Notes to Financial Statements
Note 1
Description of Plan
The following description of Peoples State Bank Profit Sharing 401(k) Plan (the Plan) provides only general information. Participants should refer to the Plan Agreement for a more complete description of the Plans provisions.
General
The Plan was established on October 1, 1989. It is a defined contribution plan covering all full-time employees of Peoples State Bank (the Bank). Full-time employees become eligible to participate in the Plan on the first entry date (the first day of the month) following completion of three months of service, provided they have reached the age of 21. Part-time employees are employees who are regularly scheduled to work less than 1,000 hours. They are eligible to participate in the Plan if they work more than 1,000 hours in a plan year. The entry date for these employees is the first day of the plan year subsequent to meeting eligibility requirements. In addition, effective June 15, 2012, the Bank acquired Marathon State Bank. The Plan was amended to credit prior service at Marathon State Bank to all employees acquired by the Bank as a result of the acquisition. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Board of Directors is responsible for oversight of the Plan. The retirement plan committee determines the appropriateness of the Plans investment offerings, monitors investment performance, and reports to the Board of Directors.
Contributions
Participants are allowed to contribute up to the maximum amount of pretax annual compensation determined by the federal government each year. The Plan allows participants to roll over distributions from other retirement plans. Participants are able to make post-tax deferrals into a Roth 401(k) in addition to pretax 401(k) deferrals. Participants meeting eligibility requirements will automatically have 6% of eligible wages deferred into the Plan into a default investment fund unless otherwise elected by the participant.
The Bank currently matches 100% of the first 1% and 50% of the next 5% of compensation a participant contributes to the Plan. In addition, the Bank may make a discretionary profit sharing contribution as determined by its Board of Directors. Employer contributions are subject to certain limitations and are contributed annually. Rollovers are not matched.
All investments in the participants accounts are participant directed. The Plan currently offers various mutual funds, PSB Holdings, Inc. common stock (PSB Holdings, Inc. is the parent company of Peoples State Bank), a common/collective trust (stable return fund), and four asset allocation models which are composed of the various mutual funds offered by the Plan as investments options for participants.
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Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Participant Accounts
Each participants account is credited with the participants contribution, the Banks matching contribution, and allocations of (a) the Banks discretionary profit sharing contribution, (b) forfeitures of terminated participants nonvested Bank discretionary profit sharing contributions, (c) plan earnings/losses and charged with an allocation of administrative expenses. Discretionary profit sharing contributions and forfeitures are allocated based upon each participants eligible pay in proportion to the pay of all eligible participants. Allocations of plan earnings/losses are based on investment options and account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participants vested account.
Vesting
Participants are always 100% vested in their salary deferral and rollover contributions. Vesting in Bank matching contributions contributed prior to January 1, 2008, and Bank discretionary profit sharing contributions are determined based on a six-year graded vesting schedule (vest 20% for each year of service after completion of one year of service). Vesting in Bank matching contributions contributed after January 1, 2008, is based on a two-year cliff vesting schedule (0% vested after completion of one year of service, 100% vested after completion of two years of service). To earn a year of service, participants must be credited with at least 1,000 hours of service.
Notes Receivable From Participants
Participants may borrow from their fund accounts up to a maximum of one-half the participants total vested balance, not to exceed $50,000. Note transactions are treated as transfers between the participants investment fund and the Participant Loan Fund. Note terms range from one to five years. The notes are secured by the balance in the participants account. Notes bear interest at a rate commensurate with the local prevailing rates as determined by the plan trustee. Interest rates on existing notes at December 31, 2012 were 4.25%, while interest rates on notes at December 31, 2011 ranged from 4.25% to 9.25%. Principal and interest are paid ratably through biweekly payroll deductions.
Payment of Benefits
On termination of service due to death, disability, retirement, or termination of employment, a participant may elect to receive a lump-sum amount equal to the value of the participants vested interest in his or her account. If the participants vested account balance does not exceed $1,000, the Plan will distribute that portion, in a lump-sum, on the first distribution date after the participant terminates employment with the Bank, or as soon as administratively practical following that date. In addition, hardship distributions out of the participants voluntary contribution accounts are permitted if certain criteria are met. The Plan also allows for in-service distributions upon attaining age 59 ½.
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Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Forfeitures
Plan forfeitures arise as a result of participants who terminate service with the Bank before becoming 100% vested in the Banks matching and discretionary profit sharing contributions.
Forfeitures of Bank matching contributions are used to reduce future Bank matching contributions. The amount of forfeited Bank matching contributions available at December 31, 2012 and 2011 were $1,268 and $1,756, respectively. Forfeitures used to reduce Bank matching contributions were $1,756 and $2,233 for the years ended December 31, 2012 and 2011, respectively.
Forfeitures of Bank discretionary profit sharing contributions are reallocated as if they were an additional discretionary profit sharing contribution. The amount of forfeited discretionary profit sharing contributions available at December 31, 2012 and 2011, were $4,955 and $8,142 respectively. Forfeitures reallocated as additional discretionary profit sharing contributions were $8,142 and $13,169 for the years ended December 31, 2012 and 2011, respectively.
Note 2
Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (GAAP).
Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because the contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. The Plan invests in investment contracts through a common/collective trust. Contract value for this common/collective trust is based on the net asset value of the fund as reported by the investment advisor. The statements of net assets available for benefits present the fair value of the investment in the common/collective trust, as well as the adjustment of the investment in the common/collective trust from fair value to contract value relating to the investment contracts. The statements of changes in net assets available for benefits is prepared on a contract value basis.
On June 19, 2012, PSB Holdings, Inc., the parent company of the B
ank, declared a 5% stock dividend to shareholders of record as of July 16, 2012, which was paid in the form of additional common stock, on July 30, 2012. All shares in these financial statements have been adjusted for all periods presented for the stock dividend.
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Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Use of Estimates
The preparation of the accompanying financial statements in conformity with GAAP requires the plan administrator to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosures, of contingent assets and liabilities. Actual results may differ from those estimates.
Investment Valuation and Income Recognition
Investments are reported at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The Plans retirement plan committee determines the Plans valuation policies utilizing information provided by investment advisors and the custodian. See Note 4 for discussion of fair value measurements.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plans gains and losses on investments bought and sold as well as held during the year.
Notes Receivable From Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant notes are reclassified as distributions based upon the terms of the plan document.
Payment of Benefits
Benefit payments to participants or beneficiaries are recorded upon distribution.
Administrative Expenses
Administrative expenses charged by the third-party administrator, as well as investment advisory and management fees, are allocated proportionately to plan participants based on their respective account balances. Loan fees are charged directly to the participants account against the investment option for which the loan was originally charged. Plan audit fees are absorbed by the Bank.
Subsequent Events
Subsequent events have been evaluated through the date that the financial statements were issued.
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Peoples State Bank Profit Sharing 401(k) Plan
Notes to Financial Statements
Note 3
Investments
The following presents investments that represent 5% or more of the Plans net assets available for benefits.