Puget Sound Bank Earns $518,862 YTD; Revenues Grow 30% YTD

BELLEVUE, Wash., Oct. 28, 2011 (GLOBE NEWSWIRE) -- Puget Sound Bank (OTCBB:PUGB), today reported that strong revenue growth, robust year-over-year loan growth and a substantial increase in non-interest bearing demand deposits, contributed to a net income of $518,862, or $.09 per share, for the first nine months of 2011. Earnings for the first nine months of 2010 totaled $920,228, or $.31 per share. Following a $1.3 million provision for loan losses, Puget Sound Bank lost $350,406, or $.23 per share, in the third quarter ended September 30, 2011. The provision more than covered a $1.0 million charge-off on loans to a single borrower.

"While our asset quality remains well above average for both the region and the nation, we are not immune to the difficult regional economic conditions. In the third quarter, we had two loans related to a single commercial loan borrower that we moved quickly to charge off to market value and bolster reserves," said Jim Mitchell, President and Chief Executive Officer. "Although third quarter results were impacted by the charge-off, we remain very well capitalized and profitable for the full year." At September 30, 2011, the allowance for loan losses was $3.5 million, or 1.84% of total loans and nonperforming assets were only 1.29% of total assets.

"Our accomplishments this year are notable, and we continue to focus on developing new relationships with businesses in the Puget Sound region. Year-to-date, we have $18.0 million of loan growth, of which almost $14.0 million are loans to businesses," continued Mitchell. "In September, Puget Sound Bank was named one of Washington's 100 fastest growing private companies, having achieved year-over-year revenue growth between 2008 and 2010 – no easy feat emerging from the recession." Puget Sound Bank was the only bank in the top 100 list.

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

• Total loans grew 15% from a year ago, to $189.9 million, and increased 8% from the preceding quarter.
• Revenues grew 30% for the first nine months of 2011, to $7.3 million.
• Non-interest bearing demand deposits jumped 98% to $69.4 million from a year earlier and account for 33% of total deposits.
• The net interest margin (NIM) was 4.34% year-to-date, up 83 basis points from the same period a year ago; NIM improved by 52 basis point in the quarter, to 4.09%, compared to the third quarter in 2010.
• Tangible book value per share grew 3% to $9.90 from a year earlier.
• Capital ratios continue to substantially exceed regulatory requirements for a well-capitalized financial institution with total risk-based capital at 16.3%.
• In August, Puget Sound Bank fully redeemed the $4.7 million of preferred stock issued through the Treasury's Capital Purchase program.
• Net charge-offs totaled $1.0 million in the third quarter of 2011, which was more than covered by the $1.3 million provision for loan losses.

Balance Sheet and Credit Quality

Puget Sound's assets totaled $243.9 million at September 30, 2011, compared to $225.4 million at June 30, 2011, and $234.2 million a year ago.

The loan portfolio totaled $189.9 million at the end of the quarter, an increase of 8% from $175.4 million at June 30, 2011, and up 15% from $165.5 million at the end of the third quarter a year ago. "As a strong business bank, we are able to deploy capital and make good quality loans, helping businesses in the region expand and create jobs," Mitchell added.

At the end of September 30, 2011, Puget Sound Bank's loan portfolio is well diversified with commercial and industrial (C&I) loans, including owner-occupied commercial real estate loans, accounted for 64% of the loan portfolio, with commercial real estate loans representing 25%, and private banking and other loans representing 11% of the loan portfolio at the end of September.

Deposits totaled $210.0 million at September 30, 2011, up 7% from the prior quarter and an increase of 2% from a year ago. Noninterest-bearing deposits at the end of September, almost doubled during the past year, and accounted for 33% of total deposits, compared to 17% a year ago. Money market and savings accounts were 34% of Puget Sound's total deposits. "We do not have any traditional brokered deposits in our deposit base, which contributes to our stability," said Phil Mitterling, Chief Financial Officer.

Nonperforming assets (NPAs) stood at $3.1 million, or 1.29% of total assets at September 30, 2011, compared to $2.7 million, or 1.19% of total assets at the end of June 2011, and $1.9 million, or 0.83% of assets a year ago. "Despite the slightly elevated level of nonperformers in the third quarter, the level of criticized loans fell by 23% from a year ago. The charge-off taken in the quarter was isolated to one borrower, and we dealt with the problem loan swiftly," added Mitterling. The allowance for loan losses at September 30, 2011, totaled $3.5 million, representing 1.84% of total loans. Puget Sound Bank has no real estate owned properties (OREO) on its books at the end of the quarter.

Review of Operations

Revenue (net interest income plus other operating income) increased 30% in the first nine months of 2011, to $7.3 million, compared to $5.6 million in the same period a year ago.

Puget Sound's net interest margin increased 83 basis points to 4.34% for the first nine months of 2011, from 3.51% in the like period a year ago. The net interest margin was 4.09% in the third quarter of 2011, compared to 3.57% in the third quarter a year ago.

The efficiency ratio improved to 67.9% for the third quarter of 2011 from 68.2% in the third quarter a year ago. Management continues to focus on controlling and managing 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.