PSB Holdings, Inc. - Page 5




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          securities totaled $38,141,487, and the loan participations                 
          totaled $27,710,909; these three categories of assets were                  
          transferred to Investments as paid-in capital.  No security or              
          tax-exempt obligation of any kind was transferred by Peoples to             
          Investments during the subject years.  Of the taxable securities            
          and tax-exempt obligations that Peoples transferred to                      
          Investments, 17 percent were federally tax-exempt municipal                 
          securities, 41 percent were federally taxable securities (issued            
          primarily by Government agencies), and 42 percent were loan                 
          participation interests.  At the time of the transfers, no                  
          liabilities encumbered the transferred securities or obligations,           
          and Investments did not assume any liability of Peoples.                    
          Investments did not sell any tax-exempt obligation or taxable               
          security before maturity, and all such obligations and securities           
          received from Investments matured by the end of the subject                 
          years.  Investments’ income for the subject years was                       
          attributable to holding federally taxable securities, federally             
          tax-exempt obligations, and loan participations.  Investments did           
          not own any other asset, and it did not provide services to                 
          unrelated third parties.                                                    
               Investments’ total assets during the subject years                     
          represented about 20 percent of the total assets of Investments             
          and Peoples combined.  During each of those years, Peoples                  
          incurred approximately $8 million to $12 million of interest                







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Last modified: March 27, 2008