Transcription
2018ANNUAL REPORT
2018AT A G L A N C E 49.7 millionnet commercialloan growth 112.2 millionresidential mortgageloan volume 2 7. 7 m i l l i o nin net local deposit growth 1.31 millionwealth managementgross revenue31 WI countieswith 1 million in loan commitments 488.6 million22018 ANNUAL REPORTin-house and secondaryserviced mortgage loans
PRESIDENT'S LETTERTo our Shareholders,2018 was an exciting and productive year with record PSB Holdings was ranked as the 50th top performingearnings and growth. With a focus on the future,community bank in the nation by Americanwe reinforced our foundation to ensure continuedBanker Magazine and among their Top 200excellence in service and strategic growth. We achievedCommunity Banks for the ninth consecutive year.many milestones and are poised to continue buildingour customer base, community presence and returnsfor shareholders. Here are a few 2018 highlights: Earnings of 2.29 per share, up 45% over 2017, withaverage return on shareholder equity of 13.41%and cash dividends of 0.36 per share, up 12.5%. Bank-wide total assets closed the yearabove 900 million for the first time. Mortgage Loan Officer Brandon Karaba wasnamed one of the Forward RhinelanderTop 10 Under 40 award winners. Our more than 170 employees volunteered8,010 hours in their communities—an averageof 47 hours per employee—with everyemployee participating in one or more volunteeractivities during and outside the workday. We reached nearly 50 million in net commercial loangrowth in a competitive environment while increasingnet interest margin, driving net interest income higher. Key operating platforms were implemented includinga new regulatory compliance monitoring system,new residential mortgage loan origination systemand new commercial credit underwriting system. Successful transition of Rhinelander commercialCustomer ExperienceSoliciting customer feedback isimportant to maintaining servicelevels and long-term relationships.Our annual customer surveyscores for 2018 increased acrossthe board. We are proud ofbanker Craig Lau into the role of Northern Marketour Net Promoter Score (NPS)President following the retirement of Tom Knudsen.achieved in this year’s survey.Giving back to support the local economy and organizationsis ingrained in Peoples culture. It is our responsibility toprovide not only outstanding banking services but toThe NPS gauges a customer’soverall satisfaction andloyalty to a brand.actively help within the communities we serve. Peoples State Bank received the StateBankers Promoting Literacy Award fromthe Wisconsin Bankers Foundation. We were voted “Best Local Bank” for the seventhyear in a row by the Wausau Daily HeraldSCOT T CAT TA NACHP RESI D ENT & CEO2018 Best of Marathon County Awards.PSB Holdings, Inc.1
“It felt like we were coming back home when webought the business and went back to Peoplesfor our banking. We can see they truly want us tosucceed. We value the personal care we receive, theunderstanding of our needs, and how those needsare met. You don’t get that with every bank. Otherbanks often ask if we want to switch, and we say no.We appreciate being able to go online and know wecan get information right away on our accounts. Welook at it daily, print out reports, and work together onfinancials. We meet with our Peoples team regularlyto discuss our financials.”– Jereme & Brenda LondervilleLonderville Steel and Concrete Supply
PRESIDENT'S LETTERReturn on Equity vs. PeerStock Price/Tangible Net Book Value – December 31NET BOOK VALUEPER SHARESTOCK PRICE5%10.24%PSB20182018201720162015 52014 1010%2017 17.98 1513.41%2016 2015%2015 252014 22.50S&P GLOBAL MARKET INTELLIGENCEPEER MEDIAN 500MM - 1B ASSETSAccording to a benchmark study done in 2018 by Tempkininterest rate indications and contact information for ourGroup, the average NPS for the banking industry is 21. Ourservice bankers and branch locations.average of 62—up from 58 in 2017—indicates our customersare almost three times more likely to recommend Peoplesto a friend than the customers of other banks.Bringing vast experience of operational strategy disciplinesfrom working 20 years with a national insurance company,Tim Dively joined Peoples State Bank as Chief OperationsSurvey results also indicate our customers desire a moreOfficer. He is responsible for the security of all informationintegrated online and mobile banking experience. Withmanaged by Peoples using industry-best practices, andthat in mind, we intend to upgrade our current mobile anddata integration and reporting. Tim also leads the bank’sonline banking platforms in 2019. This new product will giveday-to-day operations and is a great addition to the Peoplescustomers the same look, feel, functionality and experienceexecutive team.regardless of whether they are accessing their accounts ona computer, smartphone or tablet, in addition to more selfservice options to manage debit card fraud protections andconduct instant person-to-person funds transfers.Investor RelationsDuring 2018 we began to meet regularly with existing andpotential institutional investors to share Peoples’ story andPeoples And Processes –Moving Technology Forwardsuccess, along with where we’re going and how this benefitsour shareholders. We also keep investors up-to-datethrough our quarterly earnings releases, which can be foundNew technology makes it possible to deliver greaterat our investor relations website psbholdingsinc.com. Sharingcustomer value even faster than before. The newour story and strategy with a wider investor audience iscommercial loan origination platform allows us to quicklyexpected to increase interest in our stock and achieve ourand consistently review customer commercial credit risksgoal of increasing PSBQ stock trading multiples to levelsand trends. The platform can quickly collect and analyzeenjoyed by banks of our size and performance.large amounts of customer information and move creditrequests through the approval process. Helping customersincrease business cash flow to meet operational and growthneeds without taking unnecessary risk is a strength of ourcommercial banking services.Our new and improved website at bankpeoples.com wasreleased in 2018. It features an updated look, improvednavigation, financial calculators, PeoplesTalk blog, real-timeOn July 31, we completed a 3-for-1 stock split. The split spreadour market value over more shares, making it easier for smallerinvestors to acquire shares. Some current shareholders whoreceived additional shares may also sell some of the newshares, creating more stock liquidity. Often perceived as a signof success and health, our 3-for-1 stock split was well received.During 2019, we look to transition the trading of our stockfrom the Over the Counter (OTC) pink sheets to the OTC QXPSB Holdings, Inc.3
PRESIDENT'S LETTERTotal Loans and Deposits – December 31 2.502016 1.58 700MM 6 59 MM 600MM 500MM 400MMLOANSDIVIDENDS PER SHARE2018201720162015 200MM2014 0.36 100MMEARNINGSPER SHARE 726MM 300MM 0.32 0.50 800MM2017 1.002014 1.502015 2.00 2.292018Earnings and Dividends per ShareDEPOSITSExchange. While the “pink sheets” are often associated with“It’s about you.” We take our mission statement seriously,a mix of risky start-ups and established companies, OTCand our staff are the foundation supporting our service toQX companies must pass strict criteria regarding financialexisting customers and for growth in new markets. Ourhealth, established operations, and strong governance.2019 focus remains on exploring new markets to diversifyTrading on the OTC QX signals to investors we are a reliableour growth opportunities and to expand wallet-share withcompany with proven financial performance. The moveexisting customers. These efforts bring value to customers,to OTC QX may also streamline transactions in our stockas well as development opportunities for employees andamong all security brokers.increased returns for our shareholders.Thanks for your ongoing confidence and support of Peoples.Continuing GrowthSincerely,Opened in April 2016, our Milwaukee Lending Office hassupported nearly 50% of bank-wide net loan growth sinceopening. Our team, led by Milwaukee native Jeff Musa,serves a niche of delivering flexible and responsive lendingto local business owners. We continue to add staff to theMilwaukee team to offer residential mortgage loans andexpect to open a deposit-taking branch during 2019. Wewill continue to invest within the Milwaukee area, whichrepresents stronger growth potential than available in ourtraditional northern Wisconsin market.Our Stevens Point Lending Office was opened in June2018 and is under the direction of Dale Sankey, a PortageCounty native and financial services industry veteran. Weare committed to serving our large base of existing StevensPoint area customers and expanding commercial andresidential mortgage lending services in Portage County.42018 ANNUAL REPORTScott M. CattanachPresident & Chief Executive OfficerPSB Holdings Inc. & Peoples State Bank
NEW STEVENS POINT OFFICEIn June of 2018, Peoples State Bankopened a lending office in StevensPoint, Wisconsin offering commerciallending and business banking, aswell as residential mortgage servicesby appointment. Stevens Point is anextension of our home market, andPeoples already had relationshipswith customers based in PortageCounty with over 35 million in loanbalances. It was the right time toinvest more resources in the area toprovide superior customer servicefor these important current, new andpotential relationships.The first step to supporting that201 8 B OA R D O F D I R ECTORScustomer base was to hire anexperienced banking professional.Assistant ViceFRONT ROW: Timothy Sonnentag, Charles GhidorziMIDDLE ROW: Lee Guenther, Scott Cattanach, William Fish, Kevin KraftBACK ROW: Karla Kieffer, Thomas Polzer, William Reif, Peter KnittWILLIAM J. FISHChairman of PSB Holdings, Inc.& Peoples State BankRetired PresidentBILCO, Inc.CHARLES A. GHIDORZIManaging MemberGhidorzi ConstructionCompany, LLCLEE A. GUENTHERRetired CEOT.A. Solberg Co., Inc.KARLA M. KIEFFERCo-owner and VP SalesSUN PrintingPETER W. KNITTRetired President & CEOPSB Holdings, Inc.& Peoples State BankSCOTT M. CATTANACHPresident & CEOPSB Holdings, Inc.& Peoples State BankPresident –CommercialBanking, DaleSankey, wasselected to leadSANKEYthe office. Daleis a PortageCounty native and has been active inKEVIN J. KRAFTManaging DirectorWisconsin River Partners, LLCTHOMAS R. POLZERPresident & CEOPolzer of Wausau, LLCM&J Sports, Inc.WILLIAM M. REIFCEORoastar, Inc.Former CEOWausau Coated Products, Inc.financial services industries for thepast 27 years. His knowledge of thecommunity, its businesses and theirneeds made him a perfect fit for thenew location.The Stevens Point office is Peoples’first location in Portage County.Our goal is to help customersbuild wealth and business growthpotential, through our flexible andresponsive commercial servicesdelivery process.TIMOTHY J. SONNENTAGPresident & CEOCounty Materials CorporationPSB Holdings, Inc.5
PEOPLES NORTHERN MARKETLEADERSHIP TRANSITION2018 was a year of transition for Peoples State Bank’snorthern market. Senior Vice President and NorthernMarket President Tom Knudsen retired after a remarkablecareer serving Rhinelander and other Northwoodscommunities for more than 45 years.KNUDSENTom had a tremendous influence on growth in ournorthern Wisconsin market. During his 11 years overseeingthe Rhinelander, Eagle River and Minocqua locations, collectively theselocations grew to 162 million in loans and 169 million in deposits. Hewas also involved in Peoples’ successful purchase of Northwoods NationalBank’s Rhinelander branch in 2014.As Tom moved toward retirement, Peoples neededsomeone with commercial banking experience whoalso understood northern Wisconsin and embodiedthe Peoples culture. Craig Lau, Peoples commercialbanker for more than ten years in our Rhinelanderoffice, was exactly that individual and now serves asLAUour new Northern Market President.Like Tom, Craig understands how to deliver value to our customers. Craig’s20 years of banking experience and leadership skills will continue thelegacy of service and responsiveness that Tom began in the Northwoods.Thank you, Tom, for your guidance and service, and of course,congratulations on your retirement.BACK ROW ETim Dively,Lenore Breit,Scott Cattanach,Pat Heier,Maureen JorgensenFRONT ROW EDonna Staples,Mark Oldenberg62018 ANNUAL REPORT201 8 SE NIORMANAGE MEN TLENORE BREITVice PresidentDirector of Complianceand Internal AuditSCOTT CATTANACHPresident &Chief Executive OfficerTIM DIVELYVice PresidentChief Operations OfficerPAT HEIERSenior Vice PresidentGroup LeaderCommercial BankingMAUREEN JORGENSENSenior Vice PresidentRetail Sales & ServiceMARK OLDENBERGVice PresidentChief Financial OfficerDONNA STAPLESSenior Vice PresidentHuman Resources Director
“We’ve been working on a building project for the lastfive years. Tony Braun and Peoples works with us.When we talk projects, I know they’ll look for ways tomake things happen. Tony is like a consultant with thefinancial backing of Peoples behind him.When we were ready to finance the building project,every bank in the area approached us. But Tonyhas his finger on the pulse of our company. Heunderstands us. It’s always been a good fit.We have confidence in Tony, and we haveconfidence in Peoples."– Mike HafnerManaging MemberAluminum Fabricated ProductsPSB Holdings, Inc.7
S U M M ARY STAT E M E N TS OF IN COM E(dollars in thousands, except per share data)201820172016 28,828 27,176 24,9971303855528,69826,79124,942Noninterest income6,4766,1076,969Operating expenses21,71320,34619,505Net income before income taxes13,46112,55212,4063,1495,3653,970 10,312 7,187 8,436Diluted earnings per share 2.29 1.58 1.83Cash dividends per share 0.36 0.32 0.304,496,5254,558,5694,619,955Return on average assets1.19%0.87%1.07%Return on average equity13.41%9.82%12.39%Net interest incomeProvision for loan lossesNet interest income after loan loss provisionProvision for income taxesNET INCOMEAverage common shares outstandingNet Interest Margin (tax adjusted)Operating Expenses to Average Assets3.6%3.54%3.5%3.56%3%2.5%3.4%2%3.3%OTHER EXPENSESDATA PROCESSING8OCCUPANCY2018 ANNUAL 0153.1%1.5%20143.2%
S U M M A RY BAL AN C E SHEETSDecember 31, 2018, 2017 and 2016. (dollars in thousands, except per share data)Assets201820172016 43,978 28,107 34,994Securities175,108173,812169,476Loans receivable, net658,481610,076586,109Cash and cash equivalentsPremises and equipment, net10,20910,45310,427Other assets28,22225,23326,522 915,998 847,681 827,528 725,826 702,303 686,76081,07149,44837,769TOTAL ASSETSLiabilitiesTotal depositsFederal Home Loan Bank advancesOther borrowings8,3792,63614,860Senior subordinated 80,84073,78269,052 915,998 847,681 827,528 17.98 16.28 15.08Junior subordinated debenturesOther liabilitiesStockholders’ equityTOTAL LIABILITIES ANDSTOCKHOLDERS EQUITYTangible net book value per shareTotal Assets at December 31 916MM 900MMAllowance for Loan Losses & Charge-offs to Gross Loans0.94% 850MM1.6% 800MM1.2% 750MM 848MM20182017 600MM20160.07%2015 650MM0.4%201420182017201620152014 700MM0.8%-0.4%ALLOWANCE FOR LOAN LOSSES % AT DECEMBER 31PSB Holdings, Inc.NET LOAN CHARGE-OFFS % DURING YEAR9
AT PEOPLES, IT’S ABOUT YOU:our customers, employees and shareholders.stock symbol - PSBQinvestor site - psbholdingsinc.comphone - 888.929.9902
Banker Magazine and among their Top 200 Community Banks for the ninth consecutive year. Mortgage Loan Officer Brandon Karaba was named one of the Forward Rhinelander Top 10 Under 40 award winners. Our more than 170 employees volunteered 8,010 hours in their communities—an average of 47 hours per employee—with every
