PSB Holdings, Inc. Reports Earnings of $0.69 per Share for Q3 2024; Net Interest Margin and Tangible Book Value Increase; Asset Quality Improves
WAUSAU, Wis., Oct. 28, 2024 (GLOBE NEWSWIRE) -- PSB Holdings, Inc. ("PSB") (OTCQX:PSBQ), the holding company for Peoples State Bank ("Peoples") serving Northcentral and Southeastern Wisconsin reported third quarter earnings ending September 30, 2024 of $0.69 per common share on net income of $2.9 million, compared to $0.56 per common share on net income of $2.3 million during the second quarter ending June 30, 2024, and $0.29 per common share on net income of $1.2 million during the third quarter ending September 30, 2023.
PSB's third quarter 2024 operating results reflected the following changes from the second quarter of 2024: (1) higher net interest margin increased 6 basis points; (2) slightly lower non-interest income; (3) lower non-interest expense due to the second quarter reflecting elevated severance expenses; and (4) the return of a $2.5 million non-performing loan to performing status and a corresponding release in specific reserves.
"Over the past year, we have increased shareholders' tangible book value per share 18.7% and paid $0.62 in dividends to our shareholders, up 12.7% from the 12 month period ended September 30, 2023. With the rapid rise in short term interest rates over the past couple of years coming to an apparent end, we expect our net interest margin to be stable and operating expenses to continue to be well managed and efficient. Additionally, as funds become available from investment and loan repayments and maturities, we expect the funds to be reinvested into higher yielding assets which should lessen the volatility in fair market value adjustments reflected in our tangible book value," stated Scott Cattanach, President and CEO.
September 30, 2024, Highlights:
Net interest income increased to $9.9 million for the quarter ended September 30, 2024, from $9.4 million for the quarter ended June 30, 2024, as increases in asset and loan yields outpaced the increases in funding costs.
Noninterest income decreased slightly to $1.8 million for the quarter ended September 30, 2024, compared to $1.9 million the prior quarter.
Noninterest expenses decreased during the quarter ended September 30, 2024, reflecting lower salary and benefit expenses. Included in salary and benefit expenses for the prior quarter were non-recurring expenses totaling approximately $404,000.
Tangible book value per common share increased $1.86 per share to $26.41 at September 30, 2024, compared to $24.55 one quarter earlier, and increased $4.16 per share, or 18.7%, compared to $22.25 at September 30, 2023. Additionally, PSB paid dividends totaling $0.62 per share over the past year. During the third quarter ended September 30, 2024, tangible book value per share was positively influenced by higher net income, intangible asset amortization, an increase in fair market value of investment securities and consistent stock repurchase activity.
Loans decreased $16.9 million in the third quarter ended September 30, 2024, to $1.06 billion largely due to not replacing certain out of market maturing loans. Allowance for credit losses increased to 1.18% of gross loans.
Non-performing assets declined to 0.71% of total assets at September 30, 2024 from 0.84% at June 30, 2024 as a $2.5 million loan returned to performing status.
Total deposits decreased $13.2 million during the quarter ended September 30, 2024 to $1.14 billion, with a large portion of the decrease attributable to a large overnight deposit held at June 30, 2024 which was withdrawn in early July.
Return on average tangible common equity was 10.96% for the quarter ended September 30, 2024, compared to 9.34% the prior quarter and 5.17% in the year ago quarter.
Balance Sheet and Asset Quality Review
Total assets decreased $9.7 million to $1.48 billion at September 30, 2024. Investment securities available for sale increased $9.7 million to $174.9 million at September 30, 2024, from $165.2 million one quarter earlier. Total collateralized liquidity available to meet cash demands was approximately $321 million at September 30, 2024, with an additional $343 million that could be raised in a short time frame from the brokered CDs market.
Total loans receivable decreased $16.9 million to $1.06 billion at September 30, 2024, due primarily to lower commercial and construction lending. Commercial non-real estate loans decreased $9.1 million to $139.0 million at September 30, 2024, from $148.2 million one quarter earlier. Gross construction lending decreased $9.6 million to $61.0 million at September 30, 2024, from $70.5 million at June 30, 2024, while loans in process declined $3.6 million during the quarter ended September 30, 2024. Commercial real estate loans decreased $2.6 million to $541.6 million at September 30, 2024, from $544.2 million the prior quarter. Meanwhile, residential real estate loans increased slightly from the prior quarter to $341.3 million from $340.9 million. The loan portfolio remains well diversified with commercial real estate and construction loans totaling 55.4% of gross loans followed by residential real estate loans at 31.4% of gross loans, commercial non-real estate loans at 12.8% and consumer loans at 0.4%.
The allowance for credit losses increased slightly to 1.18% of gross loans at September 30, 2024, from 1.16% the prior quarter. Annualized net charge-offs to average loans were zero for the last five quarters. Non-performing assets totaled 0.71% of total assets at September 30, 2024, compared to 0.84% at June 30, 2024. During the quarter ended September 30, 2024, a loan totaling $2.5 million was returned to performing status, while a loan on a recreation facility totaling $3.3 million was added to nonaccrual status. Additionally, one loan relationship to an equipment dealership on nonaccrual status totaling $5.1 million at June 30, 2024 was paid down to $2.8 million at September 30, 2024 on sale of the equipment inventory. For the seventh consecutive quarter, the Bank did not own any foreclosed real estate.
Total deposits decreased $13.2 million to $1.14 billion at September 30, 2024, from $1.15 billion at June 30, 2024. The decrease in deposits reflects a $13.1 million decrease in interest-bearing demand and savings deposits, a $19.7 million decrease in money market deposits partially offset by a $14.6 million increase in non-interest bearing deposits and a $5.4 million increase in retail and local time deposits. The decrease in money market deposits reflected a large deposit of $49 million on June 30, 2024 that was drawn down in early July 2024.
At September 30, 2024, non-interest bearing demand deposits increased to 23.3% of total deposits from 21.6% the prior quarter, while interest-bearing demand and savings deposits decreased to 28.4% of deposits, compared to 29.3% at June 30, 2024. Uninsured and uncollateralized deposits decreased to 21.6% of total deposits at September 30, 2024, from 24.0% of total deposits at June 30, 2024.
FHLB advances decreased to $181.3 million at September 30, 2024, compared to $184.9 million at June 30, 2024.
Tangible stockholder equity as a percent of total tangible assets increased to 7.85% at September 30, 2024, compared to 7.32% at June 30, 2024, and 6.98% at September 30, 2023.
Tangible net book value per common share increased $4.16, to $26.41, at September 30, 2024, compared to $22.25 one year earlier, an increase of 18.7% after dividends of $0.62 were paid to shareholders. Relative to the prior quarter, tangible net book value per common share increased due to continued earnings, a fair market value increase in the investment portfolio which reduced unrealized losses reflected in accumulated other comprehensive income and amortization of intangible assets. The accumulated other comprehensive loss on the investment portfolio was $15.8 million at September 30, 2024, compared to $20.5 million one quarter earlier.
Operations Review
Net interest income increased to $9.9 million (on a net margin of 2.90%) for the third quarter of 2024, from $9.4 million (on a net margin of 2.84%) for the second quarter of 2024, and $9.6 million (on a net margin of 2.88%) for the third quarter of 2023. Earning asset yields increased by 8 basis points to 5.29% during the third quarter of 2024 from 5.21% during the second quarter of 2024, while interest bearing deposit and borrowing costs increased 7 basis points to 3.13% compared to 3.06% during the second quarter of 2024.
The increase in earning asset yields was primarily due to higher yields on loan originations and renewals. Loan yields increased during the third quarter of 2024 to 5.78% from 5.67% for the second quarter of 2024, up 11 basis points. Taxable security yields were 3.01% for the quarter ended September 30, 2024, compared to 3.02% for the quarter ended June 30, 2024, while tax-exempt security yields were 3.31% for the quarter ended September 30, 2024 compared to 3.33% the prior quarter.
The cost of all deposits was 2.11% for the quarter ended September 30, 2024, compared to 2.11% the prior quarter, while the overall cost of funds increased 7 basis points from 3.06% to 3.13% during the same time period. Deposit costs for money market deposits decreased during the quarter ended September 30, 2024, to 2.69% from 2.72% the prior quarter. The cost of time deposits and FHLB advances continued to increase and were primarily responsible for the rise in the Bank's cost of funds in the current quarter. The cost of time deposits increased to 4.04% for the third quarter ended September 30, 2024, from 3.97% the prior quarter. FHLB advance costs rose to 4.44% during the third quarter ended September 30, 2024, from 4.28% the prior quarter.
Total noninterest income decreased slightly for the third quarter of 2024 to $1.84 million, from $1.91 million for the second quarter of 2024. Mortgage banking income remained at $433,000 in the September 30, 2024 quarter while various decreases in nominal revenue sources accounted for the slight decline in non-interest income during the third quarter ended September 30, 2024. At September 30, 2024, the Bank serviced $371 million in secondary market residential mortgage loans for others which provide fee income.
Noninterest expenses decreased to $8.2 million for the third quarter of 2024, compared to $8.4 million for the second quarter of 2024. The second quarter ended June 30, 2024, reflected higher salary and benefit expenses related to non-recurring costs. Relative to one year earlier, salary and benefit cost increased 5.7% to $4.8 million for the quarter ended September 30, 2024, compared to $4.5 million for the third quarter ended September 30, 2023.
Taxes increased $183,000 during the third quarter to $593,000, from $410,000 one quarter earlier. The increase generally reflects higher pre-tax income. The effective tax rate for the quarter ended September 30, 2024, was 16.6% compared to 14.4% for the second quarter ended June 30, 2024, and 63.8% for the third quarter ended September 30, 2023, when higher tax expenses were incurred to recognize the loss of certain deferred tax assets following a change in Wisconsin tax law that eliminated state taxes on certain qualified assets.
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 and a loan production office in Dane County. 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. 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.
PSB Holdings, Inc.
Consolidated Balance Sheets
September 30, June 30, and March 31, 2024, September 30, 2023, unaudited, December 31, 2023 derived from audited financial statements
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
(dollars in thousands, except per share data)
2024
2024
2024
2023
2023
Assets
Cash and due from banks
$
23,554
$
16,475
$
13,340
$
20,887
$
12,881
Interest-bearing deposits
5,126
251
105
1,431
668
Federal funds sold
58,434
69,249
2,439
5,462
7,764
Cash and cash equivalents
87,114
85,975
15,884
27,780
21,313
Securities available for sale (at fair value)
174,911
165,177
165,566
164,024
160,883
Securities held to maturity (fair values of $82,389, $79,993, $81,234, $82,514 and
$75,236 respectively)
86,847
86,825
87,104
87,081
86,908
Equity securities
1,752
1,661
1,474
1,474
2,273
Loans held for sale
-
2,268
865
230
971
Loans receivable, net (allowance for credit losses of $12,598, $12,597, $12,494,
$12,302 and $12,267 respectively)
1,057,974
1,074,844
1,081,394
1,078,475
1,098,019
Accrued interest receivable
4,837
5,046
5,467
5,136
4,716
Foreclosed assets
-
-
-
-
-
Premises and equipment, net
14,065
14,048
13,427
13,098
13,242
Mortgage servicing rights, net
1,727
1,688
1,657
1,664
1,684
Federal Home Loan Bank stock (at cost)
8,825
8,825
7,006
6,373
6,373
Cash surrender value of bank-owned life insurance
24,565
24,401
24,242
24,085
23,931
Core deposit intangible
212
229
249
273
297
Goodwill
2,541
2,541
2,541
2,541
2,541
Other assets
10,598
12,111
11,682
11,866
14,094
TOTAL ASSETS
$
1,475,968
$
1,485,639
$
1,418,558
$
1,424,100
$
1,437,245
Liabilities
Non-interest-bearing deposits
$
265,078
$
250,435
$
247,608
$
266,829
$
288,765
Interest-bearing deposits
874,035
901,886
865,744
874,973
883,474
Total deposits
1,139,113
1,152,321
1,113,352
1,141,802
1,172,239
Federal Home Loan Bank advances
181,250
184,900
158,250
134,000
128,000
Other borrowings
6,128
5,775
8,096
8,058
5,660
Senior subordinated notes
4,779
4,778
4,776
4,774
4,772
Junior subordinated debentures
12,998
12,972
12,947
12,921
12,896
Allowance for credit losses on unfunded commitments
477
477
477
577
512
Accrued expenses and other liabilities
12,850
13,069
10,247
12,681
10,258
Total liabilities
1,357,595
1,374,292
1,308,145
1,314,813
1,334,337
Stockholders' equity
Preferred stock - no par value:
Authorized - 30,000 shares; no shares issued or outstanding
Outstanding - 7,200 shares, respectively
7,200
7,200
7,200
7,200
7,200
Common stock - no par value with a stated value of $1.00 per share:
Authorized - 18,000,000 shares; Issued - 5,490,798 shares
Outstanding - 4,105,594, 4,128,382, 4,147,649, 4,164,735 and
4,174,197 shares, respectively
1,830
1,830
1,830
1,830
1,830
Additional paid-in capital
8,567
8,527
8,466
8,460
8,421
Retained earnings
138,142
135,276
134,271
132,666
131,624
Accumulated other comprehensive income (loss), net of tax
(15,814
)
(20,503
)
(20,775
)
(20,689
)
(26,190
)
Treasury stock, at cost - 1,385,204, 1,362,416, 1,343,149, 1,326,063 and
1,316,601 shares, respectively
(21,552
)
(20,983
)
(20,579
)
(20,180
)
(19,977
)
Total stockholders' equity
118,373
111,347
110,413
109,287
102,908
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
1,475,968
$
1,485,639
$
1,418,558
$
1,424,100
$
1,437,245
PSB Holdings, Inc.
Consolidated Statements of Income
Quarter Ended
Nine Months Ended
(dollars in thousands,
Sep. 30,
Jun. 30,
Mar. 31,
Dec. 31,
Sep. 30,
September
except per share data - unaudited)
2024
2024
2024
2023
2023
2024
2023
Interest and dividend income:
Loans, including fees
$
15,634
$
15,433
$
15,109
$
14,888
$
14,263
$
46,176
$
38,745
Securities:
Taxable
1,345
1,295
1,197
1,147
1,114
3,837
3,772
Tax-exempt
522
521
526
532
533
1,569
1,605
Other interest and dividends
699
265
343
320
238
1,307
531
Total interest and dividend income
18,200
17,514
17,175
16,887
16,148
52,889
44,653
Interest expense:
Deposits
5,905
5,838
6,082
5,526
4,817
17,825
11,467
FHLB advances
2,038
1,860
1,450
1,349
1,321
5,348
3,068
Other borrowings
57
58
60
54
51
175
161
Senior subordinated notes
59
58
59
59
59
176
179
Junior subordinated debentures
252
255
251
254
255
758
731
Total interest expense
8,311
8,069
7,902
7,242
6,503
24,282
15,606
Net interest income
9,889
9,445
9,273
9,645
9,645
28,607
29,047
Provision for credit losses
-
100
95
100
150
195
350
Net interest income after provision for credit losses
9,889
9,345
9,178
9,545
9,495
28,412
28,697
Noninterest income:
Service fees
367
350
336
360
349
1,053
1,088
Mortgage banking income
433
433
308
247
345
1,174
981
Investment and insurance sales commissions
230
222
121
100
158
573
810
Net loss on sale of securities
-
-
(495
)
(297
)
-
(495
)
(279
)
Increase in cash surrender value of life insurance
165
159
157
154
155
481
461
Life insurance death benefit
-
-
-
-
-
-
533
Other noninterest income
648
742
617
540
675
2,007
2,022
Total noninterest income
1,843
1,906
1,044
1,104
1,682
4,793
5,616
Noninterest expense:
Salaries and employee benefits
4,771
5,167
5,123
4,244
4,514
15,061
14,404
Occupancy and facilities
757
733
721
675
689
2,211
2,086
Loss (gain) on foreclosed assets
1
-
-
1
-
1
(46
)
Data processing and other office operations
1,104
1,047
1,022
1,001
953
3,173
2,784
Advertising and promotion
164
171
129
244
161
464
489
Core deposit intangible amortization
17
20
24
24
24
61
85
Other noninterest expenses
1,337
1,257
1,306
1,169
1,113
3,900
3,388
Total noninterest expense
8,151
8,395
8,325
7,358
7,454
24,871
23,190
Income before provision for income taxes
3,581
2,856
1,897
3,291
3,723
8,334
11,123
Provision for income taxes
593
410
169
878
2,374
1,172
3,967
Net income
$
2,988
$
2,446
$
1,728
$
2,413
$
1,349
$
7,162
$
7,156
Preferred stock dividends declared
$
122
$
122
$
122
$
122
