
By DAVID K. KOPPERUD March 30, 2000
David K. Kopperued, President
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on this 30th
day of March, 2000.
SIGNATURE AND TITLE SIGNATURE AND TITLE
DAVID K. KOPPERUD TODD R. TOPPEN
David K. Kopperud, President Todd R. Toppen, Treasurer
Chief Executive Officer (Chief Financial and
Principal Accounting Officer)
DIRECTORS:
LEONARD C. BRITTEN GORDON P. CONNOR
Leonard C. Britten Gordon P. Connor
PATRICK L. CROOKS WILLIAM J. FISH
Patrick L. Crooks William J. Fish
CHARLES A. GHIDORZI GEORGE L. GEISLER
Charles A. Ghidorzi George L. Geisler
GORDON P. GULLICKSON LAWRENCE HANZ, JR.
Gordon P. Gullickson Lawrence Hanz, Jr.
THOMAS R. POLZER THOMAS A. RIISER
Thomas A. Polzer Thomas A. Riiser
WILLIAM M. REIF EUGENE WITTER
William M. Reif Eugene Witter
-56-
EXHIBIT INDEX
TO
FORM 10-K
OF
PSB HOLDINGS, INC.
FOR THE PERIOD ENDED DECEMBER 31, 1999
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. 232.102(d))
EXHIBIT 27.1 - FINANCIAL DATA SCHEDULE
Exhibits required by Item 601 of Regulation S-K
which have been previously filed and are incorporated by
reference are set forth in Part IV, Item 14(c) of the
Form 10-K to which this Exhibit Index relates.