PB BANCORP, INC. Investor Relations Contact
PSB Holdings, Inc. 1905 Stewart Avenue
Wausau, WI 54401
888.929.9902
InvestorRelations@bankpeoples.com
FOR IMMEDIATE RELEASE
Stock Symbol: PSBQ | Real-Time Quotes: www.OTCmarkets.com
Wausau, WI. - January 25, 2016 - PSB Holdings, Inc. (OTCPK: PSBQ) reported December 2015 quarterly earnings of $1.16 per share on net income of $1.84 million compared to earnings of $1.10 per share on net income of $1.81 million during the December 2014 quarter, an increase of 5.5% per share. Earnings during the year ended December 31, 2015 reached a record of $4.83 per share on net income of $7.75 million compared to earnings of $3.90 per share on net income of $6.44 million during 2014.
Calendar 2015 earnings include a $1.23 million principal recovery of a loan to a grain storage and marketing company that was charged off in 2013. Net of income tax expense and estimated increases to employee incentives based on income, this loan recovery increased net income by $552,000, or $.34 per share. 2014 earnings were reduced $225,000, or $.14 per share, by nonrecurring merger and conversion costs. Excluding the loan recovery and merger costs, calendar year proforma earnings were $4.49 per share during 2015 compared to $4.04 per share during 2014, an increase of 11.1% per share. Earnings growth was driven by higher net interest income on earning asset growth and greater net interest margin.
Peter W. Knitt, President and CEO of PSB Holdings, Inc. noted, "The December 2015 quarter was characterized by a large increase in deposits while commercial borrowers paid down their lines of credit, resulting in larger cash and short-term term investments at year-end. Net margin remained stable and non- performing loans continued the gradual improvement seen during all of 2015. Calendar 2015 results were impressive in many areas, lifting core earnings to new heights as we enter 2016. We continue to aggressively pursue quality loan growth either organically or through loan participations and to carefully manage a changing interest rate environment in response to actions by the Federal Reserve. Our success in 2016 will be built on maintaining net loan growth, limiting negative impact to margin from interest rate changes, and focusing on smart expense control."
Quarterly earnings of $1.16 per share in December compared to earnings of $1.10 per share during December 2014, up 5.5% per share. Calendar 2015 earnings are up 11.1% over 2014 after excluding a $1.23 million loan recovery and 2014's non-recurring merger and conversion costs.
2015 earnings per share benefited from PSB's repurchase of 59,627 of its common shares during the year at an average cost of $41.77 per share, representing 3.7% of shares outstanding. Tangible net book value increased to $41.16 per share at December 31, 2015, up 9.7% during the year.
Return on stockholders' equity was 12.04% during the year ended December 2015 (11.18% excluding the loan recovery) compared to 10.75% during 2014 (11.12% excluding merger conversion costs). Return on average assets was 1.03% during 2015 (.96% excluding the loan recovery) compared to .90% during 2014 (.93% excluding merger conversion costs).
Total assets increased to $784.4 million at December 31, 2015, up $50.0 million from the beginning of the year, or 6.8%. Net loans increased $9.7 million, or 1.9%, and deposits increased $43.2 million, or 6.9%, during the year. Nonperforming assets declined $2.8 million, or 19.1%, to $11.7 million at December 31, 2015, equal to just 1.49% of total assets.
Total assets were $784.4 million at December 31, 2015 compared to $734.4 million at December 31, 2014, up $50.0 million, or 6.8%. An increase in local deposits of $25.9 million was invested in $16.4 million of securities and other investments as well as net loan growth of $9.7 million (up 1.9%). Wholesale funding (including brokered certificates of deposit, Federal Home Loan Bank advances, and wholesale repurchase agreements) was $95.0 million (12.1% of total assets) at December 31, 2015 compared to $75.9 million (10.3% of total assets) at December 31, 2014, up 25.2%
During the upcoming March 2016 quarter, seasonal factors may cause loans receivable to decline due to reduced demand, while deposits will also decline as municipal customers holding recent government tax collections at December 31, 2015 remit those funds to the State of Wisconsin, decreasing cash and cash equivalents. Reduced earning assets could negatively impact March 2016 earnings compared to recent quarters.
Total nonperforming assets declined $2.76 million, or 19.1%, to $11.67 million during the year ended December 31, 2015. The majority of the decline during 2015 was from nonaccrual restructured borrowers moved to accrual status following continued timely payments on the restructured terms, as nonaccrual restructured loans declined $2.25 million. Net charge-offs of loan principal (excluding a $1.23 million large loan recovery) were $521,000 and $759,000 during the quarter and year ended December 31, 2015, respectively, compared to net charge-offs of $155,000 and $934,000 during the comparable periods during 2014. Net loan charge-offs, excluding the large 2015 loan recovery, were .14% and .18% of average loans during the years ended December 31, 2015 and 2014.
Nonperforming assets are shown in the following table:
Nonperforming Assets as of
December 31,
(dollars in thousands) 2015 2014
Nonaccrual loans (excluding restructured loans)
$ 3,161 $
3,983
Nonaccrual restructured loans 2,137 4,388
Restructured loans not on nonaccrual 4,991 4,391 Accruing loans past due 90 days or more - -
Total nonperforming loans 10,289 12,762
Foreclosed assets 1,378 1,661
Total nonperforming assets
$ 11,667 $
14,423
Nonperforming loans as a % of gross loans 1.90% 2.40%
Total nonperforming assets as a % of total assets 1.49% 1.96% Allowance for loan losses as a % of nonperforming loans 61.72% 50.22%
PSB recorded a total provision for loan losses of $210,000 during the December 2015 quarter compared to $140,000 during the December 2014 quarter. Excluding the loan recovery, provision for loan losses was
$700,000 during the year ended December 2015 compared to $560,000 during 2014. Total credit losses, including the loan loss provision and loss on foreclosed assets, totaled $284,000 and $252,000 during the quarters ended December 31, 2015 and 2014. Excluding the large loan recovery, total credit losses were
$906,000 and $793,000 during the years ended December, 2015 and 2014. At December 31, 2015, the allowance for loan losses was $6.35 million, or 1.17% of total loans (62% of nonperforming loans), compared to $6.42 million, or 1.20% of total loans (50% of nonperforming loans) at December 31, 2014.
Nonperforming assets aggregating to $500,000 or more, measured by gross principal outstanding per credit relationship, included four relationships totaling $4.72 million at December 31, 2015, compared to six relationships totaling $6.23 million at December 31, 2014. Specific reserves maintained on these large problem loans were $286,000 at December 31, 2015 and $802,000 at December 31, 2014. The number and amount of large problem borrowers declined during the December 2015 quarter due to sale of real estate collateral securing one borrower's loan and a partial charge-off of a different borrower's loan which reduced its remaining principal balance to less than $500,000.
During the year ended December 31, 2015, stockholders' equity increased $3.62 million including $7.75 million of net income earned during the year less $2.49 million paid to repurchase treasury stock, and $1.34 million of cash dividends declared. The cash dividend payout ratio on net income was 17.25% and 20.43% during 2015 and 2014, respectively.
During the December 2015 quarter, the company repurchased 9,238 shares of its common stock at an average cost of $44.57 per share, compared to December 2014 quarter repurchases of 17,244 shares of common stock at an average cost of $33.71 per share. Total common stock repurchases during calendar 2015 totaled 59,627 shares at an average price of $41.77 per share, representing 3.7% of previously outstanding shares. During calendar 2014, PSB repurchased 27,244 common shares at an average cost of $33.54 per share. PSB intends to continue its stock buyback plan during 2016 with shares purchased directly from shareholders or on the open market at prevailing prices as opportunities arise.
Tangible net book value increased to $41.16 per share at December 31, 2015, compared to $37.52 per share at December 31, 2014, an increase of 9.7%. PSB's stockholders' equity to assets ratio decreased to 8.30% at December 31, 2015, compared to 8.37% at December 31, 2014 due to increased short-term cash holdings during the December 2015 quarter. For regulatory purposes, the $7.73 million junior subordinated debentures maturing September 2035 reflected as debt on the Consolidated Balance Sheet are reclassified as Tier 1 regulatory equity capital. PSB's subsidiary, Peoples State Bank, was considered "well capitalized" at December 31, 2015, the strongest capital designation under banking regulation.
Tax adjusted net interest income totaled $6.27 million (on net margin of 3.40%) during the December 2015 quarter compared to $6.20 million (3.41%) in the September 2015 quarter and $6.01 million (3.43%) in the December 2014 quarter. During the year ended December 31, 2015, tax adjusted net interest income totaled $24.62 million (on net margin of 3.45%) compared to $23.06 million (3.38%) during 2014, an increase of 6.8%. Increased net interest income has been an important driver of higher earnings during 2015 compared to 2014, and approximately 82% of the increased net interest income was due to growth in average earning assets while approximately 18% was due to increased net interest margin on interest- earning assets and liabilities. While average loan yield has remained steady over the past several quarters, net margin has been negatively impacted by a decline in the yield on securities during the past year.
Repayment or refinance at significantly lower interest rates of maturing high cost FHLB advances and other borrowings during 2014 was another significant contributor to increased net interest income during 2015 compared to 2014. Reduced FHLB advance and other borrowings interest expense contributed to 41% of the increase in tax adjusted net interest income during the year ended December 31, 2015 compared to 2014. Because these savings are now fully realized on a quarterly basis, 2016 net interest income will not benefit from this past activity. Therefore, any future decline in loan yields may decrease net interest margin or reduce net interest income compared to prior quarters, particularly in the absence of continued loan growth.
Total noninterest income for the quarter ended December 31, 2015 was $1.53 million, compared to $1.52 million earned during the December 2014 quarter. An increase of $66,000 in mortgage banking income (up 16.2%) was offset by a $36,000 decline in service fees (down 8.3%) from lower customer usage of the bank's overdraft protection product, and a $17,000 decline in other noninterest income (down 4.9%).
Total noninterest income for the year ended December 31, 2015 was $6.15 million, compared to $5.69 million earned during 2014, an increase of 8.0%. Residential mortgage banking revenue accounted for 78% of the total noninterest income increase, up $352,000, or 25.6%, during 2015 compared to 2014. Retail investment sales commissions increased $54,000 (up 5.7%), and all other items increased $48,000 (up 1.4%) compared to the prior year.
Mortgage banking revenue includes the gain on sale of residential mortgage loans to secondary market investors as well as the net loan servicing income associated with those loans. Mortgage origination activity is highly sensitive to movements in market interest rates and would be expected to moderate or decline in a rising interest rate environment. In addition, mortgage banking income growth is impacted by seasonal factors. Therefore mortgage banking income may decline during 2016 compared to the prior year and will likely be dependent on origination of home purchase loans and increased mortgage lending market share for growth, rather than from mortgage refinance activity.
Noninterest expenses totaled $4.65 million during the December 2015 quarter compared to $4.50 million during the December 2014 quarter, up 3.3%. While salaries and employee benefits displayed a 2.3% inflationary increase of $60,000, data processing and operations expense increased $33,000, or 6.7%, and other expense increased $57,000, or 9.2%. Higher data processing costs are related to continued investment in technology to create efficiencies or improve the customer experience. The increase in other expense resulted from several factors including a $41,000 increase in loan collections expense.
Noninterest expense totaled $18.88 million during the year ended December 31, 2015 compared to $17.92 million during 2014, up 5.4%. During 2015, year-end employee incentives increased $318,000 following collection of the $1.23 million loan recovery due to the increase in net income. In addition, 2014 expense included $371,000 in non-recurring Northwoods branch purchase and conversion costs. Excluding these special charges from both years, total proforma noninterest expense was $18.56 million in 2015 compared to $17.55 million during 2014, up 5.8%.
Approximately 88% of the year's proforma expense increase is represented by increased salaries and benefits expense of $892,000, led by increased incentives separate from the loan recovery, new Northwoods branch employee expenses on a full year of operation, and increased health insurance expense. Proforma data processing and office expense made up the remainder of the increase in proforma expense, up $284,000, or 15.3%. Despite the increase seen during 2015, recurring data processing and office operations expense was .28% of average assets in 2015 compared to .26% of average assets during 2014 and a portion of the increase was due to additional accounts acquired in 2014 with the Northwoods Bank Rhinelander branch acquisition.
PSB Holdings Inc. issued this content on 25 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 25 January 2016 16:13:28 UTC
Original Document: http://www.snl.com/irweblinkx/file.aspx?IID=1024699&FID=1500079943
