PSB Holdings, Inc.
Annual Report 2018

Plain-text annual report

2018ANNUAL REPORT2 0 1 8 AT A G L A N C E $ 4 9 . 7 m i l l i o n net commercial loan growth $ 1 1 2 . 2 m i l l i o n residential mortgage loan volume $ 2 7. 7 m i l l i o n in net local deposit growth $ 1 . 3 1 m i l l i o n wealth management gross revenue 3 1 W I c o u n t i e s with $1 million+ in loan commitments 2 2018 ANNUAL REPORT $ 4 8 8 . 6 m i l l i o n in-house and secondary serviced mortgage loans P R E S I D E N T ' S L E T T E R To our Shareholders, 2018 was an exciting and productive year with record • PSB Holdings was ranked as the 50th top performing earnings and growth. With a focus on the future, community bank in the nation by American we reinforced our foundation to ensure continued Banker Magazine and among their Top 200 excellence in service and strategic growth. We achieved Community Banks for the ninth consecutive year. many milestones and are poised to continue building our customer base, community presence and returns for shareholders. Here are a few 2018 highlights: • Earnings of $2.29 per share, up 45% over 2017, with average return on shareholder equity of 13.41% and cash dividends of $0.36 per share, up 12.5%. • Bank-wide total assets closed the year above $900 million for the first time. • We reached nearly $50 million in net commercial loan growth in a competitive environment while increasing net interest margin, driving net interest income higher. • Key operating platforms were implemented including a new regulatory compliance monitoring system, new residential mortgage loan origination system and new commercial credit underwriting system. • 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 employee participating in one or more volunteer activities during and outside the workday. Customer Experience Soliciting customer feedback is important to maintaining service levels and long-term relationships. Our annual customer survey scores for 2018 increased across • Successful transition of Rhinelander commercial the board. We are proud of banker Craig Lau into the role of Northern Market our 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 organizations is ingrained in Peoples culture. It is our responsibility to provide not only outstanding banking services but to actively help within the communities we serve. • Peoples State Bank received the State Bankers Promoting Literacy Award from the Wisconsin Bankers Foundation. • We were voted “Best Local Bank” for the seventh year in a row by the Wausau Daily Herald 2018 Best of Marathon County Awards. The NPS gauges a customer’s overall satisfaction and loyalty to a brand. SCOTT CATTANACH P RESIDENT & CEO PSB Holdings, Inc. 1 “ It felt like we were coming back home when we bought the business and went back to Peoples for our banking. We can see they truly want us to succeed. We value the personal care we receive, the understanding of our needs, and how those needs are met. You don’t get that with every bank. Other banks often ask if we want to switch, and we say no. We appreciate being able to go online and know we can get information right away on our accounts. We look at it daily, print out reports, and work together on financials. We meet with our Peoples team regularly to discuss our financials.” – Jereme & Brenda Londerville Londerville Steel and Concrete Supply P R E S I D E N T ' S L E T T E R Stock Price/Tangible Net Book Value – December 31 Return on Equity vs. Peer $25 $20 $15 $10 $5 $22.50 $17.98 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 NET BOOK VALUE PER SHARE STOCK PRICE 15% 10% 5% 4 1 0 2 PSB 13.41% 10.24% 8 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 S&P GLOBAL MARKET INTELLIGENCE PEER MEDIAN $500MM - $1B ASSETS According to a benchmark study done in 2018 by Tempkin interest rate indications and contact information for our Group, the average NPS for the banking industry is 21. Our service bankers and branch locations. average of 62—up from 58 in 2017—indicates our customers are almost three times more likely to recommend Peoples to a friend than the customers of other banks. Bringing vast experience of operational strategy disciplines from working 20 years with a national insurance company, Tim Dively joined Peoples State Bank as Chief Operations Survey results also indicate our customers desire a more Officer. He is responsible for the security of all information integrated online and mobile banking experience. With managed by Peoples using industry-best practices, and that in mind, we intend to upgrade our current mobile and data integration and reporting. Tim also leads the bank’s online banking platforms in 2019. This new product will give day-to-day operations and is a great addition to the Peoples customers the same look, feel, functionality and experience executive team. regardless of whether they are accessing their accounts on a computer, smartphone or tablet, in addition to more self- service options to manage debit card fraud protections and Investor Relations conduct instant person-to-person funds transfers. During 2018 we began to meet regularly with existing and Peoples And Processes – Moving Technology Forward potential institutional investors to share Peoples’ story and success, along with where we’re going and how this benefits our shareholders. We also keep investors up-to-date through our quarterly earnings releases, which can be found New technology makes it possible to deliver greater at our investor relations website psbholdingsinc.com. Sharing customer value even faster than before. The new our story and strategy with a wider investor audience is commercial loan origination platform allows us to quickly expected to increase interest in our stock and achieve our and consistently review customer commercial credit risks goal of increasing PSBQ stock trading multiples to levels and trends. The platform can quickly collect and analyze enjoyed by banks of our size and performance. large amounts of customer information and move credit requests through the approval process. Helping customers increase business cash flow to meet operational and growth needs without taking unnecessary risk is a strength of our commercial banking services. On July 31, we completed a 3-for-1 stock split. The split spread our market value over more shares, making it easier for smaller investors to acquire shares. Some current shareholders who received additional shares may also sell some of the new shares, creating more stock liquidity. Often perceived as a sign Our new and improved website at bankpeoples.com was of success and health, our 3-for-1 stock split was well received. released in 2018. It features an updated look, improved navigation, financial calculators, PeoplesTalk blog, real-time During 2019, we look to transition the trading of our stock from the Over the Counter (OTC) pink sheets to the OTC QX PSB Holdings, Inc. 3 P R E S I D E N T ' S L E T T E R Earnings and Dividends per Share Total Loans and Deposits – December 31 $2.50 $2.00 $1.50 $1.00 $0.50 4 1 0 2 EARNINGS PER SHARE $2.29 8 1 0 2 6 1 0 2 $1.58 7 1 0 2 5 1 0 2 $0.32 $0.36 $80 0MM $700MM $600MM $500MM $400MM $300MM $200MM $100MM $726MM $6 59 MM 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 DIVIDENDS PER SHARE LOANS DEPOSITS Exchange. 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, OTC and our staff are the foundation supporting our service to QX companies must pass strict criteria regarding financial existing customers and for growth in new markets. Our health, established operations, and strong governance. 2019 focus remains on exploring new markets to diversify Trading on the OTC QX signals to investors we are a reliable our growth opportunities and to expand wallet-share with company with proven financial performance. The move existing customers. These efforts bring value to customers, to OTC QX may also streamline transactions in our stock as well as development opportunities for employees and among all security brokers. increased returns for our shareholders. Thanks for your ongoing confidence and support of Peoples. Continuing Growth Sincerely, Scott M. Cattanach President & Chief Executive Officer PSB Holdings Inc. & Peoples State Bank Opened in April 2016, our Milwaukee Lending Office has supported nearly 50% of bank-wide net loan growth since opening. Our team, led by Milwaukee native Jeff Musa, serves a niche of delivering flexible and responsive lending to local business owners. We continue to add staff to the Milwaukee team to offer residential mortgage loans and expect to open a deposit-taking branch during 2019. We will continue to invest within the Milwaukee area, which represents stronger growth potential than available in our traditional northern Wisconsin market. Our Stevens Point Lending Office was opened in June 2018 and is under the direction of Dale Sankey, a Portage County native and financial services industry veteran. We are committed to serving our large base of existing Stevens Point area customers and expanding commercial and residential mortgage lending services in Portage County. 4 2018 ANNUAL REPORT NEW STEVENS POINT OFFICE In June of 2018, Peoples State Bank opened a lending office in Stevens Point, Wisconsin offering commercial lending and business banking, as well as residential mortgage services by appointment. Stevens Point is an extension of our home market, and Peoples already had relationships with customers based in Portage County with over $35 million in loan balances. It was the right time to invest more resources in the area to provide superior customer service for these important current, new and potential relationships. The first step to supporting that customer base was to hire an experienced banking professional. Assistant Vice President – Commercial Banking, Dale Sankey, was selected to lead the office. Dale is a Portage SANKEY County native and has been active in financial services industries for the past 27 years. His knowledge of the community, its businesses and their needs made him a perfect fit for the new location. The Stevens Point office is Peoples’ first location in Portage County. Our goal is to help customers build wealth and business growth potential, through our flexible and responsive commercial services delivery process. PSB Holdings, Inc. 5 2018 BOAR D O F DIR ECTORS FRONT ROW: Timothy Sonnentag, Charles Ghidorzi MIDDLE ROW: Lee Guenther, Scott Cattanach, William Fish, Kevin Kraft BACK ROW: Karla Kieffer, Thomas Polzer, William Reif, Peter Knitt WILLIAM J. FISH Chairman of PSB Holdings, Inc. & Peoples State Bank Retired President BILCO, Inc. SCOTT M. CATTANACH President & CEO PSB Holdings, Inc. & Peoples State Bank CHARLES A. GHIDORZI Managing Member Ghidorzi Construction Company, LLC LEE A. GUENTHER Retired CEO T.A. Solberg Co., Inc. KARLA M. KIEFFER Co-owner and VP Sales SUN Printing PETER W. KNITT Retired President & CEO PSB Holdings, Inc. & Peoples State Bank KEVIN J. KRAFT Managing Director Wisconsin River Partners, LLC THOMAS R. POLZER President & CEO Polzer of Wausau, LLC M&J Sports, Inc. WILLIAM M. REIF CEO Roastar, Inc. Former CEO Wausau Coated Products, Inc. TIMOTHY J. SONNENTAG President & CEO County Materials Corporation PEOPLES NORTHERN MARKET LEADERSHIP TRANSITION 2018 was a year of transition for Peoples State Bank’s northern market. Senior Vice President and Northern Market President Tom Knudsen retired after a remarkable career serving Rhinelander and other Northwoods communities for more than 45 years. KNUDSEN Tom had a tremendous influence on growth in our northern Wisconsin market. During his 11 years overseeing the Rhinelander, Eagle River and Minocqua locations, collectively these locations grew to $162 million in loans and $169 million in deposits. He was also involved in Peoples’ successful purchase of Northwoods National Bank’s Rhinelander branch in 2014. As Tom moved toward retirement, Peoples needed someone with commercial banking experience who also understood northern Wisconsin and embodied the Peoples culture. Craig Lau, Peoples commercial banker for more than ten years in our Rhinelander office, was exactly that individual and now serves as LAU our new Northern Market President. Like Tom, Craig understands how to deliver value to our customers. Craig’s 20 years of banking experience and leadership skills will continue the legacy 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. 201 8 SE NIOR MANAGEMENT LENORE BREIT Vice President Director of Compliance and Internal Audit SCOTT CATTANACH President & Chief Executive Officer TIM DIVELY Vice President Chief Operations Officer PAT HEIER Senior Vice President Group Leader Commercial Banking MAUREEN JORGENSEN Senior Vice President Retail Sales & Service MARK OLDENBERG Vice President Chief Financial Officer DONNA STAPLES Senior Vice President Human Resources Director BACK ROW E Tim Dively, Lenore Breit, Scott Cattanach, Pat Heier, Maureen Jorgensen FRONT ROW E Donna Staples, Mark Oldenberg 6 2018 ANNUAL REPORT “ We’ve been working on a building project for the last five years. Tony Braun and Peoples works with us. When we talk projects, I know they’ll look for ways to make things happen. Tony is like a consultant with the financial backing of Peoples behind him. When we were ready to finance the building project, every bank in the area approached us. But Tony has his finger on the pulse of our company. He understands us. It’s always been a good fit. We have confidence in Tony, and we have confidence in Peoples." – Mike Hafner Managing Member Aluminum Fabricated Products PSB Holdings, Inc. 7 SU MM ARY STATEMENTS OF IN COM E (dollars in thousands, except per share data) Net interest income Provision for loan losses 2018 2017 2016 $28,828 $27,176 $24,997 130 385 55 Net interest income after loan loss provision Noninterest income Operating expenses Net income before income taxes Provision for income taxes 28,698 6,476 21,713 13,461 3,149 26,791 6,107 20,346 12,552 5,365 24,942 6,969 19,505 12,406 3,970 NET INCOME $10,312 $7,187 $8,436 Diluted earnings per share Cash dividends per share $2.29 $0.36 $1.58 $0.32 $1.83 $0.30 Average common shares outstanding 4,496,525 4,558,569 4,619,955 Return on average assets Return on average equity 1.19% 13.41% 0.87% 9.82% 1.07% 12.39% Net Interest Margin (tax adjusted) 3.54% 3.56% 3.6% 3.5% 3.4% 3.3% 3.2% 4 1 0 3.1% 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 8 2018 ANNUAL REPORT 3% 2.5% 2% 1.5% 1% 0.5% Operating Expenses to Average Assets 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 OTHER EXPENSES DATA PROCESSING OCCUPANCY WAGES SUMMA RY BALAN CE SHEETS December 31, 2018, 2017 and 2016. (dollars in thousands, except per share data) Assets 2018 2017 2016 Cash and cash equivalents Securities Loans receivable, net Premises and equipment, net Other assets $43,978 175,108 658,481 10,209 28,222 $28,107 173,812 610,076 10,453 25,233 $34,994 169,476 586,109 10,427 26,522 TOTAL ASSETS $915,998 $847,681 $827,528 Liabilities Total deposits Federal Home Loan Bank advances Other borrowings Senior subordinated notes Junior subordinated debentures Other liabilities Stockholders’ equity TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $725,826 $702,303 $686,760 81,071 8,379 2,500 7,732 9,650 80,840 49,448 2,636 2,500 7,732 9,280 73,782 37,769 14,860 2,500 7,732 8,855 69,052 $915,998 $847,681 $827,528 Tangible net book value per share $17.98 $16.28 $15.08 Allowance for Loan Losses & Charge-offs to Gross Loans 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 0.94% 8 1 0 2 0.07% 1.6% 1.2% 0.8% 0.4% -0.4% Total Assets at December 31 $916MM $848MM $900MM $850MM $800MM $750MM $700MM $650MM 4 1 0 $600MM 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 ALLOWANCE FOR LOAN LOSSES % AT DECEMBER 31 NET LOAN CHARGE-OFFS % DURING YEAR PSB Holdings, Inc. 9 AT PEOPLES, IT’S ABOUT YOU: our customers, employees and shareholders. stock symbol - PSBQ investor site - psbholdingsinc.com phone - 888.929.9902 

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