WAUSAU, Wis., July 27, 2020 (GLOBE NEWSWIRE) — PSB Holdings, Inc. (“PSB”) (OTCQX: PSBQ), the holding company for Peoples State Bank serving North Central and Southeastern Wisconsin, reported second quarter earnings ending June 30, 2020 of $0.72 per share on net income of $3.19 million, compared to earnings of $0.36 per share on net income of $1.61 million during the March 31, 2020 quarter, and $0.57 per share on earnings of $2.57 million during the second quarter a year ago.  Second quarter earnings benefitted from record mortgage refinance income and lower compensation and benefit expenses related to expense deferrals on the origination of Paycheck Protection Program (“PPP”) loans offset in part by higher loan loss provisions and a lower net interest margin. 

“We are pleased with the success of our operations during the first full quarter of the COVID-19 pandemic.  During the quarter, we were able to generate record 1st mortgage originations of $84.2 million, originate over $116.4 million in PPP loans and provide loan accommodations on $143 million of loans despite many staff members working remotely.  Meanwhile, we continued our outreach to borrowers to determine their financial health and adjust our risk-weighting accordingly. Though the balance of our “Watch Risk” loans increased during the quarter, we are currently seeing a large portion of these borrowers making payments or agreeing to return to payments in the third quarter.  We maintained the same loan loss provision during the quarter as in the previous quarter and continued strong core operating income that supported an increase in our reserve ratio to 1.32% of gross loans less our PPP loans,” stated Scott Cattanach, President and CEO.

Loan Accommodations: As of June 30, 2020, PSB has provided 114 loan accommodations totaling $143 million to defer payments or make interest only payments for 90 days in response to challenges for borrowers resulting from COVID-19.  As the initial 90-day accommodation period now ends, we expect approximately 90 of the loans totaling $97.3 million to return to making regularly scheduled payments in the third quarter.  The remaining 24 loans totaling $45.7 million have, or are expected to, request an extended deferral of an additional 90 days, including $19.9 million of loans requesting a full payment deferral.  “For each relationship, we assign a risk weighting to identify and quantify the risk of loss prior to origination of the loan and periodically afterwards.  As requests for payment deferrals or modifications for interest only payments are made, we review the credit risk rating and adjust as forward-looking circumstances warrant.  We believe this system helps us monitor the risks inherent in our loan portfolio and appropriately track the impact caused by the pandemic and the resulting slowing economy.  As shown in the table below, our “impaired loans” and “substandard risk” loans did not change materially from the prior quarter.  However, we did move approximately $38.6 million of loans to the “Watch Risk” category in 2020, which are largely related to businesses materially affected by the mandatory closing of their operation by executive order.  Thirteen of the loans where we anticipate extended deferrals totaling $28.6 million are weighted as average or acceptable risk, ten loans totaling $16.9 million are weighted as watch, and one loan totaling less than $200,000 is considered impaired,” continued Cattanach.

As of June 30, 2020, the bank had granted a 90-day payment deferral on 88 residential related loans totaling $10.3 million. As with the commercial loan deferrals, the majority of customers are expected to return to regular principal and interest payments during the third quarter 2020.

Commercial, Commercial Real Estate, Construction & Development, Agricultural and Government Loans
($000)
Risk Rating   12/2015     12/2016     12/2017     12/2018     12/2019     03/2020     06/2020
Rating 1 “High Quality” $ 79   $   $   $   $   $ 71   $ 55
Rating 2 “Minimal Risk”   59,882     67,468     76,710     85,382     57,904     59,101     72,601
Rating 3 “Average Risk”   227,020     253,673     292,496     323,627     349,002     324,378     374,709
Rating 4 “Acceptable Risk”   85,206     91,367     65,024     79,271     128,932     123,296     154,302
Rating 5 “Watch Risk”   12,520     10,774     18,049     15,551     15,933     33,999     54,522
Rating 6 “Substandard Risk”   621     2,678     500     489     2,568     2,732     4,545
Rating 7 “Impaired Loans”   9,877     7,758     9,952     8,707     5,518     7,811     6,130
    $ 395,205   $ 433,718   $ 462,731   $ 513,027   $ 559,857   $ 551,388   $ 666,864
Includes undisbursed Construction & Development lines of credit. PPP loan balances are assigned a risk-weighting of “3”.    

Industry Exposure: PSB has identified the following fifteen industries with the highest portfolio concentrations, and identified Hotels, Restaurants, Retail Stores and Services as concentrations that may be adversely impacted by the Safer-At-Home Order and the on-going pandemic.  Though these industries may change, management believes these industries are where PSB may have exposure or where credit weightings are elevated. Percentages and weightings are of the total commercial related portfolio credit extensions including PPP loans.

The following table indicates PSB’s Top Industry Risk Exposure sorted by weighted average risk rating as of June 30, 2020:

Total Industry Risk Exposure
Industry No. of Loans Total Loans % of Ln Portfolio Weighted Avg Risk Rating
Hotels 48 34,479,059 4.39 % 4.23
Restaurant 136 22,837,436 2.91 % 3.90
Agricultural 90 10,751,676 1.37 % 3.87
Other 11 7,310,552 0.93 % 3.76
Recreation 59 8,343,848 1.06 % 3.67
Wood, Log, Sawmill, Lumber 61 12,167,298 1.55 % 3.66
Retail Stores 97 23,574,361 3.00 % 3.58
Non-Owner Occupied (Residential) 324 103,744,629 13.22 % 3.52
Lessors of Residential Buildings and Dwellings Multi-Family 28 69,104,242 8.80 %  
Lessors of Residential Buildings and Dwellings 296 34,640,387 4.42 %  
Automotive and Marine Dealerships (Includes Maint.) 99 22,159,323 2.82 % 3.36
Religious Organizations 31 3,124,871 0.40 % 3.25
Non-Owner Occupied (Commercial) 194 94,049,521 11.98 % 3.23
Lessors of Nonresidential Buildings (except Miniwarehouses) 144 79,063,621 10.07 %  
Lessors of Miniwarehouses and Self-Storage Units 25 9,724,152 1.24 %  
Lessors of Other Real Estate Property 25 5,261,748 0.67 %  
Trucking 122 46,100,112 5.87 % 3.17
Land (Res. And Com.) 35 8,565,878 1.09 % 3.16
Manufacturing 218 129,082,341 16.44 % 3.16
Services 420 70,119,129 8.93 % 3.14
         
Loan portfolio includes unused loan commitments. Balances do not include any consumer loans.

Weighted average loan to collateral values at June 30, 2020 were 64%, 64% and 72% in the Hotels, Restaurant and Retail industry categories, respectively. 

Loan Loss Reserve:  For the quarter ended June 30, 2020, PSB added provisions for loan losses totaling $1.8 million, the same level provided during the prior quarter.  The provision replaced existing specific reserves related to a charge-off of approximately $500,000 on a Shopko store loan moved into foreclosed property in addition to provisions taken due to changes in risk ratings associated with loan classifications as a result of the ongoing pandemic. Loan loss provisions are expected to remain elevated in the third quarter as better clarity on the impact of the economic slowdown from the COVID-19 pandemic materializes.  Allowance for loan losses totaled $9.17 million at June 30, 2020 which includes $3.18 million of allowances for loans with risk weightings at 5 and above (“Watch and Impaired”) and $5.99 million for loans with risk weightings at 4 and below (“Acceptable and Average”).  At June 30, 2020, allowance for loan losses totaled 1.12% of gross loans and 1.32% of gross loans less PPP loans guaranteed through the SBA.

Net Interest Margin Impact:  PSB’s net interest margin declined to 3.09% for the quarter ended June 30, 2020 from 3.45% the prior quarter due to the swift reduction in short term interest rates in March, and the resulting effect of loans and investments repricing at lower rates, and the addition of PPP loans with 1% coupon yields.  “The addition of PPP loans combined with a large liquid position fueled in part by strong deposit growth in a low interest rate market influenced the net interest margin.  Excluding the impact of our PPP lending, the net interest margin would have been 3.25% for the most recent quarter,” said Mark C. Oldenberg, Chief Financial Officer.

Paycheck Protection Program Participation and Deposit Growth:  During the second quarter of 2020, PSB originated 718 loans, 152 to new customers, for a total of $116.4 million in PPP loans and generated total loan fees receivable of $3.9 million.  These fees are currently deferred and will be realized over the life of the loan or will be recognized in proportion to the amount of loan when forgiven by the SBA.  We expect customers to begin the process of requesting loan forgiveness during the third quarter and receipt of the loan funds from the SBA to begin taking place during the fourth quarter. Additionally, during the June 2020 quarter, PSB deferred direct salary and compensation expenses associated with the origination of the loans totaling $861,000 and will recognize this expense during the period in which the origination fee is recognized in income.  These factors combined during the quarter resulting in total net deferred loan fees at June 30, 2020 of $2.6 million compared to net deferred costs of $388,000 at March 31, 2020.

Main Street Lending Program:  We have reviewed the requirements for the program and stand ready to participate on behalf of our customers who need and qualify for the program. As of June 30, 2020, we have not received any borrower requests that could benefit from the program.

Capital Management:  At June 30, 2020, the holding company’s tangible equity to asset ratio was 8.95% and the bank’s capital was well in-excess of all regulatory requirements.  As the PPP loans paydown or are forgiven resulting in a declining asset base, management expects capital ratios to return to historical levels exceeding 9.00%.

June 2020 Quarterly Financial Highlights (at or for the periods ended June 30, 2020, compared to March 31, 2020 and / or June 30, 2019, as applicable):

  • Return on shareholders’ equity was 13.38% for the quarter compared to 6.84% one quarter earlier and 11.90% for the second quarter one year earlier.  Return on average assets was 1.20% for the second quarter of 2020, compared to 0.67% the previous quarter and 1.15% for the second quarter one year earlier. 
     
  • Gains on the sale of mortgage loans increased to $1.75 million for the quarter ended June 30, 2020 from $987,000 the previous quarter and $432,000 for the same quarter ended one year earlier.  The gains were slightly offset by a decline in net mortgage loan servicing rights to a loss of $165,000 compared to a loss of $23,000 the prior quarter and a gain of $84,000 for the same quarter ended one year earlier.  Through the beginning of the third quarter of fiscal 2020, mortgage banking activity remains robust.
     
  • PSB realized a sizable increase in the value of investments held for sale as the market value improved for four collateralized loan obligations.  During the quarter ended June 30, 2020, the net unrealized gain on securities available for sale increased $2.61 million from a loss of $342,000 during the March 2020 quarter, mostly due to the recovery in value related to $20 million of Collateralized Loan Obligations Peoples State Bank holds with ratings of A or better.  These obligations had been impacted by unusual volatility in the bond market and temporary illiquidity during the prior quarter.  
     
  • Tangible net book value was $21.97 per share at June 30, 2020, compared to $20.89 per share as of March 31, 2020, and $19.41 per share at June 30, 2019.  Over the past year, tangible book value per share has grown 13.19%.

Balance Sheet and Asset Quality Review

Total assets were $1.093 billion as of June 30, 2020, compared to $970 million as of March 31, 2020, an increase of $123 million, or 12.7%.  Total loans receivable increased by $101.0 million, or 14.3% due primarily to the addition of PPP loans.  With the addition of PPP loans to the commercial/agricultural non-real estate loan portfolio, commercial/agricultural non-real estate loans became the largest loan concentration.  The commercial/agricultural non-real estate loan portfolio increased to $252.0 million at June 30, 2020 from $139.2 million three months earlier.  Commercial/agricultural non-real estate loans represented 30.8% of gross loans at June 30, 2020, followed by non-owner occupied commercial real estate loans at 26.5%, owner occupied commercial/agricultural real estate loans at 22.1%, residential real estate loans at 20.1%, and consumer loans at 0.5%.  Total agricultural related loans represent 0.9% of the total loan portfolio.    

The allowance for loan losses increased to 1.12% of gross loans at June 30, 2020 and 1.32% of gross loans less the PPP guaranteed loans.  The annualized net charge-offs to average loans was 0.25% for the quarter ended June 30, 2020, compared to 0.49% the previous quarter and 0.00% one year earlier.  The charge-offs in the most recent quarter related to the previously disclosed bankruptcy of the retailer Shopko, where approximately $500,000 was charged-off, and a $50,000 write-down was taken on a former branch office held for sale that is in foreclosed assets.  Non-performing assets decreased to 0.49% of total assets at June 30, 2020, compared to 0.54% at March 31, 2020, and 0.42% at June 30, 2019.  At June 30, 2020, non-performing assets consisted of $3.0 million in non-accrual loans, $244,000 in non-accrual restructured loans, $650,000 in restructured loans not on non-accrual, and $1.53 million in other real estate owned. 

Accrued interest receivable increased during the quarter to $3.6 million from $2.8 million in the first quarter of 2020, due to the loan payment deferrals and interest-only payments related to COVID-19 accommodations.  We expect the accrued interest receivable levels to decline in the third quarter as borrowers return to regular payments.

At June 30, 2020, cash and cash equivalents totaled $60.3 million compared to $48.1 million at March 31, 2020 and $18.7 million one year earlier.  Current cash levels are elevated due to the depositing of PPP funds and to accommodate potential cash needs related to the pandemic.  Investment securities totaled $178.6 million at June 30, 2020 compared to $171.1 million at March 31, 2020 and $165.7 million one year earlier.  All investment securities during the prior three quarters were considered available for sale and carried at market value.   

Foreclosed assets increased to $1.53 million at June 30, 2020 from $425,000 at March 31, 2020 and $172,000 one year earlier.  The increase primarily reflects our foreclosure on the Shopko property which is currently listed for sale and carried at an appraised value obtained in May 2020. 

Total deposits increased 15.3% to $882.2 million at June 30, 2020 compared to $765.3 million at March 31, 2020, led by an $83.4 million increase in non-interest demand deposits.  A large portion of the increase was related to PPP funds deposited at the Bank.  At June 30, 2020, interest-bearing demand and savings deposits accounted for 30.4% of total deposits, followed by noninterest-bearing demand deposits at 27.4%, money market deposits at 23.0%, and retail and local time deposits at 14.6%.  Broker and national time deposits accounted for 4.6% of total deposits at June 30, 2020 versus 3.9% the prior quarter and 5.9% one year earlier. As a result of the Safer-At-Home Order and ongoing pandemic, we have seen customer increase mobile banking enrollment by 12% and active mobile deposit product usage of 24%.

FHLB advances decreased to $87.0 million at June 30, 2020 compared to $88.7 million at March 31, 2020 and other borrowings increased to $3.9 million from $3.5 million over the same time period.

For the quarter ended June 30, 2020, stockholders’ equity increased $4.8 million to $98.0 million, compared to $93.2 million at March 31, 2020.  Stockholders’ equity was impacted by earnings, our recently declared $0.21 per share dividend payment and other comprehensive income adjustments, including the change in unrealized gains and losses on securities available for sale.  Tangible net book value per share increased to $21.97 per share, at June 30, 2020, compared to $20.89 per share at March 31, 2020.  PSB’s tangible equity to total assets was 8.95% at June 30, 2020 compared to 9.59% at March 31, 2020.  Adjusted for $116.4 million of PPP loans, tangible equity would have been 10.03% at June 30, 2020. As previously disclosed, we have suspended our share repurchase program and will consider reinstatement of the program at a future date.

Operations Review

Net interest income totaled $7.8 million (on a net margin of 3.09%) for the second quarter of 2020, compared to $7.8 million (on net margin of 3.45%) for the first quarter of 2020 and $7.8 million (on a net margin of 3.72%) for the second quarter of 2019.  For the six months ended June 30, 2020, net interest income was $15.6 million compared to $15.4 million for the same six-month period one year earlier.  Compared to the preceding quarter, loans and investment yields decreased 61 basis points to 3.69% during the second quarter of 2020 from 4.30% one quarter earlier while deposit and borrowing costs declined 26 basis points to 0.84% from 1.10% over the same period.  The decline in loan and investment yields was partially due to a larger average balance of cash and cash equivalents held during the quarter, a decrease in the prime lending rate due to actions by the Federal Reserve and the addition of PPP loans with coupon yields of 1.00%.  Loan yields decreased to 4.14% during the quarter, 4.45% adjusted to exclude the PPP loan volume, from 4.78% during the first quarter of 2020, as many floating rate loans repriced lower as the prime rate declined towards the end of the first quarter.  “We expect the net-interest margin adjusted for low yielding PPP loans to stabilize in the third quarter near the 3.25% level as we intend to reduce the elevated level of liquidity during the quarter,” stated Oldenberg.

The cost of interest-bearing liabilities decreased during the quarter, reflecting lower rates associated with money market accounts and time deposits.  Deposit costs decreased to $1.08 million for the second quarter of 2020 from $1.48 million the previous quarter.  Interest costs on borrowings declined $5,000 for the second quarter of 2020 to $448,000 from $453,000 the previous quarter.

The provision for loan losses totaled $1.8 million during the second quarter of 2020 compared to $1.8 million for the prior linked quarter.  The provision primarily relates to our charge-off on a Shopko related loan and an increased need for reserves related to anticipated losses related to a more difficult economic climate.  For the six months ended June 30, 2020, provision for loan losses totaled $3.6 million compared to $550,000 for the same period one year earlier.

For the six months ended June 30, 2020, total noninterest income was $5.5 million compared to $4.0 million for the six-months ended June 30, 2019.  The six-month increase was largely due to gains on the sale of mortgage loans.  Total noninterest income for the second quarter of 2020 increased to $3.1 million from $2.4 million for the first quarter of 2020.  Gains on sale of mortgage loans increased to $1.7 million for the second quarter from $987,000 in the first quarter of 2020 and remained strong as lower long-term U.S. Treasury rates have spurred mortgage refinance activity by borrowers.  We expect active mortgage originations during the third quarter though the wave of refinancing activity appears to have peaked.  The gains on sale of mortgage loans were partially offset by a loss on mortgage loan servicing of $165,000 for the second quarter of 2020 compared to a loss of $23,000 the previous quarter. 

Deposit and service fee income in the second quarter were down to $278,000 compared to $391,000 during the preceding quarter of 2020.  The service fee income was down as Peoples State Bank provided waivers on service fees through June 30, 2020 and recorded less overdraft income as depositors had higher average balances from stimulus money received.  Net gains on sale of securities was $194,000 for the second quarter of 2020 compared to $123,000 for the first quarter of 2020 and $121,000 for the quarter one year earlier.  Commissions on customer investment and insurance sales decreased to $259,000 from $349,000 the prior quarter as sales activity slowed during the pandemic and advisory fees tied to market values declined.  At June 30, 2020, Peoples State Bank had wealth assets under management totaling $234.4 million compared to $217.5 million at March 31, 2020 and $236.6 million at June 30, 2019.  The volatility over the past year in assets under management was has been primarily related to stock market value declines.  Other non-interest income for the second quarter was higher year over year due to $332,000 of fee income earned on loans originated with swap like features originated during the quarter.

Noninterest expense was $4.9 million for the second quarter of 2020, compared to $6.3 million for the first quarter of 2020.  For the second quarter of 2020, noninterest expense decreased due to lower salaries and employee benefits costs related to the deferral of $861,000 in loan origination costs associated with the PPP loans.  The deferred expenses will be recognized over the life of the loan or, in the case of PPP loans, when forgiven by the SBA.  Salary and employee benefit expenses were $2.6 million for the second quarter compared to $3.8 million in the first quarter of 2020, from the deferred costs and a separate $375,000 reduction related to lower benefits expenses.  Second quarter expenses were also $115,000 less than first quarter on lower donations expense.  The second quarter 2020 results reflect renewed FDIC insurance premiums compared to zero during the prior three quarters as the FDIC insurance fund had reached its targeted level.  It is expected FDIC insurance premiums will continue to be incurred throughout the pandemic.  For the six-months ended June 30, 2020, total noninterest expense was $11.2 million compared to $11.9 million for the same period one year earlier.

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 and southeastern Wisconsin from nine full-service banking locations in Marathon, Oneida, Vilas and Milwaukee counties and a loan production office in 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. Risk and uncertainties also include the effect of the COVID-19 pandemic, including the bank’s credit quality and business operations, as well as its impact on general economic and financial market conditions. PSB Holdings, Inc. assumes no obligation to update or supplement forward-looking statements that become untrue because of events subsequent to this press release.

Investor Relations Contact
PSB Holdings, Inc.
1905 Stewart Avenue
Wausau, WI 54401
888.929.9902
InvestorRelations@bankpeoples.com

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:     2020 2020 2019 2019  2019
                 
  Interest income     $ 9,291   $ 9,726   $ 9,988   $ 10,098   $ 9,839  
  Interest expense     $ 1,528   $ 1,935   $ 2,019   $ 2,154   $ 2,041  
  Net interest income     $ 7,763   $ 7,791   $ 7,969   $ 7,944   $ 7,798  
  Provision for loan losses     $ 1,800   $ 1,800   $ 150   $ 150   $ 150  
  Other noninterest income   $ 3,138   $ 2,355   $ 1,839   $ 1,802   $ 1,903  
  Other noninterest expense   $ 4,879   $ 6,330   $ 5,947   $ 5,437   $ 6,167  
  Net income     $ 3,190   $ 1,610   $ 2,813   $ 3,131   $ 2,572  
                                     
  Basic earnings per share (3)   $ 0.72   $ 0.36   $ 0.63   $ 0.70   $ 0.57  
  Diluted earnings per share (3)   $ 0.72   $ 0.36   $ 0.63   $ 0.70   $ 0.57  
  Dividends declared per share (3)   $ 0.21   $   $ 0.20   $   $ 0.20  
  Tangible net book value per share (4)   $ 21.97   $ 20.89   $ 20.72   $ 20.24   $ 19.41  
                                     
  Semi-annual dividend payout ratio     14.50 %   n/a     15.04 %   n/a     16.95 %
  Average common shares outstanding     4,453,225     4,464,956     4,471,173     4,473,583     4,486,022  
                 
Balance sheet – average balances:            
                 
  Loans receivable, net of allowances for loss $ 786,785   $ 705,333   $ 700,469   $ 689,057   $ 666,008  
  Assets     $ 1,067,466   $ 963,191   $ 951,409   $ 928,282   $ 893,998  
  Deposits     $ 855,155   $ 761,268   $ 745,455   $ 721,788   $ 713,910  
  Stockholders’ equity     $ 95,909   $ 94,735   $ 93,189   $ 89,139   $ 86,656  
                 
Performance ratios:              
                 
  Return on average assets (1)     1.20 %   0.67 %   1.17 %   1.34 %   1.15 %
  Return on average stockholders’ equity (1)   13.38 %   6.84 %   11.98 %   13.94 %   11.90 %
  Average stockholders’ equity less accumulated        
  other comprehensive income (loss) to          
  average assets       8.83 %   9.75 %   9.68 %   9.52 %   9.68 %
  Net loan charge-offs to average loans (1)   0.25 %   0.49 %   0.01 %   0.01 %   0.00 %
  Nonperforming loans to gross loans     0.47 %   0.67 %   0.68 %   0.70 %   0.53 %
  Nonperforming assets to total assets     0.49 %   0.54 %   0.55 %   0.57 %   0.42 %
  Allowance for loan losses to gross loans   1.13 %   1.10 %   0.97 %   0.97 %   0.97 %
  Nonperforming assets to tangible equity          
  plus the allowance for loan losses (4)   5.11 %   5.24 %   5.45 %   5.69 %   4.13 %
  Net interest rate margin (1)(2)     3.09 %   3.45 %   3.53 %   3.60 %   3.72 %
  Net interest rate spread (1)(2)     2.85 %   3.20 %   3.24 %   3.31 %   3.42 %
  Service fee revenue as a percent of            
    average demand deposits (1)     0.49 %   1.04 %   1.00 %   0.90 %   1.14 %
  Noninterest income as a percent            
  of gross revenue       25.25 %   19.49 %   15.55 %   15.14 %   16.21 %
  Efficiency ratio (2)       44.23 %   61.59 %   59.90 %   55.14 %   62.83 %
  Noninterest expenses to average assets (1)   1.84 %   2.64 %   2.48 %   2.32 %   2.77 %
  Tangible equity to actual assets     8.95 %   9.59 %   9.50 %   9.53 %   9.65 %
                 
Stock price information:              
                 
  High     $ 24.75   $ 28.25   $ 28.25   $ 27.50   $ 24.75  
  Low     $ 18.55   $ 19.50   $ 26.00   $ 23.55   $ 22.00  
  Last trade value at quarter-end   $ 18.55   $ 24.75   $ 27.50   $ 26.49   $ 24.00  
                 
(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. 
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) 2020 2020 2019 2019 2019
                 
Interest and dividend income:          
Loans, including fees $ 8,175   $ 8,445   $ 8,691 $ 8,823 $ 8,629
Securities:          
Taxable   622     733     768   769   730
Tax-exempt   446     431     387   378   389
Other interest and dividends   48     117     142   128   91
                 
Total interest and dividend income   9,291     9,726     9,988   10,098   9,839
                 
Interest expense:          
Deposits   1,080     1,482     1,544   1,654   1,634
FHLB advances   323     320     328   323   230
Other borrowings   6     14     26   58   57
Senior subordinated notes   28     28     29   28   28
Junior subordinated debentures   91     91     92   91   92
                 
Total interest expense   1,528     1,935     2,019   2,154   2,041
                 
Net interest income   7,763     7,791     7,969   7,944   7,798
Provision for loan losses   1,800     1,800     150   150   150
                 
Net interest income after provision for loan losses         5,963     5,991     7,819   7,794   7,648
                 
Noninterest income:          
Service fees   278     391     411   348   403
Gain on sale of mortgage loans   1,747     987     452   463   432
Mortgage loan servicing, net   (165 )   (23 )   57   89   84
Investment and insurance sales commissions   259     349     301   276   310
Net gain on sale of securities   194     123     71     121
Increase in cash surrender value of life insurance         104     104     104   105   101
Other noninterest income   721     424     443   521   452
                 
Total noninterest income   3,138     2,355     1,839   1,802   1,903
                 
Noninterest expense:          
Salaries and employee benefits   2,583     3,819     3,523   3,372   3,322
Occupancy and facilities   508     544     506   510   591
Loss on foreclosed assets   23     71     69   4   3
Data processing and other office operations   675     644     739   654   646
Advertising and promotion   94     141     182   107   120
FDIC insurance premiums   23             63
Other noninterest expenses   973     1,111     928   790   1,422
                 
Total noninterest expense   4,879     6,330     5,947   5,437   6,167
                 
Income before provision for income taxes   4,222     2,016     3,711   4,159   3,384
Provision for income taxes   1,032     406     898   1,028   812
                 
Net income $ 3,190   $ 1,610   $ 2,813 $ 3,131 $ 2,572
Basic earnings per share $ 0.72   $ 0.36   $ 0.63 $ 0.70 $ 0.57
Diluted earnings per share $ 0.72   $ 0.36   $ 0.63 $ 0.70 $ 0.57
                 
PSB Holdings, Inc.
Consolidated Statements of Income          
        Three Months Ended   Six Months Ended
(dollars in thousands, June   June
except per share data – unaudited) 2020 2019   2020 2019
                 
Interest and dividend income:          
Loans, including fees $ 8,175 $ 8,629   $ 16,620 $ 16,963
Securities:          
Taxable   622   730     1,355   1,443
Tax-exempt   446   389     877   785
Other interest and dividends   48   91     165   252
                 
Total interest and dividend income   9,291   9,839     19,017   19,443
                 
Interest expense:          
Deposits   1,080   1,634     2,562   3,187
FHLB advances   323   230     643   539
Other borrowings   6   57     20   108
Senior subordinated notes   28   28     56   56
Junior subordinated debentures   91   92     182   183
                 
Total interest expense   1,528   2,041     3,463   4,073
                 
Net interest income   7,763   7,798     15,554   15,370
Provision for loan losses   1,800   150     3,600   550
                 
Net interest income after provision for loan losses         5,963   7,648     11,954   14,820
                 
Noninterest income:          
Service fees   278   403     669   784
Gain on sale of mortgage loans          
Mortgage banking income   1,582   516     2,546   816
Investment and insurance sales commissions   259   310     608   643
Net gain on sale of securities   194   121     317   139
Increase in cash surrender value of life insurance         104   101     208   199
Other noninterest income   721   452     1,145   1,439
                 
Total noninterest income   3,138   1,903     5,493   4,020
                 
Noninterest expense:          
Salaries and employee benefits   2,583   3,322     6,402   6,750
Occupancy and facilities   508   591     1,052   1,192
Loss on foreclosed assets   23   3     94   7
Data processing and other office operations   675   646     1,319   1,223
Advertising and promotion   94   120     235   220
FDIC insurance premiums   23   63     23   122
Other noninterest expenses   973   1,422     2,084   2,398
                 
Total noninterest expense   4,879   6,167     11,209   11,912
                 
Income before provision for income taxes   4,222   3,384     6,238   6,928
Provision for income taxes   1,032   812     1,438   1,625
                 
Net income $ 3,190 $ 2,572   $ 4,800 $ 5,303
Basic earnings per share $ 0.72 $ 0.57   $ 1.08 $ 1.18
Diluted earnings per share $ 0.72 $ 0.57   $ 1.08 $ 1.18
                 
PSB Holdings, Inc.          
Consolidated Statements of Comprehensive Income        
                 
        Three Months Ended   Six Months Ended
        June 30,   June 30,
(dollars in thousands – unaudited)   2020     2019       2020     2019  
                 
Net income $ 3,190   $ 2,572     $ 4,800   $ 5,303  
                 
Other comprehensive income, net of tax:          
                 
  Unrealized gain on securities available          
    for sale   2,608     995       2,266     2,510  
                 
  Reclassification adjustment for security          
    gain included in net income   (141 )   (88 )     (230 )   (101 )
                 
  Amortization of unrealized gain included in net        
    income on securities available for sale          
    transferred to securities held to maturity       (1 )         (6 )
                 
  Unrealized loss on interest rate swap   (3 )   (142 )     (343 )   (218 )
                 
  Reclassification adjustment of interest rate          
    swap settlements included in earnings   32     6       50     9  
                 
Other comprehensive income   2,496     770       1,743     2,194  
                 
Comprehensive income $ 5,686   $ 3,342     $ 6,543   $ 7,497  
                 
PSB Holdings, Inc. 
Consolidated Balance Sheets 
June 30, and March 31, 2020, September 30, and June 30, 2019, unaudited,
December 31, 2019 derived from audited financial statements 
  Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30,
(dollars in thousands, except per share data) 2020 2020 2019 2019 2019
Assets          
           
Cash and due from banks $ 13,016   $ 9,665   $ 23,005   $ 17,954   $ 11,825  
Interest-bearing deposits   1,483     1,349     839     1,059     2,306  
Federal funds sold   45,796     37,071     25,184     30,415     4,552  
           
Cash and cash equivalents   60,295     48,085     49,028     49,428     18,683  
Securities available for sale (at fair value)   178,635     171,054     174,448     127,587     123,586  
Securities held to maturity (fair values of $0, $0, $0, $41,311 and          
$42,511 respectively)               40,791     42,074  
Bank certificates of deposit (at cost)   1,738     3,234     4,983     1,984     1,984  
Loans held for sale   3,755     1,394     545     335     50  
Loans receivable, net   805,243     706,584     707,651     691,289     678,247  
Accrued interest receivable   3,590     2,847     2,776     2,803     2,844  
Foreclosed assets   1,525     425     460     572     172  
Premises and equipment, net   11,067     11,098     10,457     10,212     9,749  
Mortgage servicing rights, net   1,623     1,668     1,747     1,720     1,738  
Federal Home Loan Bank stock (at cost)   2,283     2,283     2,073     2,173     1,662  
Cash surrender value of bank-owned life insurance   16,981     16,877     16,773     16,668     16,564  
Other assets   6,611     4,330     3,952     4,101     3,961  
           
TOTAL ASSETS $ 1,093,346   $ 969,879   $ 974,893   $ 949,663   $ 901,314  
           
Liabilities          
           
Non-interest-bearing deposits $ 241,914   $ 158,505   $ 177,002   $ 159,897   $ 143,423  
Interest-bearing deposits   640,307     606,781     604,788     576,288     571,794  
           
Total deposits   882,221     765,286     781,790     736,185     715,217  
           
Federal Home Loan Bank advances   87,000     88,682     73,496     85,496     59,915  
Other borrowings   3,941     3,504     6,131     17,411     19,179  
Senior subordinated notes   2,500     2,500     2,500     2,500     2,500  
Junior subordinated debentures   7,732     7,732     7,732     7,732     7,732  
Accrued expenses and other liabilities   11,998     9,024     10,553     9,715     9,668  
           
Total liabilities   995,392     876,728     882,202     859,039     814,211  
           
Stockholders’ equity          
           
Preferred stock – no par value:          
Authorized – 30,000 shares; no shares issued or outstanding                    
Common stock – no par value with a stated value of $1.00 per share:          
Authorized – 6,000,000 shares; Issued – 5,490,798 shares          
Outstanding – 4,452,287, 4,453,472, 4,467,217, 4,471,216 and          
4,480,585 shares, respectively   1,830     1,830     1,830     1,830     1,830  
Additional paid-in capital   7,712     7,632     7,597     7,543     7,490  
Retained earnings   98,901     96,646     95,037     93,117     89,986  
Accumulated other comprehensive income, net of tax   3,045     550     1,302     1,103     543  
Treasury stock, at cost – 1,038,511, 1,037,326, 1,023,581, 1,019,582 and          
1,010,213 shares, respectively   (13,534 )   (13,507 )   (13,075 )   (12,969 )   (12,746 )
           
Total stockholders’ equity   97,954     93,151     92,691     90,624     87,103  
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,093,346   $ 969,879   $ 974,893   $ 949,663   $ 901,314  
           
PSB Holding, Inc. 
Loan Composition by Purpose 
Quarter-ended (dollars in thousands) Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019 Jun 30, 2019
Total Loans          
Residential real estate          
  One to four family $ 118,049   $ 122,276   $ 121,548   $ 119,620   $ 117,093  
  HELOC loans   19,550     20,795     21,668     22,855     22,158  
  Residential construction & development   23,129     22,963     23,633     21,273     20,937  
  Residential vacant land   3,417     3,745     3,908     4,299     4,680  
  Total Residential real estate   164,145     169,779     170,757     168,047     164,868  
             
Commercial/Agricultural real estate          
  Owner occupied          
  Commercial real estate   164,483     164,851     156,275     158,423     149,507  
  SBA commercial real estate   1,539     1,571     1,647     1,367     1,386  
  Agriculture real estate   4,885     5,041     5,901     5,139     5,764  
  Construction and land development   7,294     8,297     13,228     12,742     7,832  
  Commercial vacant land   2,241     1,560     929          
  Total Owner occupied   180,442     181,320     177,980     177,671     164,489  
             
  Non-owner occupied          
  Commercial real estate   193,550     188,525     192,160     179,136     168,809  
  SBA commercial real estate   793     824     844     863     141  
  Agricultural real estate                    
  Construction and land development   11,927     16,406     17,061     13,301     22,159  
  Commercial vacant land   10,135     13,965     14,280     14,532     14,702  
  Total Non-owner occupied   216,405     219,720     224,345     207,832     205,811  
             
Commercial/Agricultural non-real estate          
  Municipal non-real estate   7,826     5,933     11,601     6,384     9,017  
  Commercial line   55,317     59,266     54,538     62,991     65,252  
  Other commercial non-real estate   69,267     70,467     65,690     64,418     65,500  
  SBA commercial non-real estate   117,436     1,453     1,733     1,819     2,252  
  Agricultural non-real estate   2,148     2,075     2,402     3,606     3,491  
  Total Commercial/Agricultural non-real estate   251,994     139,194     135,964     139,218     145,512  
             
Consumer non-real estate          
  Consumer installment   3,512     3,344     3,454     3,319     3,093  
  Consumer line   243     328     1,354     1,343     304  
  Other consumer   160     183     189     197     195  
  Total Consumer non-real estate   3,915     3,855     4,997     4,859     3,592  
Gross loans   816,901     713,868     714,043     697,627     684,272  
             
  Net deferred loan (fees) costs   (2,617 )   388     326     295     300  
  Overdrafts   133     199     221     168     339  
  Allowance for loan losses   (9,174 )   (7,871 )   (6,939 )   (6,801 )   (6,664 )
Total loans receivable $ 805,243   $ 706,584   $ 707,651   $ 691,289   $ 678,247  
             
PSB Holdings, Inc.        
Nonperforming Assets as of:        
    June   December 31,
(dollars in thousands)   2020     2019      2019
           
Nonaccrual loans (excluding restructured loans) $ 2,964   $ 2,306     $ 3,697  
Nonaccrual restructured loans   244     270       499  
Restructured loans not on nonaccrual   650     1,048       676  
Accruing loans past due 90 days or more              
           
Total nonperforming loans   3,858     3,624       4,872  
Other real estate owned   1,525     172       460  
           
Total nonperforming assets $ 5,383   $ 3,796       $ 5,332  
           
Nonperforming loans as a % of gross loans receivable   0.47 %   0.53 %     0.68 %
Total nonperforming assets as a % of total assets   0.49 %   0.42 %     0.55 %
Allowance for loan losses as a % of nonperforming loans     237.79 %   183.89 %     142.43 %
           
PSB Holdings, Inc.                
Deposit Composition                
    June 30,       December 31,
(dollars in thousands) 2020   2019   2019
  $ %   $ %   $ %
                 
Non-interest bearing demand $ 241,914 27.40 %   $ 143,423 20.10 %   $ 177,002 22.60 %
Interest-bearing demand and savings   267,874 30.40 %     237,922 33.30 %     257,486 32.90 %
Money market deposits   202,708 23.00 %     165,918 23.20 %     183,370 23.50 %
Retail and local time deposits <= $250   103,917 11.80 %     100,560 14.00 %     104,455 13.40 %
                 
Total core deposits   816,413 92.60 %       647,823 90.60 %     722,313 92.40 %
Retail and local time deposits > $250   24,399 2.80 %     25,077 3.50 %     25,431 3.30 %
Broker & national time deposits <= $250   15,376 1.70 %     3,470 0.50 %     5,457 0.70 %
Broker & national time deposits > $250   26,033 2.90 %     38,847 5.40 %     28,589 3.60 %
Totals $ 882,221 100.00 %     $ 715,217 100.00 %   $ 781,790 100.00 %
                 
PSB Holdings, Inc. 
Average Balances ($000) and Interest Rates
(dollars in thousands) 
                           
                           
      Quarter ended June 30, 2020   Quarter ended March 31, 2020   Quarter ended June 30, 2019
      Average   Yield /   Average   Yield /   Average   Yield /
      Balance Interest Rate   Balance Interest Rate   Balance Interest Rate
Assets                        
Interest-earning assets:                      
Loans (1)(2) $ 795,337   $ 8,186 4.14 %   $ 712,402   $ 8,461 4.78 %   $ 672,576   $ 8,641 5.15 %
Taxable securities   99,621     622 2.51 %     110,980     733 2.66 %     106,737     730 2.74 %
Tax-exempt securities (2)   70,105     565 3.24 %     66,958     546 3.28 %     61,851     492 3.19 %
FHLB stock   2,283     25 4.40 %     2,121     26 4.93 %     1,593     24 6.04 %
Other     58,776     23 0.16 %     30,253     91 1.21 %     11,470     67 2.34 %
                           
Total (2)     1,026,122     9,421 3.69 %     922,714     9,857 4.30 %     854,227     9,954 4.67 %
                           
Non-interest-earning assets:                      
Cash and due from banks   10,760           11,621           10,837      
Premises and equipment,                      
net     11,116           10,779           10,422      
Cash surrender value ins   16,918           16,811           16,506      
Other assets   11,102           8,335           8,574      
Allowance for loan                      
losses     (8,552 )         (7,069 )         (6,568 )    
                           
  Total   $ 1,067,466           $ 963,191         $ 893,998      
                           
Liabilities & stockholders’ equity                    
Interest-bearing liabilities:                      
Savings and demand                      
deposits   $ 261,942   $ 127 0.20 %   $ 261,704   $ 330 0.51 %   $ 239,929   $ 417 0.70 %
Money market deposits   197,571     213 0.43 %     188,507     373 0.80 %     161,070     392 0.98 %
Time deposits   169,398     740 1.76 %     159,294     779 1.97 %     171,501     825 1.93 %
FHLB borrowings   90,623     323 1.43 %     80,486     320 1.60 %     51,014     230 1.81 %
Other borrowings   5,857     6 0.41 %     6,394     14 0.88 %     22,302     57 1.03 %
Senior sub. notes   2,500     28 4.50 %     2,500     28 4.50 %     2,500     28 4.49 %
Junior sub. debentures   7,732     91 4.73 %     7,732     91 4.73 %     7,732     92 4.77 %
                           
Total     735,623     1,528 0.84 %     706,617     1,935 1.10 %     656,048     2,041 1.25 %
                           
Non-interest-bearing liabilities:                    
Demand deposits   226,244           151,763           141,410      
Other liabilities   9,690           10,076           9,884      
Stockholders’ equity   95,909           94,735           86,656      
                           
Total   $ 1,067,466           $ 963,191         $ 893,998      
                           
Net interest income   $ 7,893       $ 7,922       $ 7,913  
Rate spread       2.85 %       3.20 %       3.42 %
Net yield on interest-earning assets   3.09 %       3.45 %       3.72 %
                           
(1) Nonaccrual loans are included in the daily average loan balances outstanding. 
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent 
basis using a federal tax rate of 21%. 
PSB Holdings, Inc.              
Average Balances ($000) and Interest Rates          
(dollars in thousands)              
      Six months ended June 30, 2020   Six months ended June 30, 2019
      Average   Yield/   Average   Yield/
      Balance Interest Rate   Balance Interest Rate
Assets                
Interest-earning assets:              
Loans (1)(2) $ 753,869   $ 16,647 4.44 %   $ 668,732   $ 16,986 5.12 %
Taxable securities   105,300     1,355 2.59 %     105,933     1,443 2.75 %
Tax-exempt securities (2)   68,532     1,110 3.26 %     63,472     994 3.16 %
FHLB stock   2,202     51 4.66 %     1,803     59 6.60 %
Other     45,051     114 0.51 %     16,701     193 2.33 %
                   
Total (2)     974,954     19,277 3.98 %     856,641     19,675 4.63 %
                   
Non-interest-earning assets:              
Cash and due from banks   11,190           11,080      
Premises and equipment,              
net     10,948           10,402      
Cash surrender value ins   16,864           16,456      
Other assets   9,717           8,782      
Allowance for loan              
losses     (7,810 )         (6,415 )    
                   
Total   $ 1,015,863           $ 896,946      
                   
Liabilities & stockholders’ equity            
Interest-bearing liabilities:              
Savings and demand              
deposits   $ 261,823   $ 457 0.35 %   $ 246,577   $ 889 0.73 %
Money market deposits   193,329     586 0.61 %     153,988     691 0.90 %
Time deposits   164,346     1,519 1.86 %     173,515     1,607 1.87 %
FHLB borrowings   85,555     643 1.51 %     57,635     539 1.89 %
Other borrowings   6,125     20 0.66 %     21,052     108 1.03 %
Senior sub. notes   2,500     56 4.50 %     2,500     56 4.52 %
Junior sub. debentures   7,732     182 4.73 %     7,732     183 4.77 %
                   
Total     721,410     3,463 0.97 %     662,999     4,073 1.24 %
                   
Non-interest-bearing liabilities:            
Demand deposits   189,004           139,623      
Other liabilities   10,008           9,670      
Stockholders’ equity   95,441           84,654      
                   
Total   $ 1,015,863           $ 896,946      
                   
Net interest income   $ 15,814       $ 15,602  
Rate spread       3.01 %       3.39 %
Net yield on interest-earning assets   3.26 %       3.67 %
                   
(1) Nonaccrual loans are included in the daily average loan balances outstanding.    
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent    
basis using a tax rate of 21%.            

 

 

 



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