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PSB Reports Record 2018 Earnings of $10.3 Million; Asset and Loan Growth Continues

WAUSAU, Wis., Jan. 28, 2019 (GLOBE NEWSWIRE) -- PSB Holdings, Inc. (“PSB”) (PSBQ), the holding company for Peoples State Bank serving North Central Wisconsin, reported that 2018 earnings grew to $2.29 per share on net income of $10.31 million, compared to earnings of $1.58 per share on net income of $7.2 million in 2017.  The December quarter earnings more than doubled to $0.56 per share, on net income of $2.53 million, compared to earnings of $0.21 per share, on net income of $946,000, for the fourth quarter of 2017.  December quarterly earnings also remained steady as compared to September quarterly 2018 earnings of $0.59 per share, on net income of $2.66 million.  Earnings increased primarily due to higher net interest income achieved through asset growth as well as lower taxes.

“For 2018, we achieved record earnings by expanding our asset base beyond $900 million and delivered a 25th consecutive year of increased cash dividends per share.  Our return on average equity for the full year in 2018 was 13.41%.  We are proud to provide strong stewardship of our shareholders’ capital and continue to explore growth opportunities throughout vibrant Wisconsin communities as they may arise,” stated Scott M. Cattanach, President & CEO.

“Our net loan growth during the December 2018 quarter was $21.8 million compared to a slight decline for the same quarter last year.  Our increased volume largely came from our north central Wisconsin markets where we are seeing solid commercial loan demand,” said Cattanach.  

Financial Highlights (at or for the periods ended December 31, 2018, compared to December 31, 2017 and /or September 30, 2018, as applicable):

  • Total assets grew to $916.0 million at year end, an increase of $68.3 million, or 8.1%, compared to a year ago, led by net loan growth of $48.4 million, or 7.9%, reflecting solid growth in commercial loans.  Relative to the previous quarter ended September 30, 2018, loans increased 3.4%.
     
  • The loan-to-deposit ratio increased to 90.7% at December 31, 2018, from 86.9% at December 31, 2017, as loan origination activity outpaced deposit growth over the fiscal year.
     
  • Deposit balances increased $23.5 million or 3.3% year-over year with $15.1 million consisting of new interest-bearing demand and savings accounts.
     
  • Asset quality improved over the past year as non-performing assets totaled $6.1 million, or 0.67% of total assets versus $10.7 million, or 1.27% of total assets at December 31, 2017, and increased slightly from $5.9 million, or 0.67% of total assets at September 30, 2018.
     
  • The net interest margin increased to 3.58% for the quarter ended December 31, 2018, compared to 3.48% the previous quarter and decreased from 3.68% one year earlier.  For the full year in 2018, the net interest margin was 3.56% compared to 3.54% for 2017.
     
  • Return on shareholders’ equity was 13.41% for 2018 compared to 9.82% for 2017.  For the fourth quarter of 2018, return on shareholders’ equity was 12.62% compared to 13.64% the previous quarter and 4.98% for the fourth quarter a year ago.
     
  • Return on average assets was 1.14% for the fourth quarter of 2018 compared to 1.20% the previous quarter and 0.45% one year earlier.  Return on average assets for 2018 was 1.19% compared to 0.87% for 2017.
     
  • Earnings in the fourth quarter of fiscal 2017 were reduced by $1.2 million or $0.27 per share due to the revaluation of our deferred tax asset due to the Tax Cuts and Jobs Act enacted on December 22, 2017.
     
  • Tangible net book value was $17.98 per share at December 31, 2018, an increase of 10.4% from $16.28 per share as of December 31, 2017.

Balance Sheet and Asset Quality Review

Total assets increased 8.1% to $916.0 million as of December 31, 2018, compared to $847.7 million as of December 31, 2017.  Relative to the prior quarter, assets increased 3.7% from $883.3 million.  Total loans increased $48.4 million, or 7.9% over the past year, which was partially fueled by origination activity in our loan production office in Milwaukee.  Most of the loan growth was in commercial real estate loans which increased to $349.4 million at December 31, 2018 from $319.9 million at December 31, 2017 and commercial non-real estate loans, which increased to $147.2 million at December 31, 2018, from $127.4 million at December 31, 2017.  Non-owner occupied commercial/agricultural real estate loans represented the largest component of the loan portfolio at 29.6% of gross loans at December 31, 2018, followed by residential real estate loans at 24.8%, owner occupied commercial/agricultural real estate loans at 23.0%, commercial loans at 22.1% and consumer loans at 0.5%.  The allowance for loan losses was 0.94% of gross loans at December 31, 2018, compared to 0.98% the previous quarter and 1.04% one year earlier.  Net charge-offs were $70,000 for 2017 and $296,000 for 2018.

Non-performing assets were 0.67% of total assets at December 31, 2018, compared to 0.67% at September 30, 2018, and 1.27% at December 31, 2017.  At December 31, 2018, non-performing assets consisted of $3.4 million in non-accruing loans, $2.3 million in restructured loans not on non-accrual, $313,000 in non-accrual restructured loans and $113,000 in foreclosed assets.  Nonperforming assets aggregating to $500,000 or more, measured by gross principal outstanding per credit relationship, included two relationships at December 31, 2018, and five relationships as of December 31, 2017, totaling $1.8 million and $6.7 million, respectively. Specific reserves maintained on these large problem loans were $9,000 at December 31, 2018, and $347,000 at December 31, 2017. 

At December 31, 2018, cash and investments totaled $219.1 million compared to $201.9 million at December 31, 2017 and $208.9 million at September 30, 2018.  Relative to the previous quarter, the cash and cash equivalent balance increased to $44.0 million at December 31, 2018, from $30.5 million at September 30, 2018, reflecting anticipated future funding needs.

“The securities portfolio reflected an increase in securities available for sale and a decrease in securities held to maturity as PSB transitions to carrying more securities at market values for additional future liquidity to support growth if needed,” said Mark Oldenberg, Chief Financial Officer. 

Total deposits increased $23.5 million, or 3.3% to $725.8 million at December 31, 2018 from $702.3 million at December 31, 2017. Seasonal deposits from governmental entities were not as strong in December as in years’ past, which slowed deposit growth for the year.  Interest-bearing demand and savings deposits increased as a percent of total deposits and remained the largest deposit category.  At December 31, 2018, interest-bearing demand and savings deposits accounted for 35.1% of total deposits, followed by noninterest-bearing demand deposits at 20.5%, money market deposits at 20% and retail and local time deposits at 16.8%.  Broker and national time deposits accounted for 7.6% of total deposits at December 31, 2018.

FHLB advances increased to $81.1 million at December 31, 2018, from $49.4 million at December 31, 2017, and $64.7 million at September 30, 2018.  The increase in advances was used to support increased lending volumes.  Total borrowings increased to $99.7 million at December 31, 2018, from $62.3 million one year earlier.    

For the year ended December 31, 2018, stockholders’ equity increased $7.1 million, or 9.6%, which reflects the impact of dividend payments totaling $1.6 million.  Tangible net book value increased 10.4% to $17.98 per share, at December 31, 2018, compared to $16.28 per share at December 31, 2017.  PSB’s tangible equity to total assets increased to 8.81% at December 31, 2018, compared to 8.69% at December 31, 2017. 

Operations Review

Net interest income totaled $7.5 million (on a net margin of 3.58%) for the fourth quarter of 2018, compared to $7.3 million (on net margin of 3.48%) for the third quarter of 2018 and $7.1 million (on a net margin of 3.68%) for the fourth quarter of 2017.  Net interest income growth from the prior quarter was mainly due to higher average loan yields which equaled 4.95% for the fourth quarter versus 4.85% the preceding quarter.  For the year, net interest income totaled $28.8 million (on a net margin of 3.56%) compared to $27.2 million (on a net margin of 3.54%) for 2017.   

The cost of interest-bearing liabilities continued to increase in the most recent quarter, equaling 1.15% for the fourth quarter compared to 1.10% for the preceding quarter.  For the year, the cost of interest-bearing liabilities was 1.00% compared to 0.72% for 2017.  The largest change in interest expense over the past year has come from interest cost associated with savings and demand deposits where costs increased from $553,000 to $1.32 million.  Interest cost related to time deposits also increased over the past year, though the impact of rising rates on time deposits will be felt more fully in the future as current time deposits mature, while savings and demand deposit increases were immediately affected by the rising interest rate environment.  The expense associated with time deposits increased to $2.73 million for 2018 from $2.14 million for 2017.

“Our deposit beta was 20.7% for the fourth quarter compared to 66.7% in the previous quarter.  Our fourth quarter deposit beta is near our cumulative average since September 30, 2015.  Meanwhile, our loan beta change remained relatively consistent at 33.6% for the quarter ended December 31, 2018, compared to 33.7% one quarter earlier,” said Oldenberg. 

The provision for loan losses totaled $60,000 during the fourth quarter of 2018 compared to a provision of $10,000 for the prior quarter.  The increased provision primarily relates to establishing reserves for the growing loan portfolio.

Total noninterest income for the fourth quarter of 2018 was $1.7 million compared to $1.6 million during the preceding quarter and $1.5 million for the fourth quarter of 2017.  The increase from the previous quarter was from increased commissions on investment and insurance sales of $430,000 versus $299,000 the prior quarter.  Total noninterest income for 2018 was $6.5 million compared to $6.1 million during 2017.  Investment sales commissions were up $220,000 while mortgage loan servicing income was up $185,000 for 2018 relative to the prior year. 

Noninterest expense totaled $5.8 million for the fourth quarter of 2018 compared to $5.4 million for the third quarter of 2018 and $5.3 million for the fourth quarter of 2017.  For the fourth quarter of 2018 noninterest expense increased due to increased salaries and benefit expenses associated with higher health benefit costs and personnel costs associated with our increase in total assets and the need for additional compliance resources.  For the full year in 2018, noninterest expenses totaled $21.7 million compared to $20.3 million for 2017.  The increased cost was led by salaries and employee benefit expense, up $1.0 million and occupancy expense which increased $219,000.  All other operating expenses increased $137,000 compared to the prior year.

About PSB Holdings, Inc.

PSB Holdings, Inc. is the parent company of Peoples State Bank. Peoples is a community bank headquartered in Wausau, Wisconsin, serving north central Wisconsin from nine full service banking locations in Marathon, Oneida, and Vilas counties and loan production offices in Milwaukee and Stevens Point, Wisconsin. Peoples also provides investment and insurance products, along with retirement planning services, through Peoples Wealth Management, a division of Peoples.  PSB Holdings, Inc. is traded under the stock symbol PSBQ on the OTC Markets Exchange.  More information about PSB, its management, and its financial performance may be found at www.psbholdingsinc.com.

Forward Looking Statements

Certain matters discussed in this news release, including without limitation those relating to potential loan and deposit growth, future profits, changes in noninterest income and expenses, pro-forma impacts to income from non-recurring or unusual income and expense items, and future interest rates, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in this release. Among other things, these risks and uncertainties include the strength of the economy, the effects of government policies, including, in particular, interest rate policies, and other risks and assumptions.  PSB Holdings, Inc. assumes no obligation to update or supplement forward-looking statements that become untrue because of events subsequent to this press release.

PSB Holdings, Inc.                
Quarterly Financial Summary              
(dollars in thousands, except per share data) Quarter ended  
        Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,  
Earnings and dividends:       2018     2018     2018     2018     2017    
                   
  Interest income     $   9,365   $   9,063   $   8,685   $   8,076   $   8,247    
  Interest expense     $   1,888   $   1,805   $   1,406   $   1,262   $   1,151    
  Net interest income     $   7,477   $   7,258   $   7,279   $   6,814   $   7,096    
  Provision for loan losses     $   60   $   10   $   30   $   30   $   105    
  Other noninterest income     $   1,718   $   1,615   $   1,553   $   1,590   $   1,533    
  Other noninterest expense   $   5,829   $   5,373   $   5,145   $   5,366   $   5,302    
  Net income     $   2,529   $   2,661   $   2,767   $   2,355   $   946    
                   
  Basic earnings per share (3)   $   0.56   $   0.59   $   0.62   $   0.52   $   0.21    
  Diluted earnings per share (3)   $   0.56   $   0.59   $   0.62   $   0.52   $   0.21    
  Dividends declared per share (3)   $   0.18   $   -    $   0.18   $   -    $   0.16    
  Tangible net book value per share (4)   $   17.98   $   17.37   $   16.90   $   16.52   $   16.28    
                   
  Semi-annual dividend payout ratio     15.56 % n/a   15.49 % n/a   23.68 %  
  Average common shares outstanding       4,488,397       4,490,621       4,492,059       4,515,384       4,533,081    
                   
Balance sheet - average balances:              
                   
  Loans receivable, net of allowances for loss $   646,063   $   634,469   $   619,251   $   608,203   $   602,117    
  Assets     $   883,373   $   881,518   $   845,816   $   841,863   $   832,201    
  Deposits     $   708,318   $   708,521   $   691,706   $   691,799   $   675,358    
  Stockholders' equity     $   79,525   $   77,390   $   76,150   $   74,026   $   75,309    
                   
Performance ratios:                
                   
  Return on average assets (1)     1.14 %   1.20 %   1.31 %   1.13 %   0.45 %  
  Return on average stockholders' equity (1)   12.62 %   13.64 %   14.57 %   12.90 %   4.98 %  
  Average stockholders' equity less accumulated            
    other comprehensive income (loss) to              
    average assets       9.22 %   9.02 %   9.21 %   8.92 %   9.09 %  
  Net loan charge-offs to average loans (1)   0.07 %   -0.06 %   0.16 %   0.03 %   0.05 %  
  Nonperforming loans to gross loans     0.91 %   0.84 %   0.81 %   1.05 %   1.70 %  
  Nonperforming assets to total assets     0.67 %   0.67 %   0.67 %   0.79 %   1.27 %  
  Allowance for loan losses to gross loans   0.94 %   0.98 %   0.97 %   1.04 %   1.04 %  
  Nonperforming assets to tangible equity            
    plus the allowance for loan losses (4)     7.20 %   7.14 %   7.37 %   8.47 %   13.74 %  
  Net interest rate margin (1)(2)     3.58 %   3.48 %   3.67 %   3.49 %   3.68 %  
  Net interest rate spread (1)(2)     3.32 %   3.23 %   3.46 %   3.31 %   3.50 %  
  Service fee revenue as a percent of              
    average demand deposits (1)     1.15 %   1.16 %   1.13 %   1.15 %   1.11 %  
  Noninterest income as a percent              
    of gross revenue       15.50 %   15.12 %   15.17 %   16.45 %   15.67 %  
  Efficiency ratio (2)       62.54 %   59.75 %   57.56 %   63.08 %   59.65 %  
  Noninterest expenses to average assets (1)   2.62 %   2.42 %   2.44 %   2.59 %   2.53 %  
  Tangible equity to actual assets (4)     8.81 %   8.83 %   8.61 %   8.79 %   8.69 %  
                   
Stock price information:                
                   
  High     $   27.50   $   27.45   $   24.67   $   23.67   $   23.32    
  Low     $   21.10   $   24.08   $   23.08   $   22.92   $   22.77    
  Last trade value at quarter-end   $   22.50   $   27.20   $   24.67   $   23.58   $   23.17    
                   
(1) Annualized                
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent      
  basis using a federal tax rate of 21%.              
(3) Due to rounding, cumulative quarterly per share performance may not equal annual per share totals.    
(4) Tangible stockholders' equity excludes intangible assets and any preferred stock capital elements.    
                   

 

PSB Holdings, Inc.                
Consolidated Statements of Income                
        Quarter Ended   Year Ended  
(dollars in thousands, Dec. 31, Sept. 30, Jun. 30, Mar. 31, Dec. 31, Dec. 31,  
except per share data - unaudited)   2018     2018     2018   2018 2017   2018   2017  
                       
Interest and dividend income:                
    Loans, including fees $   8,125   $   7,814   $   7,579   $   6,971 $   7,172 $  30,489   $  27,350  
    Securities:                
      Taxable     714       732       677       676     685     2,799       2,663  
      Tax-exempt     424       394       364       335     324     1,517       1,333  
   Other interest and dividends     102       123       65       94     66     384       248  
                       
  Total interest and dividend income     9,365       9,063       8,685       8,076     8,247     35,189       31,594  
                       
Interest expense:                
    Deposits     1,435       1,324       1,078       978     853     4,815       3,103  
    FHLB advances     315       359       221       190     192     1,085       709  
    Other borrowings     18       1       3       2     22     24       200  
    Senior subordinated notes     28       28       29       26     24     111       94  
    Junior subordinated debentures     92       93       75       66     60     326       312  
                       
  Total interest expense     1,888       1,805       1,406       1,262     1,151     6,361       4,418  
                       
Net interest income     7,477       7,258       7,279       6,814     7,096     28,828       27,176  
Provision for loan losses     60       10       30       30     105     130       385  
                       
Net interest income after provision for loan losses     7,417       7,248       7,249       6,784     6,991     28,698       26,791  
                       
Noninterest income:                
    Service fees     419       415       389       388     402     1,611       1,589  
    Gain on sale of mortgage loans     227       286       258       284     307     1,055       1,188  
    Mortgage loan servicing, net     129       115       131       98     61     473       288  
    Investment and insurance sales commissions     430       299       274       304     286     1,307       1,087  
    Net gain on sale of securities     -        -        -        -      -      -        4  
    Increase in cash surrender value of life insurance     96       95       93       89     93     373       383  
    Other noninterest income     417       405       408       427     384     1,657       1,568  
                       
  Total noninterest income     1,718       1,615       1,553       1,590     1,533     6,476       6,107  
                       
Noninterest expense:                
    Salaries and employee benefits     3,566       3,244       3,101       3,283     3,176     13,194       12,183  
    Occupancy and facilities     526       499       534       556     441     2,115       1,896  
    Loss (gain) on foreclosed assets     (17 )     (7 )     (18 )     8     62     (34 )     120  
    Data processing and other office operations     654       649       625       635     654     2,563       2,430  
    Advertising and promotion     163       98       74       85     149     420       454  
    FDIC insurance premiums     61       63       65       58     67     247       276  
    Other noninterest expenses     876       827       764       741     753     3,208       2,987  
                       
        Total noninterest expense     5,829       5,373       5,145       5,366     5,302     21,713       20,346  
                       
Income before provision for income taxes     3,306       3,490       3,657       3,008     3,222     13,461       12,552  
Provision for income taxes     777       829       890       653     2,276     3,149       5,365  
                       
Net income $   2,529   $   2,661   $   2,767   $   2,355 $   946 $  10,312   $   7,187  
Basic earnings per share $   0.56   $   0.59   $   0.62   $   0.52 $   0.21 $   2.29   $   1.58  
Diluted earnings per share $   0.56   $   0.59   $   0.62   $   0.52 $   0.21 $   2.29   $   1.58  
                       

 

PSB Holdings, Inc.            
Consolidated Statements of Comprehensive Income          
                   
        Quarter Ended   Year Ended  
        December 31,   December 31,  
(dollars in thousands - unaudited)   2018     2017       2018     2017    
                   
Net income $   2,529   $   946     $   10,312   $   7,187    
                   
Other comprehensive income, net of tax:            
                   
  Unrealized gain (loss) on securities available            
    for sale     1,153       (524 )       (766 )     179    
                   
  Reclassification adjustment for security            
    gain included in net income     -        -          -        (2 )  
                   
  Amortization of unrealized gain included in net            
    income on securities available for sale            
    transferred to securities held to maturity     (6 )     (18 )       (39 )     (75 )  
                   
  Unrealized gain (loss) on interest rate swap     (157 )     -          (158 )     5    
                   
  Reclassification adjustment of interest rate            
    swap settlements included in earnings     8       -          9       52    
                   
                   
Other comprehensive income (loss)     998       (542 )       (954 )     159    
                   
Comprehensive income $   3,527   $   404     $   9,358   $   7,346    
                   

 

...
             
PSB Holdings, Inc.            
Consolidated Balance Sheets            
December 31, September 30, June 30, and March 31, 2018 unaudited, December
31, 2017 derived from audited financial statements
           
   Dec. 31,   Sep. 30,   Jun. 30,   Mar. 31,   Dec. 31,   
(dollars in thousands, except per share data)   2018     2018     2018     2018     2017    
Assets            
             
Cash and due from banks $   18,923   $   15,348   $   11,876   $   8,854   $   17,241    
Interest-bearing deposits     501       930       453       164       479    
Federal funds sold     24,554       14,246       19,493       21,050       10,387    
             
Cash and cash equivalents     43,978       30,524       31,822       30,068       28,107    
Securities available for sale (at fair value)     113,821       114,997       114,939       102,865       101,527    
Securities held to maturity (fair values of $57,607, $59,341, $61,487, $63,783 and          
  $67,768, respectively     58,311       60,421       62,299       64,536       67,573    
Bank certificates of deposit (at cost)     2,976       2,976       2,976       3,472       4,712    
Loans held for sale     358       -       405       156       -    
Loans receivable, net     658,481       636,712       631,620       606,764       610,076    
Accrued interest receivable     2,777       2,709       2,544       2,372       2,279    
Foreclosed assets     113       483       736       260       250    
Premises and equipment, net     10,209