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PSB Reports Second Quarter 2019 Earnings of $2.6 Million or $0.57 Per Share; Loan Growth Up 7% Over the Past Year

WAUSAU, Wis., July 29, 2019 (GLOBE NEWSWIRE) -- PSB Holdings, Inc. (“PSB”) (PSBQ), the holding company for Peoples State Bank serving North Central Wisconsin, reported second quarter earnings ending June 30, 2019 of $2.57 million, or $0.57 per share, compared to earnings of $0.61 per share on net income of $2.73 million during the March 2019 quarter and $0.62 per share one year earlier on earnings of $2.77 million.  The second quarter earnings included expenses associated with the planned consolidation of a branch office partially offset by an increase in gains on the sale of mortgage loans and security gains.  Loan production remained strong, with net loans receivable expanding 2.6% from the previous quarter and 7.4% relative to one year earlier.

“During the past quarter, the bank decided to consolidate its two Rhinelander, WI branch locations following a branch remodeling to be completed in the September 2019 quarter. The branch to be closed was purchased in 2014 from Baraboo State Bank. Due to current real estate market conditions, we recorded a write-down of the branch to be closed, which negatively impacted net income during the June 2019 quarter by $428,000 or $0.10 per share, after income tax benefits. The consolidation combines our retail and commercial lending activities resulting in easier access and full-service for customers from one Rhinelander location, where we continue to be the leader in deposit market share. The change is also expected to improve operating efficiency, which should result in improved branch profitability,” stated Scott Cattanach, President and CEO.

Financial Highlights (at or for the periods ended June 30, 2019, compared to March 31, 2019 and /or June 30, 2018, as applicable):

  • The net interest margin increased to 3.72% for the quarter ended June 30, 2019, compared to 3.63% the previous quarter and 3.67% for the second quarter one year earlier.  The net interest margin for the second quarter of 2019 reflects a problem loan interest recovery of $109,000 versus an interest recovery of $205,000 for the second quarter of 2018.  Excluding the interest recovery for the second quarter of 2019, the net interest margin would have been 3.66%, compared to the interest recovery adjusted margin for the quarter ended June 2018 of 3.57%.
     
  • Return on shareholders’ equity was 11.90% for the quarter compared to 13.42% one quarter earlier and 14.57% for the second quarter one year earlier.  Return on average assets was 1.15% for the second quarter of 2019 compared to 1.23% the previous quarter and 1.31% for the second quarter one year earlier. Excluding the expenses associated with consolidating the Rhinelander office, the return on shareholders’ equity was 13.89% for the quarter ended June 30, 2019 and the return on average assets was 1.35% for the same period.
     
  • The efficiency ratio was 62.83% for the second quarter compared to 58.59% one quarter earlier and 57.56% in the year ago quarter.  Excluding the expenses associated with closing the Rhinelander office, the efficiency ratio would have been 58.47%.
     
  • Tangible net book value was $19.41 per share at June 30, 2019, an increase of 2.75% from $18.89 per share as of March 31, 2019 and 14.85% from $16.90 per share at June 30, 2018.

Balance Sheet and Asset Quality Review

Total assets were $901.3 million as of June 30, 2019, compared to $893.8 million as of March 31, 2019.  Relative to the prior quarter, total assets increased $7.6 million.  Meanwhile, total loans receivable increased $17.5 million, partially fueled by origination activity in our Milwaukee loan production office, which grew net loans $6.3 million during the quarter to $61.0 million.  Most of the loan growth was in the commercial/agricultural real estate loan portfolio, which increased to $370.3 million at June 30, 2019 from $360.0 million three months earlier.  The remainder of the loan growth consisted of commercial/agricultural non-real estate loans which increased to $145.5 million at June 30, 2019 from $139.4 million at March 31, 2019.  Non-owner occupied commercial/agricultural real estate loans represented the largest component of the loan portfolio at 30.1% of gross loans at June 30, 2019, followed by residential real estate loans at 24.1%, owner occupied commercial/agricultural real estate loans at 24.0%, commercial loans at 21.3% and consumer loans at 0.5%.  The allowance for loan losses was 0.97% of gross loans at June 30, 2019, compared to 0.98% at the end of the previous quarter and 0.97% one year earlier.  The annualized net charge-offs to average loans was 0.00% for the quarter ended June 30, 2019 compared to 0.08% at the end of the previous quarter and 0.16% one year earlier.

Non-performing assets declined to 0.42% of total assets at June 30, 2019, compared to 0.84% at March 31, 2019, and 0.67% at June 30, 2018.  The decrease in non-performing assets largely relates to a return to accrual status of a commercial real estate credit that leased property to the retailer Shopko. The borrower has secured a replacement tenant for the former Shopko property and loan payments have continued uninterrupted. We continue to work towards a positive resolution with another borrower affected by the Shopko bankruptcy that is on our Watch List with a balance of $2.2 million  At June 30, 2019, non-performing assets consisted of $2.3 million in non-accruing loans, $1.0 million in restructured loans not on non-accrual, $270,000 in non-accrual restructured loans and $172,000 in foreclosed assets.

At June 30, 2019, cash and investments totaled $186.3 million compared to $195.7 million at March 31, 2019.  During the course of the quarter, cash and investments were reduced in order to fund loan growth and reduce wholesale funding.

Total deposits were $715.2 million at June 30, 2019 compared to $715.4 million at March 31, 2019. At June 30, 2019, interest-bearing demand and savings deposits accounted for 33.30% of total deposits, followed by money market deposits at 23.2%, noninterest-bearing demand deposits at 20.1% and retail and local time deposits at 14.0%.  Broker and national time deposits accounted for 5.9% of total deposits at June 30, 2019 versus 6.8% the prior quarter and 9.8% one year earlier. “We have made a concerted effort to reduce our reliance on wholesale deposits and build a stronger base of core deposits to support our lending operations,” stated Mark C. Oldenberg, Chief Financial Officer.

FHLB advances were $59.9 million at June 30, 2019 compared to $51.2 million at March 31, 2019 while other borrowings decreased to $19.2 million from $22.9 million over the same time period.

For the quarter ended June 30, 2019, stockholders’ equity increased $2.0 million, or 2.40%, to $87.1 million, compared to $85.1 million at March 31, 2019.  Tangible net book value per share increased 2.75% to $19.41 per share, at June 30, 2019, compared to $18.89 per share at March 31, 2019.  PSB’s tangible equity to total assets increased to 9.65% at June 30, 2019, compared to 9.50% at March 31, 2019. 

In the first six months of fiscal 2019, PSB repurchased 19,876 shares at an average cost of $23.37 per share versus 34,956 shares repurchased at an average cost of $23.18 for the first six months of fiscal 2018.

Operations Review

Net interest income totaled $7.8 million (on a net margin of 3.72%) for the second quarter of 2019, compared to $7.6 million (on net margin of 3.63%) for the first quarter of 2019 and $7.3 million (on a net margin of 3.67%) for the second quarter of 2018.  Net interest income growth from the prior quarter was partially due to a $109,000 interest recapture related to the return of a non-accruing loan to accrual status. Compared to the March 31, 2019 quarter, loans and investment yields increased 8 bps to 4.67% during the quarter ended June 30, 2019 while deposit and borrowing costs rose only 2 bps to 1.25%.  Loan yields increased to 5.15%, 5.09% adjusted for interest recapture, from 5.09% during the quarter ended June 30, 2019.

The cost of interest-bearing liabilities increased during the quarter but at a slower rate than the yield on interest-earning assets as fewer wholesale funding sources were utilized and lower costing core deposits were used to fund a larger portion of loans and investments.  Deposit costs increased to $1.63 million for the quarter ended June 30, 2019 from $1.55 million the previous quarter.  Meanwhile, FHLB advances costs declined to $230,000 from $309,000 due to lower advance utilization.

The provision for loan losses totaled $150,000 during the second quarter of 2019 compared to a provision of $400,000 for the prior linked quarter.  The provision primarily relates to new loan originations and an expanding loan portfolio.  The prior quarter reflected provisions taken related to a borrower impacted by the Shopko bankruptcy.

Total noninterest income for the second quarter of 2019 was $1.9 million compared to $2.1 million during the preceding quarter and $1.6 million for the second quarter of 2018.  The previous quarter included a gain realized on an equity investment of approximately $534,000, due to a change in accounting principle.  Service fees and gains on the sale of mortgage loans in the second quarter were $403,000 and $432,000, respectively, compared to $381,000 and $175,000 during the first quarter of 2019.  Commissions on investment and insurance sales declined to $310,000 from $333,000 the prior quarter.  At June 30, 2019, the bank had wealth assets under management totaling $236.6 million compared to $229.8 million at March 31, 2019 and $219.5 million at June 30, 2018.  The year over year growth of assets under management was 7.80%.

Noninterest expense was $6.2 million for the second quarter of 2019 compared to $5.7 million for the first quarter.  For the second quarter of 2019, noninterest expense increased due to $589,000 in expenses associated with writing down assets associated with the closing of the Rhinelander office.  Meanwhile salaries and benefit expenses and occupancy and facilities declined over the quarter, offset in part by increased data processing expenses.

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 OTCQX Market.  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
        Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
Earnings and dividends:       2019     2019     2018     2018     2018  
                 
  Interest income     $ 9,839   $ 9,604   $ 9,365   $ 9,063   $ 8,685  
  Interest expense     $ 2,041   $ 2,032   $ 1,888   $ 1,805   $ 1,406  
  Net interest income     $ 7,798   $ 7,572   $ 7,477   $ 7,258   $ 7,279  
  Provision for loan losses     $ 150   $ 400   $ 60   $ 10   $ 30  
  Other noninterest income     $ 1,903   $ 2,117   $ 1,718   $ 1,615   $ 1,553  
  Other noninterest expense   $ 6,167   $ 5,745   $ 5,829   $ 5,373   $ 5,145  
  Net income     $ 2,572   $ 2,731   $ 2,529   $ 2,661   $ 2,767  
                 
  Basic earnings per share (3)   $ 0.57   $ 0.61   $ 0.56   $ 0.59   $ 0.62  
  Diluted earnings per share (3)   $ 0.57   $ 0.61   $ 0.56   $ 0.59   $ 0.62  
  Dividends declared per share (3)   $ 0.20   $ -   $ 0.18   $ -   $ 0.18  
  Tangible net book value per share (4)   $ 19.41   $ 18.89   $ 17.98   $ 17.37   $ 16.90  
                 
  Semi-annual dividend payout ratio     16.95 % n/a   15.65 % n/a   15.49 %
  Average common shares outstanding     4,486,022     4,494,568     4,488,397     4,490,621     4,492,059  
                 
Balance sheet - average balances:            
                 
  Loans receivable, net of allowances for loss $ 666,008   $ 658,586   $ 646,063   $ 634,469   $ 619,251  
  Assets     $ 893,998   $ 899,263   $ 883,373   $ 881,518   $ 845,816  
  Deposits     $ 713,910   $ 713,257   $ 708,318   $ 708,521   $ 691,706  
  Stockholders' equity     $ 86,656   $ 82,516   $ 79,525   $ 77,390   $ 76,150  
                 
Performance ratios:              
                 
  Return on average assets (1)     1.15 %   1.23 %   1.14 %   1.20 %   1.31 %
  Return on average stockholders' equity (1)   11.90 %   13.42 %   12.62 %   13.64 %   14.57 %
  Average stockholders' equity less accumulated          
  other comprehensive income (loss) to            
  average assets       9.68 %   9.27 %   9.22 %   9.02 %   9.21 %
  Net loan charge-offs to average loans (1)   0.00 %   0.08 %   0.07 %   -0.06 %   0.16 %
  Nonperforming loans to gross loans     0.53 %   1.11 %   0.91 %   0.84 %   0.81 %
  Nonperforming assets to total assets     0.42 %   0.84 %   0.67 %   0.67 %   0.67 %
  Allowance for loan losses to gross loans   0.97 %   0.98 %   0.94 %   0.98 %   0.97 %
  Nonperforming assets to tangible equity          
  plus the allowance for loan losses (4)     4.13 %   8.40 %   7.20 %   7.14 %   7.37 %
  Net interest rate margin (1)(2)     3.72 %   3.63 %   3.58 %   3.48 %   3.67 %
  Net interest rate spread (1)(2)     3.42 %   3.36 %   3.32 %   3.23 %   3.46 %
  Service fee revenue as a percent of            
  average demand deposits (1)     1.14 %   1.12 %   1.15 %   1.16 %   1.13 %
  Noninterest income as a percent            
  of gross revenue       16.21 %   18.06 %   15.50 %   15.12 %   15.17 %
  Efficiency ratio (2)       62.83 %   58.59 %   62.54 %   59.75 %   57.56 %
  Noninterest expenses to average assets (1)   2.77 %   2.59 %   2.62 %   2.42 %   2.44 %
  Tangible equity to actual assets     9.65 %   9.50 %   8.81 %   8.83 %   8.61 %
                 
Stock price information:              
                 
  High     $ 24.75   $ 23.45   $ 27.50   $ 27.45   $ 24.67  
  Low     $ 22.00   $ 21.25   $ 21.10   $ 24.08   $ 23.08  
  Last trade value at quarter-end   $ 24.00   $ 22.75   $ 22.50   $ 27.20   $ 24.67  
                 
(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  
(dollars in thousands, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
except per share data - unaudited) 2019 2019 2018
2018
2018
                 
Interest and dividend income:          
Loans, including fees $ 8,629 $ 8,334 $ 8,125   $ 7,814   $ 7,579  
Securities:          
Taxable   730   713   714     732     677  
Tax-exempt   389   396   424     394     364  
Other interest and dividends   91   161   102     123     65  
                 
Total interest and dividend income   9,839   9,604   9,365     9,063     8,685  
                 
Interest expense:          
Deposits   1,634   1,553   1,435     1,324     1,078  
FHLB advances   230   309   315     359     221  
Other borrowings   57   51   18     1     3  
Senior subordinated notes   28   28   28     28     29  
Junior subordinated debentures   92   91   92     93     75  
                 
Total interest expense   2,041   2,032   1,888     1,805     1,406  
                 
Net interest income   7,798   7,572   7,477     7,258     7,279  
Provision for loan losses   150   400   60     10     30  
                 
Net interest income after provision for loan losses   7,648   7,172   7,417     7,248     7,249  
                 
Noninterest income:          
Service fees   403   381   419     415     389  
Gain on sale of mortgage loans   432   175   227     286     258  
Mortgage loan servicing, net   84   125   129     115     131  
Investment and insurance sales commissions   310   333   430     299     274  
Net gain on sale of securities   121   18   -     -     -  
Increase in cash surrender value of life insurance   101   98   96     95     93  
Other noninterest income   452   987   417     405     408  
                 
Total noninterest income   1,903   2,117   1,718     1,615     1,553  
                 
Noninterest expense:          
Salaries and employee benefits   3,322   3,428   3,566     3,244     3,101  
Occupancy and facilities   591   601   526     499     534  
Loss (gain) on foreclosed assets   3   4   (17 )   (7 )   (18 )
Data processing and other office operations   646   577   654     649     625  
Advertising and promotion   120   100   163     98     74  
FDIC insurance premiums   63   59   61     63     65  
Other noninterest expenses   1,422   976   876     827     764  
                 
Total noninterest expense   6,167   5,745   5,829     5,373     5,145  
                 
Income before provision for income taxes   3,384   3,544   3,306     3,490     3,657  
Provision for income taxes   812   813   777     829     890  
                 
Net income $ 2,572 $ 2,731 $ 2,529   $ 2,661   $ 2,767  
Basic earnings per share $ 0.57 $ 0.61 $ 0.56   $ 0.59   $ 0.62  
Diluted earnings per share $ 0.57 $ 0.61 $ 0.56   $ 0.59   $ 0.62  

 

PSB Holdings, Inc.          
Consolidated Statements of Income          
        Three Months Ended   Six Months Ended
(dollars in thousands, June   June
except per share data - unaudited)   2019   2018       2019   2018  
                 
Interest and dividend income:          
Loans, including fees $ 8,629 $ 7,579     $ 16,963 $ 14,550  
Securities:          
Taxable   730   677       1,443   1,353  
Tax-exempt   389   364       785   699  
Other interest and dividends   91   65       252   159  
                 
Total interest and dividend income   9,839   8,685       19,443   16,761  
                 
Interest expense:          
Deposits   1,634   1,078       3,187   2,056  
FHLB advances   230   221       539   411  
Other borrowings   57   3       108   5  
Senior subordinated notes   28   29       56   55  
Junior subordinated debentures   92   75       183   141  
                 
Total interest expense   2,041   1,406       4,073   2,668  
                 
Net interest income   7,798   7,279       15,370   14,093  
Provision for loan losses   150   30       550   60  
                 
Net interest income after provision for loan losses   7,648   7,249       14,820   14,033  
                 
Noninterest income:          
Service fees   403   389       784   777  
Gain on sale of mortgage loans   -   -       -   -  
Mortgage banking income   516   389       816   771  
Investment and insurance sales commissions   310   274       643   578  
Net gain on sale of securities   121   -       139   -  
Increase in cash surrender value of life insurance   101   93       199   182  
Other noninterest income   452   408       1,439   835  
                 
Total noninterest income   1,903   1,553       4,020   3,143  
                 
Noninterest expense:          
Salaries and employee benefits   3,322   3,101       6,750   6,384  
Occupancy and facilities   591   534       1,192   1,090  
Loss (gain) on foreclosed assets   3   (18 )     7   (10 )
Data processing and other office operations   646   625       1,223   1,260  
Advertising and promotion   120   74       220   159  
FDIC insurance premiums   63   65       122   123  
Other noninterest expenses   1,422   764       2,398   1,505  
                 
Total noninterest expense   6,167   5,145       11,912   10,511  
                 
Income before provision for income taxes   3,384   3,657       6,928   6,665  
Provision for income taxes   812   890       1,625   1,543  
                 
Net income $ 2,572 $ 2,767     $ 5,303 $ 5,122  
Basic earnings per share $ 0.57 $ 0.62     $ 1.18 $ 1.14  
Diluted earnings per share $ 0.57 $ 0.62     $ 1.18 $ 1.14  

 

PSB Holdings, Inc.          
Consolidated Statements of Comprehensive Income        
                 
        Three Months Ended   Six Months Ended
        June 30,   June 30,
(dollars in thousands - unaudited)   2019     2018       2019     2018  
                 
Net income $ 2,572   $ 2,767     $ 5,303   $ 5,122  
                 
Other comprehensive income, net of tax:          
                 
  Unrealized gain (loss) on securities available          
    for sale   995     (232 )     2,510     (1,280 )
                 
  Reclassification adjustment for security          
    gain included in net income   (88 )   -       (101 )   -  
                 
  Amortization of unrealized gain included in net          
    income on securities available for sale          
    transferred to securities held to maturity   (1 )   (10 )     (6 )   (25 )
                 
  Unrealized loss on interest rate swap   (142 )   (60 )     (218 )   (59 )
                 
  Reclassification adjustment of interest rate          
    swap settlements included in earnings   6     2       9     2  
                 
                 
Other comprehensive income (loss)   770     (300 )     2,194     (1,362 )
                 
Comprehensive income $ 3,342   $ 2,467     $ 7,497   $ 3,760  
                 

 

...
PSB Holdings, Inc.          
Consolidated Balance Sheets          
June 30, 2019, March 31, 2019, September 30, and June 30, 2018 unaudited, December 31, 2018 derived from audited financial statements          
  Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
(dollars in thousands, except per share data)   2019     2019     2018     2018     2018  
Assets          
           
Cash and due from banks $ 11,825   $ 8,917   $ 18,923   $ 15,348   $ 11,876  
Interest-bearing deposits   2,306     349     501     930     453  
Federal funds sold   4,552     12,989     24,554     14,246     19,493  
           
Cash and cash equivalents   18,683     22,255     43,978     30,524     31,822  
Securities available for sale (at fair value)   123,586     127,368     113,821     114,997     114,939  
Securities held to maturity (fair values of $42,511, $43,338, $57,607, $59,341 and        
$61,487 respectively)   42,074     43,061     58,311     60,421     62,299  
Bank certificates of deposit (at cost)   1,984     2,976     2,976     2,976     2,976  
Loans held for sale   50     245     358     -     405  
Loans receivable, net   678,247     660,756     658,481     636,712     631,620  
Accrued interest receivable   2,844     2,826     2,777     2,709     2,544  
Foreclosed assets   172     113     113     483     736  
Premises and equipment, net   9,749     10,426     10,209     10,339     10,524  
Mortgage servicing rights, net