PSB Holdings, Inc.
Annual Report 2021

Plain-text annual report

2 0 2 1 THE ANNUAL REPORT growig fr the future 888.929.9902 psbholdingsinc.com | bankpeoples.com PSB Holdings, Inc. 2021 Annual Report growig fr the future While maintaining our leading market share in northcentral Wisconsin, Peoples expanded further in southeastern Wisconsin with the acquisition of Waukesha’s Sunset Bank & Savings. The acquisition provides an opportunity for future growth in a market expanding from commercial and retail perspectives. We’re confident our customer- and community-focused approach will set us apart in southeastern Wisconsin. Our customers look for excellent customer service, no matter how they choose to bank at Peoples. It’s what we’ve provided to them since we opened our doors in 1962 and what we’ll continue to provide—even as we look for new markets and new banking partners. t h w o r g f o S T H G I L H G H I 33 Wisconsin counties with $1 million+ in loan commitments $53 million* net local deposit growth $44 million* commercial net loan growth $205 million* new residential mortgage loan volume $2 million wealth management gross revenue *Excluding Sunset acquisition and/or PPP loans SCOTT M. CATTANACH PRESIDENT & CHIEF EXECUTIVE OFFICER PSB Holdings Inc. & Peoples State Bank MESSAGE FROM THE PRESIDENT To our Sharehoders, On behalf of our staff and management, I am proud to present 2021 highlights that reflect our team’s focus on growth and excellent personal customer service. We are committed to providing outstanding products and services in our communities to build lasting shareholder value through independence and growth. GROWTH 2021 ended with record total assets of nearly $1.3 billion, up 15% during the year and up 33% since January 2020 before the COVID pandemic began. We reached this milestone due in part to the 2021 acquisition of the $135 million Sunset Bank & Savings in Waukesha, Wisconsin, along with organic loan and deposit growth across our northern, central, and southeastern Wisconsin regions. The Milwaukee area continues to be a strong growth driver, providing approximately 50% of the 2021 asset growth when including our Waukesha acquisition. In fact, the Peoples’ southeastern Wisconsin team has grown from one employee five years ago to having two full- service bank locations and $240 million in assets today. Since the pandemic began, we helped customers obtain Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loans used to continue their employee and related costs but focused in 2021 on assisting customers in obtaining PPP loan forgiveness. We originated $151 million in PPP loans during 2020 and 2021, of which $137 million had been 1 ANNUAL REPORT | 2021 forgiven or repaid by December 31, 2021. The 2021 economic EARNINGS AND DIVIDENDS Recognition of PPP loan origination recovery in Wisconsin, along with fees of $3.4 million and a $4.6 million several SBA loan programs available reduction in provision for loan losses to customers, maintained customer offset a $2.7 million decline in mortgage loan payments with improving credit banking income (as the low-rate quality in 2021 and much lower refinance wave cooled) and $2.8 million provisions for loan losses. of Waukesha acquisition expenses Peoples has consistently increased during 2021. Earnings were $2.88 our participation in the SBA 504 per share in 2021 compared to $2.40 lending program, allowing customers per share in 2020, up 20%. Return to finance a portion of their business on equity remained strong at 11.63% expansion at attractive long-term fixed during 2021 compared to 10.83% rates while bolstering our collateral during 2020. We were pleased to position. Peoples State Bank was the increase our shareholder cash dividend largest 504 loan provider through from $0.42 per share in 2020 to $0.46 WBD, Inc. (Wisconsin Business Development) during 2021. per share in 2021, up nearly 10%. Even after recognition of intangible Stimulus checks and supply chain assets associated with our acqusition slowdowns that limited spending of Sunset Bank & Savings Waukesha, contributed to sharp deposit our tangible net book value increased growth during 2021, up nearly 6% to $24.36 per share on December 31, before considering the Sunset Bank 2021, up 4% during the year. Waukesha acquisition and up $173 million including the acquisition. It was also a record year for Peoples Wealth Management as assets under CUSTOMER SATISFACTION HIGHLIGHTS We continue to invest in the digital tools and management grew to $320 million, products desired by our growing customer generating almost $2 million of service base. Our recent surveys indicate that 45 fee income. percent of customers prefer our online 2 banking tool, 35 percent prefer to visit in person, and 13 percent prefer our Bank Peoples digital app. We seek to provide a great experience across whatever channel the customer chooses to bank with us. Our customers are our strongest promoters, significantly more likely to refer Peoples to a friend than the typical bank customer. As a community bank, we seek to serve both our customers and the larger community. That’s why we encourage and provide paid volunteer time for our staff to give back. It’s also why we contribute to local initiatives that benefit the well-being of our local neighbors. Our $250,000 of donations in 2021 included a long-term commitment to sponsor Peoples Sports Complex in Wausau and significant contributions to the Hodag Dome indoor sports and recreation facility and the Hodag Park amphitheater in Rhinelander. You can read more about Dan Augustine Financial Advisor Connie Higgins Operations Manager Jeff Isaacson Financial Advisor Bryan Nill Financial Advisor ANNUAL REPORT | 2021 these initiatives on pages 10 and 11. wealth management staff and expand digital banking Our efforts continue to be recognized by our and customer self-service options. RESPONSIVE TO CUSTOMER NEEDS Anticipating customer needs is essential in providing community and industry. The Wausau Daily Herald’s Tina Seidl also joined Peoples as vice president an excellent experience. With that in mind, we readers voted Peoples State Bank “Best Bank or - human resources director during 2021. Tina brings completed several projects in 2021, including a Credit Union” and “Best Mortgage Company” in over 15 years of experience in the financial services remodeling project at our Marathon location. The their 2021 Best of Marathon County Awards. We and healthcare fields. 2,500 square foot project creates a better flow for were also chosen among the “Best Banks to Work Director Charles Ghidorzi retired from the customers and employees and additional private For” and one of the “Top 200 Community Banks” PSB Holdings, Inc., and Peoples State Bank boards office space for customer interactions. by American Banker Magazine. You will find more in 2021 after 24 years of service. We thank him We implemented a new residential mortgage information about these awards on page 6. for his many years of contributions as he devotes platform to provide customers with a better online LEADERSHIP FOR THE FUTURE We welcome Jeff Saxton as vice president of our retail more time to leading various civic projects to loan application and allow operating efficiencies benefit the greater Wausau area. behind the scenes. Our goal is to provide more Peoples lost a longtime supporter and friend, convenient ways for customers to interact with group following the retirement of Maureen Jorgensen Lawrence ‘Larry’ Hanz, Jr., who passed away in Peoples throughout their mortgage experience after nine years of her retail banking leadership. Jeff 2021. You can read more about Larry’s impact on from start to finish. will provide direction to Peoples’ retail, mortgage, and Peoples on page 7. Our commercial banking team is rolling out a RETAIL LEADERSHIP CHANGE Peoples State Bank promoted bank’s mortgage team to managing Jorgensen spent nearly even those who might be upset Jeffrey Saxton to vice president, all retail banking efforts. “Jeff has ten years at Peoples, leading about something.” retail group leader in 2021, after a passion for expanding the bank’s the retail team through many Jorgensen leaves banking SAXTON the announcement by Maureen digital banking platforms, making changes. “Maureen never shied on a high note, as she was Jorgensen that she would retire it easier for customers to access away from a difficult customer named one of BankBeat from Peoples in December 2021. their money, and perform routine conversation,” said Cattanach. magazine’s 2021 Outstanding With the promotion, Saxton banking services,” said Scott “She is exceptional at reading Women in Banking! expanded his leadership duties, Cattanach, Peoples State Bank people and situations and finding Congratulations, Maureen! from his experience managing the president, and CEO. ways to engage with everyone— JORGENSEN 3 ANNUAL REPORT | 2021 new high-touch platform with additional products and services appropriate for our largest customers having strong business and personal relationships with Peoples to address all their banking needs in one place. It’s another way to offer convenient and personalized services to consolidate banking and wealth management assistance with flexibility, convenience, and attractive pricing. We are working to help all our neighbors access the banking system, and we’ve added a low-fee account designed to meet the needs of unbanked or underbanked households. The account tools and features allow customers to increase their financial literacy with digital and debit card access to their funds without the fear of high fees or overdrafts. LOOKING AHEAD Building upgrades are coming to two of our locations, with more details on page 10. We’ve remodeled the lobby of our Stewart Avenue (Wausau) home office to allow for more of a personal ‘concierge’ banking experience with self-service options. A remodel of our Waukesha branch will double the number of private offices and modernize the lobby. Both projects are designed to update the customer experience with multiple channels for service, both digital and personal. Currently, low net interest margins within the industry require us to explore ways to use technology and process updates to increase operating 4 efficiency and reduce expense to support a healthy bottom line. Various teams throughout the bank are working to reduce unnecessary paper handling and repetitive tasks to serve customers better. New products and services are on the horizon, like online deposit account opening and expanded text “conversations” within our mobile app for customer questions or service needs. It is essential for us to provide our customers with multiple options for product purchase and support. Continued asset, market, and product growth is vital to driving shareholder value over the next several years. We are committed to continued growth on programs, products, and people we have in place while seeking new or expanded markets or lines of business to benefit our customers, employees, and shareholders. For shareholders in the coming year, we seek to continue above-average returns on shareholder equity that prioritize continued shareholder cash dividends and maintain our stock buyback program for shareholders holding our stock outside of a brokerage account. Thank you for your ongoing investment and support of Peoples as we celebrate our 60-year anniversary during 2022. We hope to see you often this year. Scott M. Cattanach President & Chief Executive Officer PSB Holdings Inc. & Peoples State Bank ANNUAL REPORT | 2021 Retiremens Community banking is a people business, and we recognize some long-time colleagues who retired in 2021. Thank you, and we wish you all the best! TINA LIS Loan Servicing Specialist Sr. 25 years of service CINDY SWENDRZYNSKI Loan Operations Officer 24 years of service DONNA STAPLES SVR Human Resources 14 years of service MAUREEN JORGENSEN SVP Retail Sales & Service 9 years of service Donna Staples, a long-time Peoples employee, retired in mid-January 2021, serving as senior vice president and human resources director at the bank for nearly 15 years. Staples stepped aside to spend more time STAPLES with her family. Tina Seidl was hired as vice president and human resources director, bringing more than 15 years of HR experience to the bank in the healthcare and financial fields. “Tina understands the challenges of the hiring process, but additionally to support and grow SEIDL workforce culture, develop and implement corporate HR policies, and to deliver training options for employee growth,” said Scott Cattanach, Peoples State Bank president and CEO. 2021 EXECUTIVE MANAGEMENT Scott Cattanach President Maureen Jorgensen Senior Vice President Chief Executive Officer Retail Sales & Service Tim Dively Vice President Chief Technology & Operating Officer Pat Heier Senior Vice President Commercial Banking Robert McPherson Vice President Risk Management Jeffrey Saxton Vice President Retail Sales & Service 5 Back row – Jeffrey Saxton, Ma – Front row – Scott Cattanach, Robert McPherson ureen Jorgensen, Tim Dively, Pat Heier ANNUAL REPORT | 2021 SATISFIED CUSTOMERS Sam and Amanda McLellan’s first experience with Peoples State Bank was a mortgage loan they received through the now retired Dan Mortenson. “There were things ‘Morty’ and Peoples helped with that other banks we approached weren’t interested in,” said Sam. Sam and Amanda didn’t have a lengthy self-employment history as new independent home builders. But they were hard-working and dedicated to building high-quality homes. What they found in Peoples was customer service what custom is all about, and it’s the same thing we they could relate to. Their new company, Woodbury saw in our relationship with Peoples.” Custom Homes, was formed to provide custom-built houses for their customers. “We love our clients who Shortly after applying for a mortgage, Sam and Amanda come to us with a portfolio of ideas they like, said worked with Meredith Otte of Peoples commercial Amanda. “We take pride in helping them build their banking team to build a business relationship. “From dream home, with specific ideas they wanted. That’s a professional and financial standpoint, Meredith provides feedback which we appreciate,” said Sam. “She’s been able to help us make smart choices to grow our business in a healthy fashion.” A few years—and a few houses—built and sold later, and the McLellan’s have become brand ambassadors for Peoples. “Peoples has enough in-house products that provide us as business owners all we need,” said Amanda. “And we’ve gotten to the point where we never hesitate to tell our customers about Peoples. You’re going to get a good experience. And if any bank is going to help you figure out Sam and Amanda McLellan during a video production for Peoples State Bank. what you need, it’s them.” 6 Top 200 Community Bank American Banker magazine ranked PSB Holdings, Inc. as a Top 200 Community Bank for 12 straight years. In 2021, we’re ranked as the 68th top-performing community bank in the nation. Best Banks to Work For American Banker magazine named Peoples one of the Best Banks to Work For in 2021. It’s the third year in a row Peoples has been honored. Best of Marathon County Wausau Daily Herald readers rated Peoples as the “Best Bank” and the “Best Mortgage Company” in 2021. The honor marks the 10th year in a row Peoples has been named the best bank and the third year in a row as the best mortgage company. Peoples Wealth Management was also recognized as a top-two finalist in the “Best Financial Planning” category. ANNUAL REPORT | 2021 e r u s n e s r e b m e m d r a o b d e fi i l a u q y l h g i h r u O d n a y t i r u c e s l a i c n a n fi s ’ k n a B e t a t S s e l p o e P . s t s e r e t n i t s e b ’ s r e m o t s u c r u o o t n o i t a c i d e d FRONT ROW – KEVIN KRAFT, PETER KNITT, COREY VANDERPOEL, KARLA KIEFFER BACK ROW – PATRICIA HANZ, WILLIAM FISH, SCOTT CATTANACH, BOB EASTMAN, LEE GUENTHER 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 Kevin J. Kraft Managing Director Wisconsin River Partners, LLC Lee A. Guenther Retired CEO T.A. Solberg Co., Inc. Karla M. Kieffer Co-owner & VP Sales SUN Printing Peter W. Knitt Retired President & CEO PSB Holdings, Inc. & Peoples State Bank Corey B. Vanderpoel Managing Director & Owner Taureau Group, LLC Patricia M. Hanz Retired Briggs & Stratton U.S. Consumer Product Safety Commission Robert F. Eastman, Jr. Retired CEO Sunset Bank & Savings IN MEMORIAM LAWRENCE ‘LARRY’ HANZ 1924 – 2021 Larry was among a group of westside Wausau businessmen who founded Peoples State Bank in 1962. A long-time supporter of the bank, Larry also served on the board of directors from 1981 to 2002. 7 ANNUAL REPORT | 2021 I S P E T S C G E T A R T S 8 Peoples opened a full-service bank location in 2020 in West Allis. In 2021, the bank purchased Sunset Bank & Savings of Waukesha, expanding our presence and creatig oportuniies. In 2015, the PSB Holdings, Inc. board of directors moved forward with a strategic plan culminating in growth opportunities for the bank in southeastern Wisconsin. “For many years, we’ve had the great privilege in northern and central Wisconsin to have the number one community bank deposit market share in our three home counties,” said Scott Cattanach, Peoples State Bank president and CEO. “Our Marathon, Oneida, and Vilas counties are strong performers but we needed to look to other faster-growing Wisconsin counties. So, in 2015 we looked at where we could find growth opportunities.” Looking back now, the move into southeastern Wisconsin has been an impressive part of the bank’s growth. Today, Southeast Wisconsin’s $240 million in assets represents about 20% of Peoples’ total assets of $1.3 billion. Peoples opened a loan production office in Wauwatosa in 2016, quickly adding staff as more commercial customers brought their financial needs to the bank. “I look at it and have to pinch myself. Five years ago, it was just me and Jose Pimienta, Jr., and a few customers. Now we have 30 employees between two full-service bank locations,” said Jeff Musa, Peoples State Bank southeastern Wisconsin market president. “We’ve focused on being able to do what’s right for our customers from day one, building true relationships with them.” ANNUAL REPORT | 2021 “It’s all about building good relationships — with our customers— and our employees.” – Chadd Frank, Peoples State Bank Waukesha Market President Peoples opened a full-service bank location in 2020 in West Allis. In 2021, the bank purchased Sunset Bank & Savings of Waukesha, expanding our presence and creating opportunities. “It’s all about building good relationships—with our customers— and our employees,” said Chadd Frank, Peoples State Bank Waukesha market president. “It doesn’t matter if it’s a commercial customer or a retail customer. We want to create an atmosphere where customers know we’re here for them.” “West Allis and Waukesha are branch locations of Peoples State Bank,” said Cattanach. “What that means is that you’ll have the same great experience at the Waukesha or West Allis locations as you do in our Stewart Avenue, Rhinelander, or Minocqua locations where we have been ranked the best local bank for ten years in a row.” 9 ANNUAL REPORT | 2021 REDESIGNED Spacs Keeping in mind our customers and employees, Peoples has renovated several bank locations to improve traffic flow for our customers and workflow for our employees. SUPPORTING OUR COMMUNITY MARATHON CITY WAUSAU WAUKESHA Our Marathon bank saw extensive renovation work in 2021, including creating more offices to allow privacy with customers and improved workflow for our employees. At Stewart Avenue, we created a “concierge” service model for our customers, with a remodeled lobby including high- top tables, self-service tablets, and a retail banker greeting customers and assisting them in non-cash transactions. Our renovation work will double our office space in Waukesha and provide the newest technology for a great customer and employee experience. 10 MC UNITED SOCCER CLUB JERSEY SPONSORSHIP “With a four-year agreement in place, we know our parents and athletes will take notice of Peoples’ commitment to the club,” said Sharon Belton, former MC United president. ANNUAL REPORT | 2021 PEOPLES SPORTS COMPLEX Peoples State Bank and Marathon County announced the agreement for Peoples State Bank to become the naming rights sponsor of the Peoples Sports Complex. “We re excited for this new partnership with People ’ State Bank,” said Jamie Polley, Marathon County Parks, Recreation & Forestry Director. WAUKESHA TRAGEDY Peoples donated $15,000 United for Waukesha Community Fund hosted by the Waukesha County Community Foundation and United Way of Greater Milwaukee & Waukesha County. HELPING OTHERS Peoples employee Marlie Gordon and her husband Lorn gathered items donated by our employees to send to Kentucky tornado victims. HODAG PARK Peoples donated $15,000 to Rhinelander s Hodag ’ Park improvement project. “When completed, these improvements will draw thousands of people to Hodag Park,” said Craig Lau, Peoples State Bank northern market president. 11 ANNUAL REPORT | 2021 SUMMARY STATEMENTS OF INCOME Years ended December 31 (dollars in thousands, except per share data) Net interest income $38,601 $31,879 $31,283 $28,828 $27,176 Provision for loan losses 1,000 5,575 850 130 385 2021 2020 2019 2018 2017 Net interest income after loan loss provision Noninterest income Operating expenses Net income before income taxes Provision for income taxes 37,601 9,418 30,110 16,909 4,092 26,304 11,413 23,744 13,973 3,284 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 NET INCOME $12,817 $10,689 $11,247 $10,312 $7,187 Diluted earnings per share Cash dividends per share $2.88 $0.46 $2.40 $0.42 $2.51 $0.40 $2.29 $0.36 $1.58 $0.32 Average common shares outstanding 4,454,836 4,455,670 4,481,251 4,496,525 4,558,569 Return on average assets Return on average equity 1.03% 11.63% 1.01% 10.83% 1.22% 12.77% 1.19% 13.41% 0.87% 9.82% 12 ANNUAL REPORT | 2021 SUMMARY BALANCE SHEETS Years ended December 31 (dollars in thousands, except per share data) ASSETS Cash and cash equivalents Securities Loans receivable, net Premises and equipment, net Other assets 2021 $53,543 310,690 876,337 12,695 45,446 2020 $38,528 229,527 820,956 10,920 32,024 2019 $49,028 179,431 707,651 10,457 28,326 2018 $43,978 175,108 658,481 10,209 28,222 2017 $28,107 173,812 610,076 10,453 25,233 TOTAL ASSETS $1,298,711 $1,131,955 $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 TOTAL LIABILITIES & STOCKHOLDERS EQUITY 2021 2020 2019 2018 2017 $1,105,240 $932,137 $781,790 $725,826 $702,303 47,000 6,677 2,500 12,717 13,315 111,262 62,000 12,239 2,500 7,732 10,920 104,427 73,496 81,071 49,448 6,131 2,500 7,732 10,553 92,691 8,379 2,500 7,732 9,650 2,636 2,500 7,732 9,280 80,840 73,782 $1,298,711 $1,131,955 $974,893 $915,998 $847,681 Tangible net book value per share $24.36 $23.43 $20.72 $17.98 $16.28 13 ANNUAL REPORT | 2021 GROWING FOR the future P S B Q 8 8 8 . 9 2 9 . 9 9 0 2 P S B H O L D I N G S I N C . 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