Puget Sound Bank Net Income for 2010 Surges to $1.4 million

Fourth Quarter Profits Increase Nearly 40%

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| Source: Puget Sound Bank

BELLEVUE, Wash., Jan. 19, 2011 (GLOBE NEWSWIRE) -- Puget Sound Bank (OTCBB:PUGB), today reported that higher revenues, sound core deposit growth and strong loan growth generated a substantial increase in full year profits. For the year ended December 31, 2010, Puget Sound Bank's net income more than tripled to $1.4 million compared to $418,107 in 2009. Net income in the fourth quarter of 2010 increased sharply to $436,361 from $315,122 in the preceding quarter and $361,152 in the fourth quarter a year ago.   

"Our achievements this year include strong earnings and a solid increase in net interest margin, demonstrating the underlying earnings power of our franchise and the solid quality of our assets," said Jim Mitchell, President and Chief Executive Officer. "We have a strong focus on our customers, and we are delighted with the continued demand for good loans generated by our lending team and the solid growth we have produced in local deposits."

Fourth Quarter and 2010 Highlights:

  • Revenues for 2010 increased 28% to $8.0 million from a year ago.
  • Continued profitability in the fourth quarter with return on average assets at 0.76% and return on average common equity at 6.45%.
  • Net interest margin increased 54 basis point to 4.09% in the fourth quarter from 3.55% in the year ago quarter. 
  • Gross loans grew 28% to $171.4 million from $133.7 million a year earlier.
  • Total deposits increased 14% to $194.1 million from $170.9 million a year earlier, with demand and interest bearing checking account balances growing 43% from a year ago.
  • Tangible book value per common share increased to $9.81 compared to $9.29 a year ago.
  • Asset quality continues to be solid with nonperforming assets to total assets at 1.15%.
  • The allowance for loan losses totaled 1.85% of the total loan portfolio, compared to 1.86% of total loans a year ago.
  • Dividends paid on preferred stock issued to the U.S. Treasury under the Capital Purchase Program for the full year 2010, totaled $290,250.
  • Puget Sound Bank continued to maintain strong capital ratios with a Total Risk-based Capital Ratio of 14.85% down from 18.10% a year ago due to loan growth. To be considered "well-capitalized" a bank must have over 10%Total Risk-based Capital.
  • Tangible common equity ratio is 10.1%, compared to 10.7% a year ago.

Balance Sheet and Asset Quality Review

Puget Sound Bank's total assets grew 13% to $221.9 million at December 31, 2010, compared to $197.2 million a year ago. Total loans increased 28% to $171.4 million at year end from $133.7 million a year ago. "Our loan portfolio performance continues to be superior to the regional and national averages on every credit quality metric, and we are proud of our lending team for their asset quality management," added Mitchell. "We believe the regional real estate markets are starting to stabilize and we continue to see loan demand from our small business customers."

The loan portfolio is well-diversified with commercial and industrial (C&I) loans, including owner-occupied commercial real estate loans, accounting for 66%, commercial real estate loans representing 26%, and personal and other loans representing 8% of the loan portfolio at year end.

Nonperforming loans totaled $2.6 million at December 31, 2010, compared to $1.9 million in the preceding quarter. "As a percentage of total capital (Texas Ratio), our nonperforming loans continue to be among the lowest in the State of Washington, at 9.5%," said Phil Mitterling, EVP and Chief Financial Officer. "Although loan quality is very strong, we continue to build reserves to provide for overall growth in the portfolio and any lingering effects from the economic downturn of the past three years." At the end of December 31, 2010, Puget Sound Bank's nonperforming assets were 1.15% of total assets, compared to 0.83% at the end of the preceding quarter. 

Puget Sound Bank booked a $563,100 provision for loan losses in the fourth quarter of 2010 compared to $344,000 in the previous quarter and $100,000 in the fourth quarter of 2009. Net charge-offs in the fourth quarter 2010 and the full year, totaled $455,000, or 2.65% of average fourth quarter loan balances. The allowance for loan losses increased to $3.2 million, or 1.85% of total loans at year end, compared to $2.5 million, or 1.86% of total loans a year ago. 

Total deposits grew 14% year-over-year to $194.1 million at December 31, 2010, compared to $170.9 million a year ago. The bank had no traditional brokered deposits or other purchased funding at year-end. "We continue to have a solid core deposit base and we value our loyal customers," continued Mitterling. 

Shareholders' equity increased 6% to $22.4 million at year end, compared to $21.1 million at December 31, 2009. Tangible book value per share was $9.81 up from $9.29 a year earlier. Puget Sound Bank remains well-capitalized with Total Risk-based Capital at 14.85% at December 31, 2010.

Review of Operations

Puget Sound Bank's revenues (net interest income plus other operating income) were up 28% for the year at $8.0 million compared to $6.2 million in 2009, reflecting the growth in the balance sheet and a higher net interest margin. Fourth quarter 2010 revenue was $2.3 million compared to $2.1 million in the third quarter of 2010 and $1.7 million a year ago.

In 2010, net interest income before provision for loan losses was $7.7 million, compared to $5.9 million a year ago. Fourth quarter 2010 net interest income, before the provision for loan losses, was $2.3 million, up 14% from the preceding quarter and up 44% from $1.6 million in the same quarter a year ago. 

Puget Sound Bank's net interest margin (net interest income as a percentage of average earnings assets on a tax equivalent basis) was 3.66% in 2010 up 12 basis points from 3.54% generated in 2009. In the fourth quarter of 2010, net interest margin was 4.09% compared to 3.57% in the third quarter of 2010 and 3.55% in the fourth quarter a year ago. 

Fourth quarter noninterest expense increased $56,000 from the preceding quarter mainly due to an increase in compensation for additional staffing. "Controlling discretionary expenses continues to be a priority for everyone at the bank," said Mitterling. The efficiency ratio improved during the fourth quarter to 62.5% compared to 68.2% reported in the preceding quarter, and 72.2% in the fourth quarter a year ago.

Puget Sound Bank Rated 5 Stars ("Superior Performance") by BauerFinancial, Inc.

BauerFinancial has rated Puget Sound Bank 5 stars ("superior performance"), its highest rating, based on capital strength, asset quality and profitability. BauerFinancial has been reporting on and analyzing the performance of U.S. banks since 1983. They are an independent organization and no institution pays for its ratings. Click here to access the BauerFinancial website: www.bauerfinancial.com

About Puget Sound Bank

Puget Sound Bank is a locally-owned and operated commercial bank proudly serving the greater Puget Sound region. Based out of Bellevue, Washington, the bank was founded to meet the specialized needs of small and medium-sized businesses, commercial real estate projects, professionals and individuals seeking a higher level of service in the Puget Sound region. Staffed by the most experienced, customer-oriented banking professionals in the region, Puget Sound Bank offers a full range of competitive financial products with superior customer service and a consultative/partnership approach to its clients. Puget Sound Bank provides online banking at www.pugetsoundbank.com and has access to a large branch network in the state of Washington. The bank can also provide remote capture technology which allows its clients to make deposits from their offices. Puget Sound Bank is located at 10500 NE 8th Street, Suite 1500, Bellevue, Washington. For more information, please call 425-455-2400.

Safe Harbor Statement. This news release contains comments or information that constitutes forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices; levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by Puget Sound Bank with the Securities and Exchange Commission. Puget Sound Bank undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Puget Sound Bank
Fourth Quarter 2010 
(Unaudited)
  Quarterly    
($ in thousands except per share data) 2010
4th Qtr
2010
3rd Qtr
2009
4th Qtr
2010
YTD
2009
YTD
           
EARNINGS          
Net interest income  $ 2,270 1,983 1,576 7,655 5,928
Provision for loan losses  $ 563 344 100 1,133 916
NonInterest income  $ 80 88 81 330 310
NonInterest expense  $ 1,467 1,411 1,196 5,612 4,904
Pre-tax, pre-provision net income  $ 882  659 461  2,490 1,334
Pre-tax Net income  $ 319  315 361  1,239  418
Tax Benefit  $ 117  --   --   117  -- 
After-tax Net income  $ 436 315 361 1,357 418
Preferred dividends  $ 73 73 73 290 249
Net income available to common shareholders  $ 364 243 289 1,066 169
Total revenue  $ 2,349 2,070 1,657 7,984 6,238
1Earnings (loss) per share  $ 0.16 0.11 0.13 0.47 0.07
Average shares outstanding 2,288 2,287 2,265 2,283 2,261
           
PERFORMANCE RATIOS          
Return on average assets 0.76% 0.55% 0.78% 0.62% 0.24%
1Return on average common equity 6.45% 4.39% 5.47% 4.86% 0.81%
Net interest margin 4.09% 3.57% 3.55% 3.66% 3.54%
Efficiency ratio 62.5% 68.2% 72.2% 70.3% 78.6%
           
CAPITAL          
Tier 1 leverage ratio 11.70% 11.49% 13.70%    
Tier 1 risk-based capital ratio 13.60% 14.01% 16.84%    
Total risked based capital ratio  14.85% 15.26% 18.10%    
Tangible Common Equity Ratio 10.11% 9.42% 10.70%    
           
ASSET QUALITY          
Net loan charge-offs (recoveries)  $ 455 0 188    
Allowance for loan losses  $ 3,164 3,058 2,488    
Allowance for losses to total loans 1.85% 1.85% 1.86%    
Nonperforming loans  $ 2,561 1,941 0    
Other real estate owned $ 0 0 0    
Nonperforming assets to total assets 1.15% 0.83% 0.00%    
           
BALANCE SHEET          
($ in millions)          
 Cash and Due From Banks   $ 3.6  10.0  6.9    
 Investments   $ 44.5  56.5  57.1    
 Commercial and Industrial Loans   $ 70.0  68.9  53.4    
 Owner-Occupied Commercial Real Estate   $ 42.2  42.9  28.8    
 Other Commercial Real Estate   $ 42.3  39.9  40.2    
 Personal Loans   $ 14.6  12.2  11.5    
 Non-accrual Loans   $ 2.6  1.9  --     
 Deferred Loan Fees   $ (0.3)  (0.3)  (0.2)    
 Total Loans   $ 171.4  165.5  133.7    
 Allowance for Loan Losses   $ (3.2)  (3.1)  (2.5)    
Net Loans   $ 168.2  162.5  131.2    
 Other Assets   $ 5.5  5.2  2.0    
 Total Assets   $ 221.9  234.2  197.2    
           
 Non-interest bearing Demand   $ 31.4  35.1  25.2    
 Interest Bearing Demand   $ 26.1  25.5  15.1    
 Money Market and Savings   $ 66.3  67.1  49.0    
 Certificates of Deposit   $ 70.3  79.1  81.6    
 Total Deposits   $ 194.1  206.8  170.9    
 Borrowings   --         
Other Liabilities  $ 0.8 0.7 0.7    
Total Equity  $ 27.0 26.6 25.6    
Total Liabilities and Equity  $ 221.9 234.2 197.2    
           
Shareholders' equity  $ 22.4 22.1 21.1    
Tangible book value per share 9.81 9.65 9.29    
           
1Includes preferred stock dividends and warrants expense not included in net income.
Jim Mitchell, President & CEO
(425) 455-2400