Wausau, WI – January 28, 2019 – PSB Holdings, Inc. (“PSB”) (OTCPK: 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.
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 forwardlooking 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.
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Peoples State Bank is a community bank headquartered in Wausau, Wisconsin, serving north central Wisconsin from nine full service banking locations in Marathon, Oneida and Vilas Counties, as well as a commercial loan production office in Milwaukee, WI. Peoples provides financial services to business owners and individuals, as well as investment and retirement planning services through Peoples Wealth Management, a division of Peoples. Peoples was founded in 1962 and has total assets in excess of $916 million. PSB Holdings, Inc., the parent company of Peoples State Bank, trades its common stock under stock symbol PSBQ on the OTC Markets Exchange. Peoples is an Equal Housing Lender and Member FDIC.