Puget Sound Bank YTD Earnings Increase 44% Year-Over-Year

BELLEVUE, Wash., July 20, 2011 (GLOBE NEWSWIRE) -- Puget Sound Bank (OTCBB:PUGB), today reported solid growth in earnings, fueled by growing revenues and loans, a higher net interest margin, and strong capital ratios. For the first half of 2011, profits grew 44% to $869,269 from $605,105 in the like period a year ago. Puget Sound's net income increased 31% to $413,145 in the second quarter compared to $315,095 in the same quarter a year ago.  

"Puget Sound Bank has reported consistently profitable results for the last few years, and we are very encouraged with the progress we continue to see in our franchise," said Jim Mitchell, President and Chief Executive Officer. "Our capital strength and strong operating results are noteworthy accomplishments in any environment but particularly in today's weak economic climate."  

"We are honored to be among the first banks accepted to receive Small Business Lending Funds from the U.S. Treasury at a dividend rate of 1%. These funds count as capital and will increase our total risk-based capital to over 16%. A portion of these funds will retire the preferred shares issued under the Treasury's Capital Purchase Program from two years ago," added Mitchell. "As a strong business bank, we believe we will be able to deploy this capital to help businesses in the region expand and create jobs."

Financial Highlights (at or for the period ended June 30, 2011)

• Revenues grew 36% from a year ago to $2.5 million and increased 7% from the prior quarter.
• Total loans increased by $3.2 million to $175.4 million from the first quarter and grew by $28.5 million from the second quarter of 2010.
• Demand deposits, comprising non-interest and interest bearing checking accounts, made up 33% of total deposits, and are up from 29% a year ago.
• The net interest margin increased 21 basis points to 4.57% in the second quarter of 2011, from 4.36% in the preceding quarter and up 106 basis points from 3.51% in the second quarter of 2010.
• Tangible book value per share grew 6% to $10.11 from a year earlier.
• Puget Sound Bank continued to strengthen its capital ratios with total risk-based capital at 14.99% compared to 14.64% last quarter. 
• Net charge-offs totaled $234,704 in the second quarter of 2011, which was included in the provision for loan losses; there were no net charge-offs in the prior quarter or the second quarter a year earlier.
• Efficiency ratio improved to 64.0% this quarter.

Balance Sheet and Credit Quality

"Despite weak demand for business loans, we continue to generate strong origination volume from a diversified customer and prospect base," continued Mitchell. "While many banks are seeing a reduced demand for new lending and/or have a diminished appetite to lend during these tougher economic times, we have had strong loan growth without compromising credit quality." Total loans increased by 19% to $175 million, at June 30, 2011, from $147 million a year ago.

"Our loan portfolio remains diversified with a healthy percentage of commercial and industrial (C&I) loans in the portfolio," said Mitchell. C&I loans, including owner-occupied commercial real estate loans, accounted for 64% of the loan portfolio, with commercial real estate loans representing 27%, and private banking and other loans representing 9% of the loan portfolio at the end of June.

Deposits totaled $196.6 million at June 30, 2011. Although deposits were down 5% year-over-year, the mix of deposits continues to be strong with a high proportion of non-interest bearing deposits which increased $2.4 million during the quarter and currently account for 29% of total deposits, compared to 18% a year ago. Puget Sound Bank continues to have no reliance on deposits from outside of its local customer base.

"Credit quality remains strong with nonperforming assets (NPAs) at $2.7 million, or 1.19% of total assets, at June 30, 2011, only slightly elevated from the preceding quarter," said Phil Mitterling, Chief Financial Officer. Puget Sound Bank has no real estate owned properties (OREO) on its books. The allowance for loan losses remained flat at $3.2 million at June 30, 2011, compared to the prior quarter, and represented 1.84% of total loans. 

Review of Operations

Revenue (net interest income plus other operating income) increased 36% year-over-year to $2.5 million in the second quarter of 2011, compared to $1.9 million in the second quarter of 2010. 

The net interest margin was 4.57%, compared to 4.36% in the first quarter, and 3.51% in the second quarter a year ago. "Our margin in the second quarter benefited from non-recurring income of $129,000 related to loans," said Mitterling.  

The bank recorded a $294,570 provision for loan losses in the second quarter of 2011, compared to $13,870 in the preceding quarter and $121,000 in the second quarter a year ago. The increase in the provision in the second quarter of 2011 was mainly a result of a $234,704 charge-off in the quarter and partially due to $3.2 million of loan growth from the prior quarter.

The efficiency ratio improved to 64.0% for the second quarter of 2011 due to an increase in revenue and a decrease in noninterest expense as management continues to focus on controlling expenses.

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 8^th 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.