**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, DC 20549**

 

----

 

**FORM 10-QSB**

 

**(MarkOne)**

 

**ý****        ****QUARTERLY REPORT PURSUANT TO SECTION 13OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended September 30,2005**

 

**o****        ****TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934**

 

**For the transition period from                to                **

 

**Commission file number 0-50970**

 

**PSB Holdings, Inc.**

(Exact name of registrant as specified in its charter)

 
| **United States**                                                                   |   | **42-1597948**                    |
|-------------------------------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or  organization)                     |   | (IRS Employer Identification No.) |
|                                                                                |
| **40 Main Street, Putnam, Connecticut 06260**                                       |
| (Address of principal executive offices)                                            |
|                                                                                |
| **(860) 928-6501**                                                                  |
| (Issuer’s telephone number)                                                    |
|                                                                                |
| **N/A**                                                                             |
| (Former name, former address and former fiscal year,  if changed since last report) |

 

Indicate by check markwhether the registrant:  (1) hasfiled all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

 
| Yes  ý |   | No  o |
|-----------------------|--------|-----------------|

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).

 
| Yes  o |   | No  ý |
|------------------|--------|----------------------|

 

Indicate by check markwhether the Registrant is a shell company as defined in Rule 12b-2 of theExchange Act o  YES  ý NO

 

As of September 30,2005, there were 6,943,125 shares of the registrant’s common stock outstanding.

 

TransitionalSmall Business Disclosure Format Yes  o  No  ý

 

 

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PSB Holdings, Inc.

 

Table of Contents

 
| **Part I.**  | **FINANCIAL  INFORMATION**                                                                                                 |   |
|-------------------|----------------------------------------------------------------------------------------------------------------------------|--------|
|              |                                                                                                                       |   |
| Item 1.           | Financial  Statements                                                                                                      |   |
|              |                                                                                                                       |   |
|              | Consolidated  Statements of Financial Condition at September 30, 2005 (Unaudited) and June 30,  2005 (Unaudited) |   |
|              |                                                                                                                       |   |
|              | Consolidated  Statements of Income for the Three Months Ended September 30, 2005 and  2004 (Unaudited)                |   |
|              |                                                                                                                       |   |
|              | Consolidated  Statements of Cash Flows for the Three Months Ended September 30, 2005  and 2004 (Unaudited)            |   |
|              |                                                                                                                       |   |
|              | Notes  to Financial Statements (Unaudited)                                                                                 |   |
|              |                                                                                                                       |   |
| Item 2.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                |   |
|              |                                                                                                                       |   |
| Item 3.           | Controls  and Procedures                                                                                                   |   |
|              |                                                                                                                       |   |
| **Part II.** | **OTHER  INFORMATION**                                                                                                     |   |
|              |                                                                                                                       |   |
| Item 1.           | Legal  Proceedings                                                                                                         |   |
|              |                                                                                                                       |   |
| Item 2.           | Unregistered  Sales of Equity Securities and Use of Proceeds                                                               |   |
|              |                                                                                                                       |   |
| Item 3.           | Defaults  Upon Senior Securities                                                                                           |   |
|              |                                                                                                                       |   |
| Item 4.           | Submission  of Matters to a Vote of Security Holders                                                                       |   |
|              |                                                                                                                       |   |
| Item 5.           | Other  Information                                                                                                         |   |
|              |                                                                                                                       |   |
| Item 6.           | Exhibits                                                                                                                   |   |
|              |                                                                                                                       |   |
| SIGNATURES        |                                                                                                                       |

 

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**Part I.  FINANCIAL INFORMATION**

 

Item 1.  Financial Statements

 

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**PSB Holdings, Inc.**

 

Consolidated Statementsof Financial Condition

(Unaudited)

 
| ** **                                                                                                                       | ** **   | **September 30,**                | ** **   | **June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|--------------|---------------------------------------|--------------|-------------------|------------|
| ** **                                                                                                                       | ** **   | **2005**                              | ** **   | **2005**          | ** ** |
| *** ***                                                                                                                     | *** *** | **(in thousands except share  data)** | *** *** |
| **ASSETS**                                                                                                                       |         |                                  |         |              |       |
| Cash and due  from depository institutions                                                                                       |         | $                                     | 9,945        |              | $          | 7,705 |   |
| Federal funds  sold                                                                                                              |         | —                                |         | —            |       |
| Available-for-sale  securities                                                                                                   |         | 154,060                               |         | 153,405           |       |
|                                                                                                                             |         |                                  |         |              |       |
| Loans  receivable, gross                                                                                                         |         | 172,545                               |         | 166,365           |       |
| Allowance for  loan losses                                                                                                       |         | (1,466                                | )            | (1,359            | )          |
| Loans  receivable, net                                                                                                           |         | 171,079                               |         | 165,006           |       |
|                                                                                                                             |         |                                  |         |              |       |
| Premises and  equipment, net                                                                                                     |         | 4,547                                 |         | 4,514             |       |
| Accrued income  receivable                                                                                                       |         | 1,599                                 |         | 1,571             |       |
| BOLI                                                                                                                             |         | 2,292                                 |         | 2,270             |       |
| Deposit for  branch acquisitions                                                                                                 |         | 1,888                                 |         | 1,888             |       |
| Other assets                                                                                                                     |         | 1,926                                 |         | 1,276             |       |
| **TOTAL  ASSETS**                                                                                                                | ** **   | **$**                                 | **347,336**  | ** **        | **$**      | **337,635** | ** ** |
| ** **                                                                                                                       | ** **   | ** **                            | ** **   | ** **        | ** ** |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                   |         |                                  |         |              |       |
| Liabilities                                                                                                                      |         |                                  |         |              |       |
| Deposits                                                                                                                         |         | $                                     | 232,081      |              | $          | 218,123 |   |
| Borrowed funds                                                                                                                   |         | 60,535                                |         | 63,734            |       |
| Mortgagors’ escrow accounts                                                                                                 |         | 550                                   |         | 1,029             |       |
| Other liabilities                                                                                                                |         | 1,461                                 |         | 1,729             |       |
| Total  Liabilities                                                                                                               |         | 294,627                               |         | 284,615           |       |
|                                                                                                                             |         |                                  |         |              |       |
| Stockholders’  Equity                                                                                                       |         |                                  |         |              |       |
| Preferred stock,  $.10 par value, 1,000,000 shares authorized, no shares issued and outstanding                                  |         | —                                |         | —            |       |
| Common stock, $.10 par value, 12,000,000 shares  authorized, 6,943,125 shares issued and outstanding at September 30,  2005 |         | 694                                   |         | 694               |       |
| Additional  paid-in capital                                                                                                      |         | 30,446                                |         | 30,446            |       |
| Unearned ESOP  shares                                                                                                            |         | (2,472                                | )            | (2,472            | )          |
| Retained  earnings                                                                                                               |         | 24,272                                |         | 23,808            |       |
| Accumulated  other comprehensive income (loss)                                                                                   |         | (231                                  | )            | 544               |       |
| Total  Stockholders’ Equity                                                                                                 |         | 52,709                                |         | 53,020            |       |
| **TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                             | ** **   | **$**                                 | **347,336**  | ** **        | **$**      | **337,635** | ** ** |

 

See notes to consolidated financial statements.

 

1

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**PSB Holdings, Inc.**

 

Consolidated Statementsof Income

(Unaudited)

 
| ** **                                             | ** ** | **Three Months Ended  September 30,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                             | ** ** | **2005**                                   | ** ** | **2004** | ** ** |
| ** **                                             | ** ** | **(in thousands except share  data)**      | ** ** |
| Interest income:                                       |       |                                       |       |   |   |
| Interest on loans                                      |       | $                                          | 2,561      |   | $ | 2,024 |   |
| Interest and dividends on investments and deposits     |       | 1,603                                      |       | 1,375 |   |
| Total interest income                                  |       | 4,164                                      |       | 3,399 |   |
|                                                   |       |                                       |       |   |   |
| Interest expense:                                      |       |                                       |       |   |   |
| Deposits and escrow                                    |       | 1,127                                      |       | 884 |   |
| Borrowed money                                         |       | 595                                        |       | 422 |   |
| Total interest expense                                 |       | 1,722                                      |       | 1,306 |   |
| Net interest income                                    |       | 2,442                                      |       | 2,093 |   |
|                                                   |       |                                       |       |   |   |
| Provision for loan losses                              |       | 20                                         |       | 23 |   |
| Net interest income after provision for loan losses    |       | 2,422                                      |       | 2,070 |   |
|                                                   |       |                                       |       |   |   |
| Noninterest income:                                    |       |                                       |       |   |   |
| Fees for services                                      |       | 281                                        |       | 206 |   |
| Net gain on sale of loans                              |       | 30                                         |       | 21 |   |
| Commissions from brokerage service                     |       | 29                                         |       | — |   |
| Other income                                           |       | 48                                         |       | 49 |   |
| Net investment security gains                          |       | 120                                        |       | — |   |
| Total noninterest income                               |       | 508                                        |       | 276 |   |
|                                                   |       |                                       |       |   |   |
| Noninterest expense:                                   |       |                                       |       |   |   |
| Compensation and benefits                              |       | 1,174                                      |       | 1,005 |   |
| Occupancy and equipment                                |       | 243                                        |       | 189 |   |
| Data processing                                        |       | 153                                        |       | 132 |   |
| Advertising and marketing                              |       | 57                                         |       | 58 |   |
| Other noninterest expense                              |       | 458                                        |       | 367 |   |
| Total noninterest expense                              |       | 2,085                                      |       | 1,751 |   |
| Income before income tax expense                       |       | 845                                        |       | 595 |   |
|                                                   |       |                                       |       |   |   |
| Income tax expense                                     |       | 233                                        |       | 170 |   |
| **NET INCOME**                                         | ** ** | **$**                                      | **612**    | ** ** | **$** | **425** | ** ** |
| Net income per common share Basic and Diluted          |       | $                                          | 0.09       |   | N/A |   |
| Weighted-average shares outstanding-Basic and  Diluted |       | 6,943,125                                  |       | N/A |   |

 

See notes to consolidated financialstatements.

 

2

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**PSB Holdings, Inc.**

 

Consolidated Statementsof Cash Flows

(Unaudited)

 
| ** **                                                                     | ** **   | **For the Three Months  Ended September 30,** | ** **   |
|--------------------------------------------------------------------------------|--------------|----------------------------------------------------|--------------|
| ** **                                                                     | ** **   | **2005**                                           | ** **   | **2004** | ** ** |
| *** ***                                                                   | *** *** | **(in thousands)**                                 | *** *** |
| **Cash  flows from operating activities**                                      |         |                                               |         |   |   |
| Net income                                                                     |         | $                                                  | 612          |   | $ | 425 |   |
| Adjustments to  reconcile net income to cash provided by operating activities: |         |                                               |         |   |   |
| Provision for loan losses                                                      |         | 20                                                 |         | 23 |   |
| Depreciation                                                                   |         | 130                                                |         | 87 |   |
| Net amortization on available-for-sale securities                              |         | 99                                                 |         | 113 |   |
| Amortization of premium on purchased loans                                     |         | 12                                                 |         | — |   |
| Net realized investment security gains                                         |         | (120                                               | )            | — |   |
| Originations of loans for resale                                               |         | (3,056                                             | )            | (2,216 | ) |
| Proceeds from sale of loans                                                    |         | 2,580                                              |         | 3,861 |   |
| Gain on sale of loans                                                          |         | (30                                                | )            | (21 | ) |
| Accrued earnings on bank owned life insurance                                  |         | (22                                                | )            | (26 | ) |
| Net change in:                                                                 |         |                                               |         |   |   |
| Accrued income receivable                                                      |         | (28                                                | )            | (13 | ) |
| Deferred loan fees                                                             |         | (36                                                | )            | (10 | ) |
| Other assets                                                                   |         | (156                                               | )            | (457 | ) |
| Stock offering escrow account                                                  |         | —                                             |         | 64,282 |   |
| Other liabilities                                                              |         | (268                                               | )            | (237 | ) |
| **Net cash provided by operating activities**                                  |         | (263                                               | )            | 65,811 |   |
| **Cash  flows from investing activities**                                      |         |                                               |         |   |   |
| Proceeds from  sales of available-for-sale securities                          |         | 1,377                                              |         | 1,000 |   |
| Proceeds from  maturities of available-for-sale securities                     |         | 16,695                                             |         | 6,179 |   |
| Purchase of  available-for-sale securities                                     |         | (19,975                                            | )            | (36,386 | ) |
| Loan  originations net of principal payments                                   |         | (5,563                                             | )            | (6,473 | ) |
| Purchase of  premises and equipment                                            |         | (163                                               | )            | (98 | ) |
| **Net cash used by investing activities**                                      |         | (7,629                                             | )            | (35,778 | ) |
| **Cash  flows from financing activities**                                      |         |                                               |         |   |   |
| Change in  savings and demand deposit accounts                                 |         | (2,205                                             | )            | (1,000 | ) |
| Change in time  deposit accounts                                               |         | 16,163                                             |         | 2,325 |   |
| Proceeds from  long term borrowings                                            |         | 5,000                                              |         | — |   |
| Repayments of  long term borrowings                                            |         | (151                                               | )            | (598 | ) |
| Net change in  short term borrowings                                           |         | (8,048                                             | )            | 1,816 |   |
| Change in  mortgagors’ escrow account                                     |         | (479                                               | )            | (468 | ) |
| Dividends  paid/declared                                                       |         | (148                                               | )            | — |   |
| **Net cash provided by financing activities**                                  |         | 10,132                                             |         | 2,075 |   |
| Increase in cash  and cash equivalents                                         |         | 2,240                                              |         | 32,108 |   |
| Cash and cash  equivalents at beginning of year                                |         | 7,705                                              |         | 7,427 |   |
| **Cash and cash equivalents at end of year**                                   |         | $                                                  | 9,945        |   | $ | 39,535 |   |
| ***Supplemental  disclosures***                                                |         |                                               |         |   |   |
| Cash paid during  the year for:                                                |         |                                               |         |   |   |
| Interest                                                                       |         | $                                                  | 1,629        |   | $ | 1,278 |   |
| Income taxes                                                                   |         | $                                                  | 162          |   | $ | 102 |   |

 

See notes to consolidated financialstatements.

 

3

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**PSB Holdings, Inc.**

 

Notes to ConsolidatedFinancial Statements

(Unaudited)

 

**NOTE 1 –Organization**

 

PSB Holdings, Inc.(Company) is a federally chartered holding company formed on May 27, 2003for the purpose of acquiring all of the common stock of Putnam Savings Bank(Bank) concurrent with the Bank’s reorganization from a mutual savingsinstitution to the mutual holding company form of organization.  No shares were offered to the public as partof this reorganization.

 

On October 4, 2004,the Company sold 3,089,691 shares of its common stock to depositors of the Bankand certain other persons, and issued shares of its common stock to PutnamBancorp, MHC. After the stock offering, purchasers in the offering owned 44.5%of outstanding shares of common stock, and Putnam Bancorp, MHC owned 53.7% ofthe Company’s outstanding shares of common stock.  In addition, shares of common stock, equal to4% of the shares sold were issued to a charitable foundation established by theBank.

 

Costs incurred inconnection with the offering were recorded as a reduction of the proceeds fromthe offering and amounted to $1.1 million.

 

**NOTE  2 – Basis of Presentation**

 

The accompanyingunaudited condensed consolidated interim financial statements have beenprepared in accordance with accounting principles generally accepted in theUnited States of America for interim financial statements and the instructionsto Form 10-QSB, and accordingly do not include all of the information andfootnotes required by accounting principles generally accepted in the UnitedStates of America for complete financial statements.  In the opinion of management, theaccompanying unaudited financial statements reflect all adjustments necessary,consisting of only normal recurring accruals, to present fairly the financialposition, results of operations and cash flows of the Company for the periodspresented.  In preparing the interimfinancial statements, management is required to make estimates and assumptionsthat affect the reported amounts of assets and liabilities as of the date ofthe balance sheet and revenues and expenses for the period.  Material estimates that are particularlysusceptible to significant changes in the near-term relate to the determinationof the allowance for losses on loans and the valuation of real estate acquiredin connection with foreclosure or in satisfaction of loans.  While management uses available informationto recognize losses on loans and foreclosed real estate, future additions tothe allowance may be necessary based on changes in economic conditions,particularly in Connecticut.  Actualresults could differ significantly from those estimates.  The interim results of operations are notnecessarily indicative of the operating results to be expected for the yearending June 30, 2006.

 

4

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**NOTE 3 –Investment Securities**

 

The carrying value andestimated market values of investment securities are as follows:

 
| ** **                               | ** ** | **September 30, 2005** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Amortized**               | ** ** | **Gross Unrealized** | ** ** | **Estimated  Market** | ** ** |
| ** **                               | ** ** | **Cost Basis**              | ** ** | **Gain** | ** ** | **(Loss)** | ** ** | **Value** | ** ** |
| ** **                               |       | **(in thousands)**          |       |
| Debt securities:                         |       |                        |       |   |   |   |   |   |   |
| US government  and agency obligations:   |       |                        |       |   |   |   |   |   |   |
| From one through five years              |       | $                           | 27,062     |   | $ | — |   | $ | (457 | ) | $ | 26,605 |   |
|                                     |       | 27,062                      |       | — |   | (457 | ) | 26,605 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| State agency and  municipal obligations: |       |                        |       |   |   |   |   |   |   |
| From five through ten years              |       | 609                         |       | 27 |   | — |   | 636 |   |
| After ten years                          |       | 8,513                       |       | 461 |   | — |   | 8,974 |   |
|                                     |       | 9,122                       |       | 488 |   | — |   | 9,610 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Corporate bonds  and other obligations:  |       |                        |       |   |   |   |   |   |   |
| Due within one year                      |       | 6,182                       |       | 33 |   | (10 | ) | 6,205 |   |
| From one through five years              |       | 7,933                       |       | 21 |   | (99 | ) | 7,855 |   |
| After ten years                          |       | 8,041                       |       | 427 |   | (207 | ) | 8,261 |   |
|                                     |       | 22,156                      |       | 481 |   | (316 | ) | 22,321 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Mortgage-backed  securities              |       | 74,609                      |       | 182 |   | (884 | ) | 73,907 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Total debt securities                    |       | 132,949                     |       | 1,151 |   | (1,657 | ) | 132,443 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Marketable  equity securities:           |       |                        |       |   |   |   |   |   |   |
| Common stock                             |       | 128                         |       | 83 |   | (1 | ) | 210 |   |
| Preferred stock                          |       | 17,606                      |       | 45 |   | — |   | 17,651 |   |
|                                     |       | 17,734                      |       | 128 |   | (1 | ) | 17,861 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| FHLB restricted  stock                   |       | 3,756                       |       | — |   | — |   | 3,756 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| Total equity securities                  |       | 21,490                      |       | 128 |   | (1 | ) | 21,617 |   |
|                                     |       |                        |       |   |   |   |   |   |   |
| **Total  available-for-sale securities** |       | $                           | 154,439    |   | $ | 1,279 |   | $ | (1,658 | ) | $ | 154,060 |   |

 

5

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| ** **                               | ** **   | **June 30, 2005** | ** ** |
|------------------------------------------|--------------|------------------------|------------|
| ** **                               | ** **   | **Amortized**          | ** ** | **Gross Unrealized** | ** ** | **Estimated** | ** ** |
| ** **                               | ** **   | **Cost Basis**         | ** ** | **Gain** | ** ** | **(Loss)** | ** ** | **Market Value** | ** ** |
|                                     | *** *** | **(in thousands)**     |       |
| Debt securities:                         | ** **   | ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| US government and agency obligations:    |         |                   |       |   |   |   |   |   |   |   |   |   |   |
| From one through five years              |         | $                      | 25,564     |   | $ | 3 |   | $ | (267 | ) | $ | 25,300 |   |
|                                     |         | 25,564                 |       | 3 |   | (267 | ) | 25,300 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| State agency and  municipal obligations: |         |                   |       |   |   |   |   |   |   |
| From five through ten years              |         | 609                    |       | 31 |   | — |   | 640 |   |
| After ten years                          |         | 8,512                  |       | 554 |   | — |   | 9,066 |   |
|                                     |         | 9,121                  |       | 585 |   | — |   | 9,706 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| Corporate bonds  and other obligations:  |         |                   |       |   |   |   |   |   |   |
| Due within one year                      |         | 8,200                  |       | 63 |   | (11 | ) | 8,252 |   |
| From one through five years              |         | 7,973                  |       | 47 |   | (89 | ) | 7,931 |   |
| After ten years                          |         | 8,040                  |       | 534 |   | (260 | ) | 8,314 |   |
|                                     |         | 24,213                 |       | 644 |   | (360 | ) | 24,497 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| Mortgage-backed  securities              |         | 65,866                 |       | 380 |   | (357 | ) | 65,889 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| Total debt securities                    |         | 124,764                |       | 1,612 |   | (984 | ) | 125,392 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| Marketable  equity securities:           |         |                   |       |   |   |   |   |   |   |
| Common stock                             |         | 386                    |       | 202 |   | — |   | 588 |   |
| Preferred stock                          |         | 23,608                 |       | 61 |   | — |   | 23,669 |   |
|                                     |         | 23,994                 |       | 263 |   | — |   | 24,257 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| FHLB restricted  stock                   |         | 3,756                  |       | — |   | — |   | 3,756 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| Total equity securities                  |         | 27,750                 |       | 263 |   | — |   | 28,013 |   |
|                                     |         |                   |       |   |   |   |   |   |   |
| **Total  available-for-sale securities** |         | $                      | 152,514    |   | $ | 1,875 |   | $ | (984 | ) | $ | 153,405 |   |

 

Gross gains of $132,000and losses of $12,000 were realized on available-for-sale securities for thethree months ended September 30, 2005. There were no realized gains orlosses for the three months ended September 30, 2004.

 

6

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**NOTE 4 –Allowance for Loan Losses**

 

The following summarizes thechanges in the allowance for loan losses for the three months ended September 30,2005:

 
| ** **                                        | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|
| ** **                                        | ** ** | **September 30,** | ** ** |
| ** **                                        | ** ** | **2005**               | ** ** | **2004** | ** ** |
| ** **                                        | ** ** | **(in thousands)**     | ** ** |
| Balance,  beginning of period                     |       | $                      | 1,359      |   | $ | 1,285 |   |
| Provision for loan losses                         |       | 20                     |       | 23 |   |
| Charge offs                                       |       | (11                    | )          | — |   |
| Recoveries                                        |       | —                 |       | 17 |   |
| Transfer from reserve for off-balance sheet items |       | 98                     |       | — |   |
| **Balance,  end of period**                       | ** ** | **$**                  | **1,466**  | ** ** | **$** | **1,325** | ** ** |

 

At September 30, 2005and September 30, 2004, the Company had loans with balances of $107,663(representing 4 loans) and $634,507 (representing 7 loans), respectively, onnonaccrual status.  The loans were notconsidered impaired.

 

**NOTE 5 –Earnings per Share and Dividends Declared**

 

As presented, basicearnings per share is computed by dividing income available to commonstockholders by the weighted average number of common shares outstanding forthe period.  Diluted earnings per sharereflect the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common stockor resulted in the issuance of common stock that then shared in the earnings ofthe entity.  Because the initial publicoffering of the Company was completed on October 4, 2004, per shareearnings data was not meaningful for the three months ended September 30,2004.

 

On September 23,2005, the Board of Directors of the Company declared a cash dividend of $0.05 ashare for stockholders of record as of October 5, 2005 and payable on October 20,2005.  The dividends declared totaling$161,000 were accrued and are included in other liabilities in the September 30,2005 Consolidated Statements of Financial Condition.  Putnam Bancorp, MHC, the mutual holdingcompany, waived the receipt of the dividend declared by the Company.

 

7

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**NOTE 6 –Comprehensive Income**

 

Statement of FinancialAccounting Standards No. 130, “Reporting Comprehensive Income” establishesstandards for disclosure of comprehensive income, which includes net income andany changes in equity from non-owner sources that are not recorded in theincome statement (such as changes in the net unrealized gains (losses) onsecurities).  The Company’s one source ofother comprehensive income is the net unrealized gain (loss) on securities.

 
| ** **                                                                          | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                          | ** ** | **September 30,** | ** ** |
| ** **                                                                          | ** ** | **2005**               | ** ** | **2004** | ** ** |
| ** **                                                                          | ** ** | **(in thousands)**     | ** ** |
| Net Income                                                                          |       | $                      | 612        |   | $ | 425 |   |
|                                                                                |       |                   |       |   |   |   |   |
| Other comprehensive income (loss):                                                  |       |                   |       |   |   |
| Net unrealized holding gains (losses) on available-for-sale  securities             |       | (1,150                 | )          | 1,106 |   |
| Reclassification adjustment for gain recognized in  net income                      |       | (120                   | )          | — |   |
| Other comprehensive income (loss) before tax expense                                |       | (1,270                 | )          | 1,106 |   |
| Income tax expense (benefit) related to items of  other comprehensive income (loss) |       | 495                    |       | (431 | ) |
| Other comprehensive income net of tax                                               |       | (775                   | )          | 675 |   |
| **Total comprehensive income (loss)**                                               | ** ** | **$**                  | **(163**   | **)** | **$** | **1,100** | ** ** |

 

**NOTE7  – Commitment to Extend Credit**

 

The Company is party tofinancial instruments with off-balance sheet risk in the normal course ofbusiness to meet the financing needs of its customers. These financialinstruments include commitments to extend credit. These commitments involve, tovarying degrees, elements of credit and interest rate risk in excess of theamount recognized in the statement of financial condition.

 

The contractual amountsof outstanding commitments were as follows:

 
| ** **                     | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|--------------------------------|------------|------------------------|------------|-------------------|------------|
| ** **                     | ** ** | **2005**               | ** ** | **2005**          | ** ** |
| ** **                     | ** ** | **(in thousands)**     | ** ** |
| Commitments to  extend credit: |       |                   |       |              |       |
| Loan commitments               |       | $                      | 5,476      |              | $          | 3,476 |   |
| Unadvanced construction loans  |       | 4,282                  |       | 4,220             |       |
| Unadvanced lines of credit     |       | 12,365                 |       | 12,301            |       |
| Standby letters of credit      |       | 144                    |       | 144               |       |
| Outstanding commitments        |       | $                      | 22,267     |              | $          | 20,141 |   |

 

**NOTE 8 –Subsequent Events**

 

On October 14, 2005,Putnam Savings Bank, the wholly owned subsidiary of the Company, completed itsacquisition of three branches from People’s Bank, Bridgeport, Connecticutlocated in Windham and New London Counties, Connecticut.  As of October 14, 2005, the deposits ofthese three branches aggregated approximately $60.6 million.

 

8

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**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

Thefollowing analysis discusses changes in the financial condition and results ofoperations at and for the three  monthsended September 30, 2005 and 2004, and should be read in conjunction withthe Company’s Condensed Consolidated Financial Statements and the notesthereto, appearing in Part I, Item 1 of this quarterly report.  These financial statements should be read inconjunction with the 2005 consolidated financial statements and notes theretoincluded in the Company’s Form 10-KSB filed with the SEC on September 19,2005.

 

Theyear-end condensed balance sheet data were derived from audited financialstatements, but do not include all disclosures required by GAAP.

 

**Forward-LookingStatements**

 

This report containsforward-looking statements within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the SecuritiesExchange Act of 1934, as amended.  TheCompany intends such forward-looking statements to be covered by the safeharbor provisions for forward-looking statements contained in the PrivateSecurities Litigation Reform Act of 1995, and is including this statement forpurposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions anddescribe future plans, strategies and expectations of the Company, aregenerally identified by use of the words “believe,” “expect,” “intend,” “anticipate,”“estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effect of futureplans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations ofthe Company and its subsidiary include, but are not limited to, changes in:interest rates, general economic conditions, legislation and regulations,monetary and fiscal policies of the U.S. Government, including policies of theU.S. Treasury and the Federal Reserve Board, the quality or composition of theloan or investment portfolios, demand for loan products, deposit flows,competition, demand for financial services in the Company’s market area andaccounting principles and guidelines. These risks and uncertainties should be considered in evaluatingforward-looking statements and undue reliance should not be placed on suchstatements.  Further informationconcerning the Company and its business, including additional factors thatcould materially affect the Company’s financial results, is included in theCompany’s filings with the Securities and Exchange Commission.

 

Except as required byapplicable law and regulation, the Company does not undertake — andspecifically disclaims any obligation — to publicly release the result of anyrevisions that may be made to any forward-looking statements to reflect eventsor circumstances after the date of such statements or to reflect the occurrenceof anticipated or unanticipated events.

 

**Overview**

 

The Company’s results ofoperations depend primarily on net interest and dividend income, which is thedifference between the interest and dividend income earned on itsinterest-earning assets, such as loans and securities, and the interest expenseon its interest-bearing liabilities, such as deposits and borrowings. TheCompany also generates noninterest income, primarily from fees and servicecharges.  Gains on sales of loans andsecurities and cash surrender value of life insurance policies are addedsources of noninterest income.  TheCompany’s noninterest expense primarily consists of employee compensation andbenefits, occupancy and equipment expense, advertising, data processing,professional fees and other operating expenses.

 

**Comparisonof Financial Condition at September 30, 2005 and June 30, 2005**

 

**Assets**

 

Totalassets of the Company were $347.3 million at September 30, 2005, anincrease of $9.7 million or 2.9%, from $337.6 million at June 30, 2005.  Investments in available-for-sale securitiesincreased $655,000 or .4%, to $154.1 million at September 30, 2005compared to $153.4 million at June 30, 2005.  There were no Federal funds sold as of September 30,2005 or June 30, 2005.  Total loans outstandingincreased $6.2 million to $172.5 million at September 30, 2005 from $166.3million at June 30, 2005.  Thisincrease was primarily due to an increase of $4.0 million in residentialmortgage loans.  Commercial loansincreased $2.2 million, or 6.9%, from June 30, 2005 to September 30,2005, which reflected the continued strong performance by the Company’sBusiness Banking Group.

 

9

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**Allowancefor Loan Losses**

 

The Company determinesthe adequacy of the allowance for loan losses on a quarterly basis. We considera variety of factors in establishing this estimate including, but not limitedto, current economic conditions, delinquency statistics, geographic andindustry concentrations, the adequacy of the underlying collateral, thefinancial strength of the borrower, results of internal and external loanreviews and other relevant factors.  Thisevaluation is inherently subjective as it requires material estimates by managementthat may be susceptible to significant change. The table below indicates the relationships between the allowance forloan losses, total loans outstanding and nonperforming loans at September 30,2005 and June 30, 2005.

 

**Past dueand Nonperforming loans**

 

The following table setsforth information regarding past due and non-accrual loans:

 
| ** **                         | ** ** | **September 30,**     | ** ** | **June 30,** | ** ** |
|------------------------------------|------------|----------------------------|------------|-------------------|------------|
| ** **                         | ** ** | **2005**                   | ** ** | **2005**          | ** ** |
| ** **                         | ** ** | **(dollars in thousands)** | ** ** |
| Allowance for  loan losses         |       | $                          | 1,466      |              | $          | 1,359 |   |
| Gross loans  outstanding           |       | $                          | 172,454    |              | $          | 166,365 |   |
| Nonperforming  loans               |       | $                          | 108        |              | $          | 86 |   |
|                               |       |                       |       |              |       |   |   |
| Allowance/gross  loans outstanding |       | 0.85                       | %          | 0.82              | %          |
| Allowance/nonperforming  loans     |       | 1357                       | %          | 1580              | %          |

 

**Liabilities**

 

Total liabilitiesincreased $10.0 million, or 3.5%, from $284.6 million at June 30, 2005 to$294.6 million at September 30, 2005, primarily due to an increase indeposits of $14.0 million and a decrease in other borrowed funds of $3.2million.  Deposits increased $14.0million, or 6.4%, from $218.1 million at June 30, 2005 to $232.1 millionat September 30, 2005.  Of this$14.0 million increase, $13.6 million was brokered certificates of deposits.  The brokered deposits were used to pre-investa portion of the deposits that were acquired through the branch acquisitionthat closed in October 2005.

 

**Stockholders’Equity**

 

Total stockholders’ equitydecreased $311,000 to $52.7 million at September 30, 2005 from $53.0million at June 30, 2005.  This wasprimarily due to the decrease in the accumulated other comprehensive income(loss) of $775,000, and an increase in net income of $612,000. The unrealizedloss in the available-for-sale securities was attributable solely to interestrate movements. Management does not consider the loss to be other thantemporary.

 

**Comparisonof Operating Results for the Three Months Ended September 30, 2005 and 2004**

 

## **Net Income**

 

Net income increased $187,000,or 44.0%, to $612,000 for the three months ended September 30, 2005 from $425,000for the three months ended September 30, 2004.  The increase in net income resulted primarilyfrom an improvement in net interest income and noninterest income, which waspartially offset by an increase in noninterest expense.

 

**Interestand Dividend Income**

 

Interestand dividend income increased by $765,000, or 22.5%, to $4.2 million for thethree months ended September 30, 2005 from $3.4 million for the threemonths ended September 30, 2004. The increase in interest and dividend income resulted primarily from anincrease of $44.5 million, or 15.6%, in average interest-bearing assets  and an increase of 27 basis points in the averageyield on our interest-earning assets between the periods.  This increase was primarily due to the netproceeds of the stock offering being deployed into loans and investments inaddition to the pre-investing of a portion of the deposits that were acquiredin the branch acquisition that closed in October 2005.  The yield increased to 5.04% for the threemonths ended September 30, 2005 from 4.77% for the three months ended September 30,2004.  Interest income on loans increasedby $537,000, or 26.5%, to $2.6 million from $2.0 million.

 

10

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Interestand dividend income on investment securities increased $228,000, or 16.6%, to $1.6million for the three months ended September 30, 2005 from $1.4 millionfor the three months ended September 30, 2004.

 

**Interest Expense**

 

Interestexpense increased by $416,000, or 31.9%, to $1.7 million for three months endedSeptember 30, 2005 from $1.3 million for the three months ended September 30,2004.  The increase in interest expenseresulted primarily from an increase in average interest-bearing liabilities of$18.9 million, or 7.7% from period to period and an increase of 47 basis pointsin the average cost of our interest-bearing liabilities to 2.60% for the threemonths ended September 30, 2005 from 2.12% for the three months ended September 30,2004.  This increase was primarily due toan increase of $7.4 million in average interest-bearing deposits and anincrease of $11.5 million in average other borrowed money from September 30,2004 to September 30, 2005.

 

**Net Interest and Dividend Income**

 

Netinterest and dividend income increased $349,000, or 16.7%, to $2.4 million forthe three months ended September 30, 2005 from $2.1 million for threemonths ended September 30, 2004. The primary reason for the improvement in our net interest and dividendincome was the $25.6 million increase in our net interest-earning assets to $66.7million for the three months ended September 30, 2005 from $41.1 millionfor the three months ended September 30, 2004.  The net interest margin increased to 2.96%for the three months ended September 30, 2005 from 2.95% for the threemonths ended September 30, 2004.

 

**Provision for Loan Losses**

 

Theprovision for loan losses for the quarter ended September 30, 2005 was $20,000compared to $23,000 recorded for the three months ended September 30, 2004.

 

**Noninterest Income**

 

Noninterestincome increased $232,000, or 84.1%, to $508,000 for the three months ended September 30,2005 from $276,000 for the three months ended September 30, 2004. Theincrease in noninterest income resulted primarily from an increase in servicefee income on transaction accounts of $75,000, net investment security gains of$120,000, and net gains on loan sales of $9,000 and an increase of $29,000 in commissionsfrom brokerage services.

 

**Noninterest Expense**

 

Noninterestexpense increased by $334,000, or 19.1%, to $2.1 million for the three monthsended September 30, 2005 from $1.8 million for the three months ended September 30,2004.  The increase in noninterestexpense resulted primarily from an increase in compensation and benefits,occupancy and equipment expense and other noninterest expenses.  Compensation and benefits expense increasedby $169,000, or 16.8%, to $1.2 million for the three months ended September 30,2005 from $1.0 million for the three months ended September 30, 2004.  The primary reasons for the increase incompensation and benefits expense were increased salaries and commissions, dueto increased staffing and higher medical insurance premiums.  In addition, the current quarter included$36,000 in ESOP compensation expense as compared to no ESOP compensationexpense for the three months ended September 30, 2004.  Occupancy and equipment expense increased by$54,000, or 28.6%, to $243,000 for the three months ended September 30,2005 from $189,000 for the three months ended September 30, 2004 primarilydue to increased depreciation expense of $31,000.  Other noninterest expense, consistingprimarily of marketing, office supplies, and professional expenses increased by$111,000, or 19.9%, to $668,000 for the three months ended September 30,2005 from $557,000 for the three months ended September 30, 2004.  The increase resulted primarily fromincreased  data processing fees and othermiscellaneous expenses including a new Office of Thrift Supervision assessmentand higher professional fees related to being a public company.

 

11

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**Provision for Income Taxes**

 

Theincome tax expense increased by $63,000, or 37.1%, to $233,000 for the threemonths ended September 30, 2005 from $170,000 for the three months ended September 30,2004.  Our effective tax rate was 27.6%for the three months ended September 30, 2005, compared to 28.6% for thethree months ended September 30, 2004. The effective tax rate differed from the statutory tax rate of 34%primarily due to the dividends-received deduction applicable to certainsecurities in our investment portfolio, tax-exempt municipal income andnon-taxable bank-owned life insurance income.

 

12

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## **Average Balance Sheet**

 

The following tables set forth average balance sheets,average yields and costs, and certain other information for the periods indicated.  No tax-equivalent yield adjustments weremade, as the effect thereof was not material. All average balances are daily average balances.  Non-accrual loans were included in thecomputation of average balances, but have been reflected in the table as loanscarrying a zero yield.  The yields setforth below include the effect of deferred fees, discounts and premiums thatare amortized or accreted to interest income or expense.

 
| ** **                                                      | ** ** | **For the three months ended September 30,** | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                      | ** ** | **2005**                                          | ** ** | **2004** | ** ** |
| ** **                                                      | ** ** | **(Dollars in thousands)**                        | ** ** |
| ** **                                                      | ** ** | **Average**                                       | ** ** | **Interest/** | ** ** | **Yield/** | ** ** | **Average** | ** ** | **Interest/** | ** ** | **Yield/** | ** ** |
| ** **                                                      | ** ** | **Balance**                                       | ** ** | **Dividends** | ** ** | **Cost** | ** ** | **Balance** | ** ** | **Dividends** | ** ** | **Cost** | ** ** |
| **Interest-earning assets:**                                    |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Investment securities                                           |       | $                                                 | 155,905    |   | $ | 1,589 |   | 4.04 | % | $ | 134,067 |   | $ | 1,338 |   | 3.96 | % |
| Loans                                                           |       | 169,874                                           |       | 2,561 |   | 5.98 | % | 138,824 |   | 2,026 |   | 5.79 | % |
| Other earning assets                                            |       | 3,928                                             |       | 36 |   | 3.64 | % | 12,326 |   | 63 |   | 2.03 | % |
| Total interest-earnings assets                                  |       | 329,707                                           |       | 4,185 |   | 5.04 | % | 285,217 |   | 3,427 |   | 4.77 | % |
|                                                            |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Non-interest-earning assets                                     |       | 13,417                                            |       |   |   |   |   | 21,147 |   |   |   |   |   |
| Total assets                                                    |       | $                                                 | 343,124    |   |   |   |   |   | $ | 306,364 |   |   |   |   |   |
|                                                            |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| **Interest-bearing liabilities:**                               |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| NOW accounts                                                    |       | $                                                 | 34,433     |   | 151 |   | 1.74 | % | $ | 10,206 |   | 6 |   | 0.25 | % |
| Savings accounts                                                |       | 41,795                                            |       | 68 |   | 0.65 | % | 55,345 |   | 96 |   | 0.69 | % |
| Money market accounts                                           |       | 27,639                                            |       | 117 |   | 1.68 | % | 48,059 |   | 190 |   | 1.57 | % |
| Time deposits                                                   |       | 95,352                                            |       | 791 |   | 3.29 | % | 78,240 |   | 591 |   | 3.00 | % |
| Borrowed money                                                  |       | 63,784                                            |       | 595 |   | 3.70 | % | 52,275 |   | 424 |   | 3.22 | % |
| Total interest-bearing liabilities                              |       | 263,003                                           |       | 1,722 |   | 2.60 | % | 244,125 |   | 1,307 |   | 2.12 | % |
| Non-interest-bearing demand deposits                            |       | 26,514                                            |       |   |   |   |   | 24,349 |   |   |   |   |   |
| Other non-interest-bearing liabilities                          |       | 523                                               |       |   |   |   |   | 14,025 |   |   |   |   |   |
| Capital accounts                                                |       | 53,084                                            |       |   |   |   |   | 23,865 |   |   |   |   |   |
| Total liabilities and capital accounts                          |       | $                                                 | 343,124    |   |   |   |   |   | $ | 306,364 |   |   |   |   |   |
|                                                            |       |                                              |       |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                             |       |                                              |       | $ | 2,464 |   |   |   |   |   | $ | 2,119 |   |   |   |
| Interest rate spread                                            |       |                                              |       |   |   | 2.44 | % |   |   |   |   | 2.64 | % |
| Net interest-earning assets                                     |       | $                                                 | 66,704     |   |   |   |   |   | $ | 41,092 |   |   |   |   |   |
| Net interest margin                                             |       |                                              |       |   |   | 2.96 | % |   |   |   |   | 2.95 | % |
| Average earning assets to average interest-bearing  liabilities |       |                                              |       |   |   | 125.36 | % |   |   |   |   | 116.83 | % |

 

13

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## **Rate/Volume Analysis**

 

The following table sets forth the effects of changingrates and volumes on our net interest income for the periods indicated.  The rate column shows the effectsattributable to changes in rate (changes in rate multiplied by priorvolume).  The volume column shows theeffects attributable to changes in volume (changes in volume multiplied byprior rate).  The net column representsthe sum of the prior columns.  Forpurposes of this table, changes attributable to changes in both rate and volumethat cannot be segregated have been allocated proportionately based on the changesdue to rate and the changes due to volume.

 
| ** **                              | ** ** | **2005 Compared to 2004**     | ** ** |
|-----------------------------------------|------------|-------------------------------|------------|
| ** **                              | ** ** | **Increase(Decrease) Due to** | ** ** |
| **(Dollars in Thousands)**              | ** ** | **Rate**                      | ** ** | **Volume** | ** ** | **Net** | ** ** |
| **INTEREST-EARNING  ASSETS:**           |       |                          |       |   |   |   |   |
| Interest and  Dividend Income:          |       |                          |       |   |   |   |   |
| Investment  securities                  |       | $                             | 29         |   | $ | 222 |   | $ | 251 |   |
| Loans                                   |       | 69                            |       | 466 |   | 535 |   |
| Other  interest-earning assets          |       | 169                           |       | (196 | ) | (27 | ) |
| **TOTAL  INTEREST-EARNING ASSETS**      |       | 267                           |       | 492 |   | 759 |   |
|                                    |       |                          |       |   |   |   |   |
| **INTEREST-BEARING  LIABILITIES:**      |       |                          |       |   |   |   |   |
| Interest  Expense:                      |       |                          |       |   |   |   |   |
| NOW accounts                            |       | 104                           |       | 41 |   | 145 |   |
| Savings accounts                        |       | (6                            | )          | (22 | ) | (28 | ) |
| Money Market  accounts                  |       | 81                            |       | (154 | ) | (73 | ) |
| Time deposits                           |       | 62                            |       | 138 |   | 200 |   |
| Other borrowed  money                   |       | 69                            |       | 102 |   | 171 |   |
| **TOTAL  INTEREST-BEARING LIABILITIES** |       | 310                           |       | 105 |   | 415 |   |
|                                    |       |                          |       |   |   |   |   |
| **CHANGE  IN NET INTEREST INCOME**      |       | $                             | (43        | ) | $ | 387 |   | $ | 344 |   |

 

**Liquidity and Capital Resources**

 

Theterm liquidity refers to the ability of the Company and the Bank to meetcurrent and future short-term financial obligations.  The Company and the Bank further defineliquidity as the ability to generate adequate amounts of cash to fund loanoriginations, deposit withdrawals and operating expenses.  Liquidity management is both a daily andlong-term function of business management. The Bank’s primary sources ofliquidity are deposits, scheduled amortization and prepayments of loanprincipal and mortgage-related securities, and Federal Home Loan Bankborrowings.  The Bank can borrow fundsfrom the Federal Home Loan Bank based on eligible collateral of loans and securities.  The Bank had Federal Home Loan Bankborrowings as of September 30, 2005 of $59.5 million with unused borrowingcapacity of $72.4 million.  The Bank alsohad brokered CD’s as of September 30, 2005 of $13.6 million and theability to originate additional brokered CD’s, up to our policy limit of 10% oftotal assets.

 

TheBank’s primary investing activities are the origination of loans and thepurchase of investment securities. During the three months ended September 30, 2005 and 2004, the Bankoriginated loans net of principal payments of approximately $5.6 million and $6.5million, respectively.  Purchases ofsecurities totaled $20.0 million and $36.4 million, for the three months ended September 30,2005 and 2004, respectively.

 

Loanrepayment and maturing investment securities are a relatively predictablesource of funds.  However, deposit flows,calls of investment securities and prepayments of loans and mortgage-backedsecurities are strongly influenced by interest rates, general and economic conditionsand competition in the marketplace. These factors

 

14

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reduce the predictabilityof the timing of these sources of funds. Deposit flows are affected by the level of interest rates, by theinterest rates and products offered by competitors and by other factors.  The Bank monitors its liquidity positionfrequently and anticipates that it will have sufficient funds to meet itscurrent funding commitments.

 

Certificatesof deposits totaled $86.9 million at September 30, 2005. The Bank relieson competitive rates, customer service and long-standing relationships withcustomers to retain deposits.  Based onthe Bank’s experience with deposit retention and current retention strategies,management believes that, although it is not possible to predict future termsand conditions upon renewal, a significant portion of such deposits will remainwith the Bank.

 

TheBank was well capitalized at September 30, 2005 and exceeded each of theapplicable regulatory capital requirements at such date.  The table below presents the capital requiredand maintained at September 30, 2005.

 

| ** **                 | ** ** | **Required** | ** ** | **Actual** | ** ** |
|----------------------------|------------|--------------|------------|------------|------------|
|                       |       |         |       |       |       |
| Tier 1 Capital             |       | 4            | %          | 11.95      | %          |
| Total Risk Based  Capital  |       | 8            | %          | 22.05      | %          |
| Tier 1 Risk  Based Capital |       | 8            | %          | 21.25      | %          |

 

Managementis not aware of any known trends, events or uncertainties that will have or arereasonably likely to have a material effect on the Company’s or the Bank’sliquidity, capital or operations, nor is management aware of any currentrecommendations by regulatory authorities which, if implemented, would have amaterial effect on the Company’s or the Bank’s liquidity, capital oroperations.

 

**Off-Balance Sheet Arrangements**

 

Inaddition to the normal course of operations, we engage in a variety offinancial transactions that, in accordance with generally accepted accountingprinciples are not recorded in our financial statements.  These transactions involve, to varyingdegrees, elements of credit, interest rate, and liquidity risk.  Such transactions are used primarily tomanage customers’ requests for funding and take the form of loan commitments,lines of credit, and letters of credit.

 

Forthe three months ended September 30, 2005, we engaged in no off-balancesheet transactions reasonably likely to have a material effect on our financialcondition, results of operations or cash flows.

 

15

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**Item 3.  Controls and Procedures**

 

Underthe supervision and with the participation of the Company’s management,including its Chief Executive Officer and Chief Financial Officer, the Companyevaluated the effectiveness of the design and operation of its disclosurecontrols and procedures (as defined in Rule 13a-15(e) and Rule 15(d)-15(e) underthe Exchange Act) as of the end of the period covered by this report.  Basedupon that evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that, as of the end of the period covered by this report, the Company’sdisclosure controls and procedures were effective to ensure that informationrequired to be disclosed in the reports that the Company files or submits underthe Exchange Act is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission’s rules andforms and in timely altering them to material information relating to theCompany (or its consolidated subsidiaries) required to be filed in its periodicSEC filings.

 

Therehas been no change in the Company’s internal control over financial reportingin connection with the quarterly evaluation that occurred during the Company’slast fiscal quarter that has materially affected, or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.

 

**Part II. – OTHER INFORMATION**

 

**Item 1.****           Legal Proceedings – Notapplicable**

**Item 2.****           Unregistered Sales ofEquity Securities and Use of Proceeds**

 

Completion of the Company’s stock offering resulted in the issuance of 6,943,125 shares of common stock, 3,729,846 shares (53.7%) of which were issued to the MHC and 3,089,691 shares (44.5%) of which were sold to eligible depositors of the Bank at $10.00 per share. In addition, the Company issued 123,588 shares (1.8%) to a charitable foundation established by Putnam Savings Bank.  Costs related to the Offering (primarily marketing fees paid to an underwriting firm, professional fees, registration fees, and printing and mailing costs) aggregated $1.1 million and have been deducted to arrive at net proceeds of $29.8 million from the Offering. The Company contributed 50% of the net proceeds of the Offering to the Bank for general corporate use. Net Offering proceeds retained by the Company were used to acquire investments and fund a loan to the Bank’s employee stock ownership plan.

 

**Item 3.****           Defaults Upon SeniorSecurities – Not applicable**

**Item 4.****           Submission of Mattersto a Vote of Security Holders – Not applicable**

**Item 5.****           Other Information – Notapplicable**

**Item 6.****           Exhibits**

 

Exhibits
| 31.1 |   | Chief Executive Officer Certification pursuant to 17  CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Chief Financial Officer Certification pursuant to 17  CFR 240.13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. |
| 32.1 |   | Chief Executive Officer Certification pursuant to 18  U.S.C. Section 1350.                                                                  |
| 32.2 |   | Chief Financial Officer Certification pursuant to 18  U.S.C. Section 1350.                                                                  |

 

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**SIGNATURES**

 

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 

 
| ** ** | **PSB  HOLDINGS, INC.**                |
|------------|----------------------------------------|
|       | (Registrant)                           |
|       |                                   |
|       |                                   |
| Date       | November 14,  2005                     |   | /s/  Robert G. Cocks, Jr. |   |
|       | Robert G. Cocks, Jr.              |
|       | President and  Chief Executive Officer |
|       |                                   |
|       |                                   |
| Date       | November 14, 2005                      |   | /s/  Robert J. Halloran, Jr. |   |
|       | Robert J.  Halloran, Jr.          |
|       | Vice President  and Treasurer          |

 

17

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