News Details

WAUSAU, Wis., July 24, 2023 (GLOBE NEWSWIRE) -- PSB Holdings, Inc. (“PSB”) (OTCQX: PSBQ), the holding company for Peoples State Bank (“Peoples”) serving Northcentral and Southeastern Wisconsin reported second quarter earnings ending June 30, 2023 of $0.64 per common share on net income of $2.7 million, compared to $0.67 per common share on net income of $2.9 million during the first quarter ending March 31, 2023, and $0.72 per common share on net income of $3.2 million during the second quarter ending June 30, 2022.

PSB’s second quarter 2023 operating results reflected the following changes from the first quarter of 2023: (1) lower net interest income due to rising deposit and FHLB advance costs; (2) higher non-interest income despite losses on sale of securities; (3) slightly higher non-interest expense related to health care expenses; (4) higher accumulated other comprehensive loss due to an increase in intermediate interest rates; (5) strong loan growth of $75 million; and (6) increased borrowings to fund seasonal business customer and municipal deposit outflows, promote increased on-balance sheet liquidity, and to fund net loan growth.

“We realized strong loan growth in the second quarter which has helped boost yields on the loan portfolio and offset increased interest expense. Additionally, with a gain realized on a life insurance policy, we were able to offset a loss on the sale of securities and right-size our investment portfolio with better asset yields. Towards the end of the quarter, and with the addition of new loans, we began to see the compression on our net interest margin stabilize,” stated Scott Cattanach, President and CEO. “On July 14^th, we converted our loan production office in Stevens Point to a full service branch which should facilitate attracting full deposit relationships with existing and new loan customers in the Stevens Point community.”

June 30, 2023 Highlights:

• Loans increased $75.1 million in the second quarter ended June 30, 2023 to $1.1 billion from $973.3 million at the end of the first quarter March 31, 2023.

• Tangible book value per common share increased to $22.64 at June 30, 2023 from $22.43 one quarter earlier. Tangible book value per share benefited from fewer shares outstanding. Return on tangible common equity was 11.14% for the quarter ended June 30, 2023 compared to 12.51% the prior quarter.

• Net interest income decreased to $9.5 million for the quarter ended June 30, 2023, compared to $9.9 million for the quarter ended March 31, 2023 due to funding costs rising faster than increases in asset yields.

• Provision for loan losses remained at $100,000 for the quarter ended June 30, 2023. The provision for the second quarter was largely related to new loan growth of $75.1 million.

• Noninterest income remained at $2.0 million for the quarter ended June 30, 2023 as losses on the sale of securities of $279,000 partially offset a $533,000 life insurance benefit. Investment and insurance sales commissions were also lower in the second quarter relative to the prior quarter.

• Net income adjusted for the non-recurring impact of a life insurance benefit and loss on the sale of securities was $2.4 million, or $0.56 per common share.

• Noninterest expenses increased $128,000, or 1.6% for the second quarter of 2023 to $7.9 million from $7.8 million the prior quarter. The increase was primarily related to higher data processing and office operations costs.

• During the second quarter, PSB repurchased 48,055 shares of its common stock.

Balance Sheet and Asset Quality Review

Total assets increased slightly to $1.42 billion at June 30, 2023, from $1.36 billion at March 31, 2023. Cash and cash equivalents totaled $44.4 million at June 30, 2023 compared to $39.6 million the previous quarter. Investment securities available for sale decreased $23.4 million from security sales, maturities and paydowns to $167.4 million at June 30, 2023 from $190.7 million one quarter earlier. Total collateralized liquidity available to meet cash demands was approximately $600 million at June 30, 2023 with an additional $300 million that could be raised in a short timeframe from the brokered CDs market.

Total loans receivable increased $75.1 million to $1.05 billion at June 30, 2023, from $973.3 million at March 31, 2023. Over the past year, loans have increased 13.3%. Commercial loans were the largest addition to the loan portfolio during the most recent quarter, which included municipal non-real estate loans. Total commercial loans increased $34.6 million to $196.4 million from $161.8 million the prior quarter. Non-owner occupied commercial real estate loans were also added to the portfolio, increasing $13.7 million to $240.0 million at June 30, 2023 from $226.3 million at March 31, 2023. Construction and land development loans increased $8.0 million during the second quarter. Owner occupied one-to-four family mortgage loans with variable rate features largely rounded out the loan growth over the quarter increasing $11.8 million to $199.1 million at June 30, 2023. Currently, the lending pipeline is expected to slow from the second quarter pace through the remainder of 2023, but the economic climate in our markets remains vibrant.

The allowance for loan losses declined slightly to 1.19% of gross loans at June 30, 2023 from 1.25% the prior quarter. Annualized net recoveries to average loans were 0.07% for the second quarter ended June 30, 2023. Non-performing assets remained at 0.45% of total assets at June 30, 2023. For the second consecutive quarter, the Bank did not own any foreclosed real estate.

Total deposits increased $35.5 million, or 3.2%, to $1.14 billion at June 30, 2023. Much of the deposit increase was non-interest bearing demand deposits (up $14.3 million) and money market deposits (up $16.3 million). Brokered deposits increased $19.5 million while interest-bearing demand deposits declined $21.6 million.

The composition of deposits continued to change during the June 2023 quarter as customers continue to seek higher deposit rates. At June 30, 2023, money market deposits and time deposits increased to 37.7% of deposits, compared to 36.6% at March 31, 2023. Lower-yield demand and savings deposits declined to 53.8% of deposits compared to 56.2% at March 31, 2023. Broker and national time deposits increased to 8.5% of total deposits at June 30, 2023 from 7.2% one quarter earlier. Uninsured and uncollateralized deposits represented 21.6% of total deposits at June 30, 2023 compared to 19.0% at March 31, 2023.

FHLB advances increased to $133.0 million at June 30, 2023 compared to $113.0 million at March 31, 2023. Other borrowings increased to $5.7 million at June 30, 2023 compared to $5.0 million at March 31, 2023. New FHLB advances were added to support loan growth during the quarter as well as increase cash on hand for liquidity contingency plans.

Tangible stockholder equity as a percent of total tangible assets was 7.22% at June 30, 2023, compared to 7.54% at March 31, 2023.

Tangible net book value per common share increased to $22.64 at June 30, 2023, compared to $22.43 per common share one quarter earlier. Relative to the prior quarter, accumulated other comprehensive loss increased $725,000. At June 30, 2023, the fair value on all securities (available for sale and held to maturity) was 12.0% less than amortized purchase cost, compared to 10.4% of the amortized purchase cost at March 31, 2023.

Operations Review

Net interest income decreased to $9.5 million (on a net margin of 2.98%) for the second quarter of 2023, compared to $9.9 million (on a net margin of 3.21%) for the first quarter of 2023, and $9.7 million (on a net margin of 3.23%) for the second quarter of 2022. Earning asset yields increased 13 basis points to 4.58% during the second quarter of 2023 from 4.45% during the first quarter of 2023, while deposit and borrowing costs increased 44 basis points to 2.12% compared to 1.68% during the first quarter of 2023.

The increase in earning asset yields was partially due to higher yields on loans while yields on investment securities remained relatively flat during the quarter ended June 30, 2023. Taxable security yields were 2.71% for the quarter ended June 30, 2023, compared to 2.70% for the quarter ended March 31, 2023. Loan yields increased during the second quarter to 5.04% from 4.90% for the first quarter of 2023 as new loans were added to the portfolio and existing loans repriced to higher indices from Federal Reserve and market rate increases.

Rising deposit costs for money market deposits, time deposits and FHLB advances were primarily responsible for the rise in the Bank’s cost of funds. The overall cost of deposits was 1.33% for the quarter ended June 30, 2023 compared to 1.06% the prior quarter. FHLB advance costs rose to 3.78% during the second quarter ended June 30, 2023 from 3.22% the prior quarter.

Total noninterest income increased slightly for the second quarter of 2023 to $1.98 million from $1.95 million for the first quarter of 2023, due primarily to the payment of a life insurance benefit. The life insurance benefit was partially offset by the loss realized on the sale of investment securities with the sale proceeds reinvested into higher yielding loans. The increase in noninterest income also reflected larger gains on the sale of mortgage loans as origination activity increased from the prior quarter. At June 30, 2023, the Bank serviced $370.8 million in secondary market residential mortgage loans for others.

Noninterest expenses increased slightly to $7.9 million for the second quarter of 2023, compared to $7.8 million for the first quarter of 2023. The second quarter of 2023 included higher data processing and other operation expenses as well as continued elevated employee benefit expenses. Salary and employee benefit expenses were $4.9 million for the second quarter of 2023, compared to $5.0 million for the first quarter of 2023. Noninterest expense is expected to be a similar amount in the third quarter.

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 northcentral and southeastern Wisconsin from twelve full-service banking locations in Marathon, Oneida, Vilas, Portage, Milwaukee and Waukesha counties. 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

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about PSB’s business based, in part, on assumptions made by management and include, without limitation, statements with respect to the potential growth of PSB, its future profits, expected stock repurchase levels, future dividend rates, future interest rates, and the adequacy of its capital position. Forward-looking statements can be affected by known and unknown risks, uncertainties, and other factors, including, but not limited to, strength of the economy, the effects of government policies, including interest rate policies, risks associated with the execution of PSB’s vision and growth strategy, including with respect to current and future M&A activity, and risks associated with global economic instability relating to the COVID-19 pandemic and its effect on PSB and Peoples, and their customers, and other risks. The forward-looking statements in this press release speak only as of the date on which they are made and PSB does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.

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