PSB Holdings, Inc.
Annual Report 2019

Plain-text annual report

it’s about you our customers, employees and shareholders. 2019 ANNUAL REPORT PSB HOLDINGS, INC. 2019 ANNUAL REPORT Positioning Ourselves for Shareholders Peoples continually seeks new opportunities to bring our unique brand of banking to new markets to support increased shareholder value and returns. People tell us time and again they how they reach us, by walking in or appreciate our customer service, driving up to one of our locations, a friendly smile, a handshake after reaching out by phone, or through signing a contract, and a thank you our digital platforms, it all adds up for banking at Peoples. No matter to success. $41 MILLION commercial net loan growth $156 MILLION new residential first mortgage loan volume $77 MILLION in net local deposit growth $1.2 MILLION wealth management gross revenue $514 MILLION in-house and serviced mortgage loans 34 COUNTIES with $1 million+ in loan commitments president’s letter ... BUILDING ON OUR STRENGTHS FOR THE FUTURE TO OUR SHAREHOLDERS, As a community bank, we focus on adding value to all stakeholders by providing our customers with outstanding service and products, supporting our communities, offering employees a great place to work, and delivering strong returns for our shareholders. When we greet a customer by name, they feel welcome. When they are provided a full range of traditional and digital banking tools to meet their financial goals they feel heard and valued. When we find solutions that match their individual needs and goals, we create loyalty. We build success by working as partners with our customers; this is how we continue to grow and build stronger communities. We had another year of success in meeting these goals in 2019! Scott M. Cattanach President & Chief Executive Officer, PSB Holdings Inc. & Peoples State Bank 1 PSB Holdings, Inc.PRESIDENT’S LETTER Stock Price/Tangible Net Book Value – December 31 2019 HIGHLIGHTS Bottom-line performance continued to be strong with 2019 earnings of $2.51 per share, up 9.6% from $2.29 per share during 2018. Our 2019 return on equity of 12.77% remained in the top 25 percent of similar-sized banks. We also increased shareholder dividends to $0.40 per share, up 11.1%, continuing 26 consecutive years of cash dividend increases. PSBQ’s stock price increased 22.2% during 2019 reaching $27.50 per share at year-end. $30 $25 $20 $15 $10 $5 $27.50 $20.72 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 NET BOOK VALUE PER SHARE STOCK PRICE Beyond the financial measures, we were again recognized Our strategy continues to look for increased growth in our as an outstanding community bank based on several current markets and to add new markets to diversify our different criteria. growth opportunities, helping us achieve the scale needed to American Banker Magazine selected PSB Holdings, Inc. as increase earnings and shareholder value. one of the “Top 200 Community Banks” for the tenth year in We experienced continued growth in our Milwaukee a row. The ranking was based on a three-year average return lending office, which reached $73 million in total loans, on average stockholders’ equity. Our entire team can be very up 37% during the year. To further our growth in this proud of our ranking of 53rd in the nation of publicly traded market, we purchased and renovated a bank branch for banks having under $2 billion in total assets. our first standalone location in Milwaukee. Located at 10725 W. National Ave. in West Allis near shopping and The Wausau Daily Herald’s 2019 Best of Marathon County residential neighborhoods, this new location provides Awards named Peoples State Bank “Best Bank or Credit loan and deposit services. Read more about our West Union” and “Best Mortgage Company” based on a survey Allis location on page 8. of their readers. It is a great feeling to be affirmed by your customers and community as being a trusted partner. Peoples was chosen as one of the “Best Banks to Work For” by American Banker Magazine and Best Companies Group. This award honors those institutions which have gone above and beyond to invest in their employees’ personal well-being and professional growth. We consolidated our Rhinelander locations into our remodeled Anderson Street location. In addition to interior remodeling, we added an additional drive-up lane, expanded the parking lot, and added an adjacent public green space. The transition has been well received, and customer feedback indicates they appreciate the new “all-in-one” location. We upgraded our digital and mobile banking platform during the year, making it easier for customers to use their phones to review and conduct their normal bank activity. Additional 2 Digital and mobile banking platform upgrade in 2019. More and more Peoples State Bank customers are banking digitally— online with a computer or using our mobile phone app. 11,266 DIGITAL BANKING USERS (as of 12/31/2019) 4,231 MOBILE APP BANKING USERS (as of 12/31/2019) $1.2 MILLION AVERAGE MONTHLY PEOPLES MOBILE APP DEPOSITS (2019) 2019 ANNUAL REPORTPRESIDENT’S LETTER features include setting text alerts and stronger fraud base, ownership positions, and average trading activity, Robert McPherson joined our team protections with the ability to turn a debit card on and off 88% of all our shareholders could, if they wished, liquidate as vice president of risk management. to prevent unauthorized use. all their shares within one week. In addition, the number He brings substantial experience in Our customers have recognized our efforts to better serve them. Recent survey results on customer satisfaction and loyalty show Peoples customers are two times more likely to refer Peoples to a friend than other banks’ customers. We shared part of our recent success by supporting significant local projects to expand the Wausau area YMCA and build a new Rhinelander youth sports dome. These donations of $100,000 each demonstrated our commitment to those communities and their economic development. You can read more about these donations and other community involvement efforts on page 11. Adding the PSB common stock, ticker PSBQ, to the OTCQX trading platform is helping to increase our shareholder liquidity. During the past two years, the number of business days with a PSBQ share trade has increased 68 percent. Based on our current shareholder of parties consistently bidding to acquire shares at a consumer regulatory compliance and similar price has increased, showing greater investment other operational risk areas and is a interest and providing greater price stability in our stock. strong resource as we grow into new UPDATES ON OUR TEAM We continue to add to our team and align our strategies related to continued growth and risk management. During 2019, Pat Heier was appointed vice president of PSB Holdings, Inc. by the board of directors. Pat continues to serve as senior vice president, markets and products. As we planned for upcoming director retirements, Corey Vanderpoel joined our board as a new director during 2019, after an extensive needs review and search. He is a candidate for a new 3-year director term to be voted on at the 2020 annual shareholder meeting. Corey is a mid-market investment banker with the Taureau Group, LLC, headquartered in Milwaukee serving privately owned businesses with commercial banking group leader of Peoples. He has experience in capital raising and strategic purchase and sale options. He brings important experience related to our growth markets around the state and his network—both in strategy involving acquisitions. Corey is also well and outside the banking industry—will benefit us as connected with the Milwaukee business community, we grow outside our legacy footprint. which will help us grow that market. “Corey’s background in mergers and acquisitions with Taureau Group is valuable experience as we pursue building value for shareholders through new market growth. His appointment made perfect sense, and we believe he will add value for our shareholders.” – Bill Fish, Chairman of PSB Holdings Inc. 3 PSB Holdings, Inc.PRESIDENT’S LETTER Patricia Hanz, J.D., daughter of Lawrence Return on Equity vs. Peer We have a goal to reach $1 billion in total assets by the end of 2020 and Doris Hanz, founding bank shareholders, 15% as we capitalize on organic growth in our new Milwaukee location was recently added as a new director and is proposed as a candidate for a new three- year directorship term at the 2020 annual shareholder meeting. Patricia brings legal 10% 5% experience from her career with Briggs & Stratton and the United States Consumer Product Safety Commission and will help support Peoples’ long-term mission as a strong community bank. She is a long-time Milwaukee resident and, like Corey, is familiar with the Milwaukee business climate. Director Tim Sonnentag is retiring from our board after ten years of service. He has been a valuable member of our board but is moving on to pursue other important business opportunities within his company. Directors Tom Polzer and William Reif have reached the Company’s stated retirement age and are also retiring after 28- and 23-years of service, respectively. As past chairmen of several important committees, each will serve next year as $2.50 $2.00 $1.50 $1.00 $0.50 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 12.77% 10.53% 9 1 0 2 PSB S&P GLOBAL MARKET INTELLIGENCE PEER MEDIAN $750MM - $1.25B ASSETS and increase market share in our existing northern Wisconsin markets. We also continue to seek new markets via merger and acquisition activity. The Wisconsin banking industry experienced 17 bank sales during 2019 (tied for 3rd highest in the nation), a trend driven by the large number of independent banks in Wisconsin relative to other states. There is significant competition from other banks when we consider a bank purchase that adds value to our Earnings and Dividends per Share shareholders. 6 1 0 2 7 1 0 2 5 1 0 2 $2.51 9 1 0 2 $2.29 8 1 0 2 Despite the challenges, bank acquisitions provide us the opportunity to grow quickly beyond $1 billion in total assets while adding operating scale, new market growth potential, and geographically diversified credit risk. Therefore, we continue to investigate acquisitions that make sense. We’ve been busy expanding our investor base by sharing the $0.36 $0.40 Peoples’ story with potential investors. We regularly meet with institutional investors who focus on small bank investing to share our story and strategy. We have experienced a growing number of directors emeritus to assist in our leadership transitions. Their EARNINGS PER SHARE DIVIDENDS PER SHARE investors providing a daily bid to purchase our shares on the OTCQX long-time leadership and local connections will be missed but Total Assets, Loans, and Deposits - December 31 ($000s) market. Regular weekly trades permit smaller shareholders to grow they will remain an important part of the Peoples family. LOOKING AHEAD In recent survey results released by The Wisconsin Bankers Association, bank CEOs are confident Wisconsin will experience good loan demand, and the economy will remain similar to 2019. In connection with opening our new Milwaukee branch, we’re updating our retail checking lineup for all our markets, streamlining the menu, and adding a unique new account, Peoples Edge Plus, which carries new features, including robust identity theft protection $800 MM $600 MM $400 MM $200 MM Total Assets, Loans, and Deposits - December 31 $1,000 MM $975 MM their position over time with the confidence they could acquire or sell PSBQ shares on their timeframe at a fair price. Thank you for your trust and investment in Peoples. We hope you enjoy the benefits of being our customer, as well, and we look forward to connecting with you often in 2020. 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 Sincerely, Scott M. Cattanach President & Chief Executive Officer PSB Holdings Inc. & Peoples State Bank and cell phone damage protection. LOANS DEPOSITS ASSETS 4 2019 ANNUAL REPORTCOMMERCIAL BANKING building wisconsin Peoples’ commercial banking team works with businesses throughout Wisconsin, taking the time to understand a business owner’s need, offering financial insight to make sound financial decisions. In 2019, the team grew commercial net loans by more than $41 million. Peoples helps businesses throughout Wisconsin with all types of loans, deposit products, cash management solutions, and fraud protection products. DENTAL CRAFTERS MARSHFIELD New Employees: 10-20 OCUPOP MILWAUKEE New Employees: 10 VALUE HOSPITALITY, LLC MADISON New Employees: 24 BRICKNER’S WAUSAU Total Employees: 60+ Dental Crafters, a full-service dental Ocupop—a design, branding and technology This project includes a four-story Brickner’s new 40,000 square foot building laboratory, expanded their business to firm with staff in Wisconsin, Hawaii, British interconnected building to house a on Grand Avenue in Wausau provides a state-of-the-art dental accommodate milling and 3D printing equipment, Columbia and more—recently worked with Peoples State Bank to finance the Baymont Inn and Suites hotel surrounded by surface parking, retention pond, comfortable and welcoming setting for if they’re their customers, regardless additional workspace for employees and transformation of a manufacturing storage and landscaping. The hotel will include looking for a new Chrysler, Jeep, Dodge, a training room designed to help educate building into their new Milwaukee HQ. The approximately 85 rooms, large lobby, Ram, or Fiat vehicle, a used car or truck, or their customers and staff for the future. new space serves as a creative haven for front desk, fitness center, micro mart, bringing a vehicle in for service. employees, brimming with natural light and small bar, breakfast area, pantry area, maple wood accents. and a porte co·chère, allowing guests to pull under to load and unload their cars. 5 PSB Holdings, Inc.THE 2019 LEADERSHIP TEAM board of directors William J. Fish Charles A. Ghidorzi Lee A. Guenther Karla M. Kieffer Peter W. Knitt Corey B. Vanderpoel Chairman of PSB Holdings, Managing Member Retired CEO Co-owner & VP Sales Retired President & CEO Managing Director & Inc. & Peoples State Bank Ghidorzi Construction T.A. Solberg Co., Inc. SUN Printing PSB Holdings, Inc. & Owner Retired President Company, LLC BILCO, Inc. Thomas R. Polzer William M. Reif Kevin J. Kraft President & CEO CEO Scott M. Cattanach Managing Director Polzer of Wausau, LLC Roastar, Inc. President & CEO Wisconsin River M&J Sports, Inc. Former CEO PSB Holdings, Inc. & Partners, LLC Peoples State Bank Wausau Coated Products, Inc. Peoples State Bank Taureau Group, LLC Timothy J. Sonnentag President & CEO County Materials Corporation 6 Front row: Lee Guenther, Karla Kieffer, Peter Knitt, Timothy Sonnentag Back row: Kevin Kraft, Thomas Polzer, William Reif, Scott Cattanach, William Fish, Corey Vanderpoel, Charles Ghidorzi 2019 ANNUAL REPORTBEST BANK TO WORK FOR Peoples was named as one of the Best Banks to Work For by American Banker magazine and Best Companies Group in 2019. It’s the first time Peoples has applied for the prestigious designation. TOP 200 COMMUNITY BANK The ranking comes on the heels of American Banker naming PSB Holdings, Inc. as a Top 200 Community Bank for 10 straight years. American Banker recognized us as the 53rd top performing community bank in the nation. BEST OF MARATHON COUNTY Peoples was voted as “Best Bank or Credit Union” and “Best Mortgage Company” in the Wausau Daily Herald 2019 Best of Marathon County Awards. The honor marks the eighth year in a row THE 2019 LEADERSHIP TEAM senior management Scott Cattanach Pat Heier Robert McPherson Donna Staples President Senior Vice President Vice President Senior Vice President Chief Executive Officer Group Leader Risk Management Human Resources Commercial Banking Tim Dively Vice President Maureen Jorgensen Senior Vice President Mark Oldenberg Chief Operations Officer Senior Vice President Chief Financial Officer Retail Sales & Service that Peoples has been honored as best bank. Front row: Mark Oldenberg, Robert McPherson 7 Back row: Maureen Jorgensen, Pat Heier, Scott Cattanach, Donna Staples, Tim Dively PSB Holdings, Inc.MILWAUKEE NEWS PEOPLES EXPANDS MILWAUKEE OPERATION Peoples State Bank has opened a full- “Our team is excited to extend the same service bank location at 10725 W. National level of personalized, community banking Avenue in West Allis. The expansion service to retail clients as well,” said Musa. to a full-service location for retail and commercial banking was a natural “It was our plan from the beginning to grow progression for Peoples, which opened a into a full-service bank in Milwaukee. Jeff lending office in nearby Wauwatosa—to Musa has been a great fit in guiding us serve the greater Milwaukee area—in 2016. through a measured-growth approach,” said Cattanach. “He understands you have “We strive to be a ‘can-do’ bank that makes to pay as you go, a step-by-step process, a difference for local business owners and but he has a very strategic view.” families,” said Scott Cattanach, president and CEO of Peoples State Bank. Peoples has provided loan services for Milwaukee area businesses since 2016. That’s when Jeff Musa was hired as the market president and built a team to provide commercial banking services throughout the Milwaukee area. 8 Left to Right: Bryan Nill, AVP - Mortgage Lender; Mark Chambers, Jr., AVP - Deposit Relationship Manager; David LaBrie, VP – Commercial Banker; Jeff Musa, VP – Southeastern Wisconsin Market President; Barbara Jones, VP – West Allis Branch Manager; Jose Pimienta, Jr., Commercial Banking Officer; Julie Katz, Commercial Portfolio Specialist II; Michael Merritt, Commercial Portfolio Manager $20 MM$40 MM$60 MM$80 MM$12 MMMilwaukee Lending Office –Cummulative Loan Growth by Year$37 MM$54 MM$73 MM20162017201820192019 ANNUAL REPORTPeoples Provides Expansion Opportunity to Milwaukee’s Monterrey Market “We found many of our Monterrey Market customers were coming in from outside the area. So, we said, ‘Let’s look for a second location.’ We found the old Toys R Us building on S. 27th and W. Howard in South Milwaukee. Peoples State Bank has been great to work with. Jeff Musa and his team went through our financial projections and saw the business will support the loan to purchase the property and to build it into Monterrey Plaza. Peoples has helped our business tremendously…giving us an opportunity to grow from one location to two. We’ll be hiring more than 50 full- and part-time employees at the new location. Jeff and the staff at Peoples understand our needs. They’ve helped guide us to grow our business even more. Peoples cares for their customers. They know you by your first name instead of by your account number.” LEONOR & ROBERT MONTEMAYOR Monterrey Market 9 PSB Holdings, Inc.MORTGAGE LENDING building wisconsin Peoples’ mortgage team helps Wisconsinites purchase their dream homes with options that help customers make the best choice for their needs. In 2019, Peoples provided $156 million in new residential first loan mortgages, and serviced $514 million in mortgages throughout Wisconsin. PURCHASE LOGAN & KASSI HEIL WAUSAU PURCHASE JOSEPH & STELLE CRISTOFORO MIDDLETON PURCHASE GARY & AMY BAUMETZ THREE LAKES CONSTRUCTION TRAVIS & REBECCA HOERMAN WAUSAU 10 2019 ANNUAL REPORTPHILANTHROPY giving back COMMUNITY BANKING MEETS COMMUNITY NEEDS Peoples is a community bank, not just a bank in your community. We’re vested in the community. Our employees give back to the communities they live in through volunteering—in 2019 they set a record of 8,677 hours! That’s nearly 50 volunteer hours per employee. Peoples employees are provided 20 hours of volunteer time off to make a difference in their communities. The time allows employees to volunteer during their regular workday hours, when they otherwise aren’t able to. In addition to the philanthropy provided to those in need, Peoples supports many schools, churches, non-profits, sports teams, and other agencies and organizations through scholarships, sponsorship of their events, and by providing promotional items and raffle baskets to more than 200 events on an annual basis. 11 PEOPLES COMMITTED $100,000 EACH TO LARGE PROJECTS IN TWO OF OUR COMMUNITIES. In Wausau, Peoples gave to the Woodson YMCA’s modernization and expansion project. The project is part of a reinvestment in Wausau’s downtown, creating space for seniors, child-care, and additional fitness facilities to enhance the quality of life and health of our residents. In Rhinelander, Peoples announced a $100,000 donation to the Hodag Sports Complex. “The project will benefit the community’s youth, student-athletes, their families, and citizens of Rhinelander by promoting health and wellness, team-building, and social responsibility,” said Craig Lau, Peoples northern market president. PSB Holdings, Inc. stats at a glance Net Interest Margin (tax adjusted) 3.62% 3.56% 3.6% 3.5% 3.4% 3.3% 3.2% 5 1 0 3.1% 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 SUMMARY STATEMENTS OF INCOME (dollars in thousands, except per share data) Net interest income Provision for loan losses Net interest income after loan loss provision Noninterest income Operating expenses Net income before income taxes Provision for income taxes 2019 2018 2017 $31,283 850 $28,828 130 $27,176 385 30,433 7,661 23,296 14,798 3,551 28,698 6,476 21,713 13,461 3,149 26,791 6,107 20,346 12,552 5,365 Operating Expenses to Average Assets NET INCOME $11,247 $10,312 $7,187 3% 2.5% 2% 1.5% 1% 0.5% 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 OTHER EXPENSES DATA PROCESSING OCCUPANCY WAGES Diluted earnings per share Cash dividends per share $2.51 $0.40 $2.29 $0.36 $1.58 $0.32 Average common shares outstanding 4,481,251 4,496,525 4,558,569 Return on average assets Return on average equity 1.22% 12.77% 1.19% 13.41% 0.87% 9.82% 12 2019 ANNUAL REPORT SUMMARY BAL ANCE SHEETS December 31, 2019, 2018 and 2017. (dollars in thousands, except per share data) Assets 2019 2018 2017 Cash and cash equivalents Securities Loans receivable, net Premises and equipment, net Other assets $49,028 179,431 707,651 10,457 28,326 $43,978 175,108 658,481 10,209 28,222 $28,107 173,812 610,076 10,453 25,233 TOTAL ASSETS $974,893 $915,998 $847,681 Liabilities Total deposits Federal Home Loan Bank advances Other borrowings Senior subordinated notes Junior subordinated debentures Other liabilities Stockholders’ equity $781,790 73,496 6,131 2,500 7,732 10,553 92,691 $725,826 $702,303 81,071 8,379 2,500 7,732 9,650 80,840 49,448 2,636 2,500 7,732 9,280 73,782 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $974,893 $915,998 $847,681 stats at a glance Allowance for Loan Losses & Charge-offs to Gross Loans 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 1.6% 1.2% 0.8% 0.4% -0.4% ALLOWANCE FOR LOAN LOSSES % AT DECEMBER 31 NET LOAN CHARGE-OFFS % DURING YEAR Total Assets at December 31 $1,000MM $900MM $85 0MM $800MM $750MM $700MM Tangible net book value per share $20.72 $17.98 $16.28 $650MM 5 1 0 $600MM 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 PSB Holdings, Inc. 13 better banking starts here PSBQ psbholdingsinc.com | 888.929.9902 

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