PSB Holding Corp. Reports Third Quarter Results

PRESTON, Md., Oct. 21, 2021 /PRNewswire/ -- PSB Holding Corp. (OTC-QX: PSBP) (the "Company"), the parent company of Provident State Bank, Inc. ("Provident" or the "Bank"), reported net income of $1.52 million ($.99 per diluted common share) for the third quarter ended September 30, 2021, representing an increase of 21.7% compared to $1.25 million ($.82 per diluted common share) for the third quarter 2020 and a decrease of 0.5% compared to $1.53 million ($1.00 per diluted common share) for the second quarter 2021.  For the nine months ended September 30, 2021, net income totaled $4.27 million ($2.78 per diluted common share) compared to $3.33 million ($2.17 per diluted common share) for the nine months ended September 30, 2020, representing an increase of 28.2%.

Performance Review

Third Quarter 2021 compared to Third Quarter 2020

• Net income increased $272,000 as a result of an increase in net fees (fees net of loan origination costs) earned on loans originated under the Small Business Administration's Payroll Protection Program ("PPP"), which began in April 2020, offset by pressure on the net interest margin (the "NIM"), exclusive of the benefit of PPP income.
• Net fees earned on PPP loans totaled $1.21 million during the third quarter 2021 compared to $238,000 during 2020 and represented monthly net fee amortization and accelerated net fee amortization associated with the forgiveness of $18.0 million in PPP loans while the third quarter 2020 represented only monthly net fee amortization as PPP loans did not begin the forgiveness process until the fourth quarter. As a result, the NIM increased from 3.40% during the third quarter 2020 to 3.69% during the third quarter 2021.

Third Quarter 2021 compared to Second Quarter 2021 

• Net income was essentially flat at $1.5 million as an increase in net interest income was offset by increases in salaries and benefits expense and other noninterest expense.
• Net fees earned on PPP loans totaled $1.21 million during the third quarter 2021 compared to $833,000 during the second quarter 2021. PPP loans forgiven in the third quarter were primarily those originated in 2021 while those forgiven in the second quarter were primarily those originated in 2020. Average net fees associated with 2021 originations were higher than those associated with 2020 originations.
• Salaries and benefits expense increased $243,000 primarily as a result of the end of PPP loan origination activity and the associated deferral of salary costs, and increased commissions associated with mortgage banking activity.
• Other noninterest expense increased $103,000 primarily as a result of a $91,000 write down of property held for sale.

Year-to-date 2021 compared to 2020

• Net income increased $939,000 during the nine months ended September 30, 2021 compared to the same period in 2020 as a result of increased net fees earned on PPP loans and an increase in gain on sale of loans, offset by pressure on the net interest margin, exclusive of the benefit of PPP income.
• Net fees earned on PPP loans totaled $2.71 million in 2021 compared to $416,000 in 2020. As a result, the NIM increased from 3.52% during 2020 to 3.53% during 2021. The increase in net fees amortized and the NIM is the function of the timing of the start of the PPP program and the forgiveness process. As of September 30, 2021, PPP loans outstanding total $11.5 million and unearned net fees totaled $466,000.
• Gain on sale of loans increased $201,000 as a result of increased mortgage banking activity associated with a low interest rate environment.

Net Interest Margin Performance

• As noted above, the NIM improved both during the third quarter 2021 compared to the second quarter 2020 and during the nine months ended September 30, 2021 compared to the same period in 2020. Improved performance was driven by income associated with PPP lending activities. Without the influence of PPP lending activities, the underlying NIM has been under pressure. Pressure on the NIM is the result of an economic environment challenged by a pandemic and the federal government's fiscal and monetary response to such. Specifically, the NIM has been challenged by (i) low interest rates, (ii) a change in the mix of earning assets, with larger than normal levels of excess liquidity invested in lower yielding investment securities and interest-earning cash, and (iii) highly competitive loan pricing.

Balance Sheet and Asset Quality

• Assets totaled $581.6 million at September 30, 2021, increasing $39.6 million or 7.3% compared to September 30, 2020. Growth in assets was driven primarily by growth in deposits as government stimulus increased customer liquidity. Deposits and repurchase agreements totaled $506.2 million at September 30, 2021 compared to $454.3 million at September 30, 2020, representing growth of 11.4%. Gross loans totaled $351.5 million at September 30, 2021, representing a decrease of $56.3 million or 13.8% compared to September 30, 2020. The decrease in loans was driven primarily by a decline in PPP loans, which fell $45.4 million to $11.5 million outstanding at September 30, 2021 as a result of continuing loan forgiveness.
• Stockholders' Equity totaled $51.8 million at September 30, 2021 compared to $47.7 million at September 30, 2020 representing an increase of 8.5%. The Bank remained well-capitalized at September 30, 2021.
• As of September 30, 2021, non-performing assets and past due loans 30 days or more were .29% of total assets compared to .49% at September 30, 2020 and .44% at December 31, 2020.

President and Chief Executive Officer Melissa Quirk commented on the Company's performance stating, "Our strong financial performance continues to be positively influenced by PPP loan forgiveness activity, which will begin to wane in the fourth quarter and likely end during the first quarter 2022.  Future financial performance will be determined by our ability to reposition our balance sheet through core loan growth.  We are confident a more stable economic environment will provide ample opportunity to do so."

PSB Holding Corp. is the holding company of Provident State Bank, Inc., a full-service financial institution serving the eastern shore of Maryland since 1904. Provident State Bank, Inc. has ten locations in Preston, Federalsburg, Ridgely, Denton, Easton-Elliot Road, Easton-Harrison Street, Secretary, Cambridge, Salisbury and Lewes (Delaware).  For more information on PSB Holding Corp. and Provident State Bank, Inc., visit www.providentstatebank.com.

Forward-Looking Statements

Forward-looking statements relating to PSB Holding Corp. and its subsidiary, Provident State Bank, Inc. may include plans, strategies, objectives, expectations, intentions and adequacy of resources.  All statements other than statements of historical fact, including, without limitation, statements regarding business strategy, future events, activities, performance, and plans and objectives for future operations, are forward-looking statements.  Therefore, the illustrative value of forward-looking statements made in or pursuant to this press release should not, under any circumstances, be considered a guaranty or promise that such future events, activities, occurrences or performances will take place.

CONDENSED CONSOLIDATED BALANCE SHEETS
	Sep 30, 2021				Sep 30, 2020		Percent Change from
	(unaudited)		Dec 31, 2020		(unaudited)		Dec 31, 2020		Sep 30, 2020
Assets
Cash and cash equivalents	$  55,440,007		$  29,162,136		$  49,787,272		90.1%		11.4%
Investment securities	151,967,929		111,930,314		60,255,717		35.8%		152.2%
Loans held for sale	486,917		2,367,448		4,165,011		-79.4%		-88.3%
Loans receivable	351,521,972		386,189,190		407,839,192		-9.0%		-13.8%
Less allowance for loan losses	3,922,902		3,583,204		3,560,334		9.5%		10.2%
Loans, net of allowance for loan losses	347,599,070		382,605,986		404,278,858		-9.1%		-14.0%
Property and equipment	7,803,240		8,401,637		9,247,116		-7.1%		-15.6%
Bank-owned life insurance	11,832,335		8,656,454		8,597,456		36.7%		37.6%
Lease assets	2,255,565		2,508,345		2,510,384		-10.1%		-10.2%
Accrued interest receivable	1,478,194		1,616,775		1,802,412		-8.6%		-18.0%
Other assets	2,737,459		2,103,866		1,392,579		30.1%		96.6%
Total assets	$581,600,716		$549,352,961		$542,036,805		5.9%		7.3%
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing	$181,613,833		$171,855,568		$166,851,015		5.7%		8.8%
Interest-bearing	303,305,903		277,526,516		280,316,111		9.3%		8.2%
Total deposits	484,919,736		449,382,084		447,167,126		7.9%		8.4%
Repurchase agreements	21,279,283		15,528,356		7,113,626		37.0%		199.1%
FHLB advances and other borrowing	19,747,864		31,078,123		35,854,654		-36.5%		-44.9%
Lease liabilities	2,461,594		2,685,641		2,686,251		-8.3%		-8.4%
Other liabilities	1,435,154		1,934,558		1,526,699		-25.8%		-6.0%
Total liabilities	529,843,631		500,608,762		494,348,356		5.8%		7.2%
Stockholders' equity	51,757,085		48,744,199		47,688,449		6.2%		8.5%
Total liabilities and equity	$581,600,716		$549,352,961		$542,036,805		5.9%		7.3%
Book value per common share	$            33.79		$            31.82		$            31.14		6.2%		8.5%

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	Three Months Ended						Nine Months Ended
	Sep 30,				Percent		Sep 30,				Percent
	2021		2020		Change		2021		2020		Change
Interest income
Loans, including fee income	$      5,200,935		$      4,796,814		8.4%		$    14,931,449		$    14,147,629		5.5%
Investment securities	502,460		305,329		64.6%		1,412,162		985,034		43.4%
Other interest income	13,540		7,190		88.3%		26,372		50,672		-48.0%
Total interest income	5,716,935		5,109,333		11.9%		16,369,983		15,183,335		7.8%
Interest expense
Deposits	490,718		616,225		-20.4%		1,532,706		1,981,187		-22.6%
Repurchase agreements	1,466		782		87.5%		3,436		6,763		-49.2%
FHLB advances	109,882		195,442		-43.8%		448,906		611,990		-26.6%
Other borrowings	32,967		38,461		-14.3%		102,245		118,593		-13.8%
Total interest expense	635,033		850,910		-25.4%		2,087,293		2,718,533		-23.2%
Net interest income	5,081,902		4,258,423		19.3%		14,282,690		12,464,802		14.6%
Provision for loan losses	120,000		130,000		-7.7%		330,000		428,500		-23.0%
Net interest income after provision	4,961,902		4,128,423		20.2%		13,952,690		12,036,302		15.9%
Noninterest income
Service charges	480,290		412,317		16.5%		1,343,392		1,210,266		11.0%
Gain on sale of loans	407,328		397,309		2.5%		1,005,214		804,583		24.9%
Gain on sale of securities	-		-		NM		4,310		25,470		-83.1%
Other noninterest income	80,747		69,745		15.8%		198,080		215,400		-8.0%
Total noninterest income	968,365		879,371		10.1%		2,550,996		2,255,719		13.1%
Noninterest expense
Salaries and benefits	2,063,437		1,843,439		11.9%		5,692,263		5,321,741		7.0%
Occupancy	512,155		488,246		4.9%		1,534,015		1,502,527		2.1%
Data processing and software	408,523		287,995		41.9%		1,029,337		791,650		30.0%
Other noninterest expense	893,689		715,565		24.9%		2,524,038		2,246,009		12.4%
Total noninterest expense	3,877,804		3,335,245		16.3%		10,779,653		9,861,927		9.3%
Net income before tax	2,052,463		1,672,549		22.7%		5,724,033		4,430,094		29.2%
Tax expense	528,699		420,666		25.7%		1,456,027		1,100,704		32.3%
Net income	$      1,523,764		$      1,251,883		21.7%		$      4,268,006		$      3,329,390		28.2%
Net income per diluted share	$                0.99		$                0.82		21.5%		$                2.78		$                2.17		28.0%

 

HISTORICAL TRENDS
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	2021						2021		2020
	Q3		Q2		Q1		Q3 vs. Q2		Q4		Q3				Q2				Q1
Interest income
Loans, including fee income	$      5,200,935		$      4,967,402		$      4,763,112		4.7%		$      4,988,220		$      4,796,814				$  4,758,983				$  4,591,832
Investment securities	502,460		485,823		423,879		3.4%		334,830		305,329				332,732				346,973
Other interest income	13,540		6,688		6,144		102.5%		10,291		7,190				5,014				38,468
Total interest income	5,716,935		5,459,913		5,193,135		4.7%		5,333,341		5,109,333				5,096,729				4,977,273
Interest expense
Deposits	490,718		507,708		534,280		-3.3%		570,013		616,225				657,010				707,952
Repurchase agreements	1,466		891		1,079		64.5%		1,298		782				1,036				4,945
FHLB advances	109,882		163,552		175,472		-32.8%		187,295		195,442				204,654				211,894
Other borrowings	32,967		34,341		34,937		-4.0%		36,686		38,461				39,834				40,298
Total interest expense	635,033		706,492		745,768		-10.1%		795,292		850,910				902,534				965,089
Net interest income	5,081,902		4,753,421		4,447,367		6.9%		4,538,049		4,258,423				4,194,195				4,012,184
Provision for loan losses	120,000		120,000		90,000		0.0%		20,000		130,000				180,000				118,500
Net interest income after provision	4,961,902		4,633,421		4,357,367		7.1%		4,518,049		4,128,423				4,014,195				3,893,684
Noninterest income
Service charges	480,290		445,963		417,139		7.7%		416,823		412,317				374,471				423,478
Gain on sale of loans	407,328		337,422		260,464		20.7%		502,302		397,309				243,830				163,444
Gain on sale of securities	-		4,310		-		-100.0%		18,557		-				25,470				-
Other noninterest income	80,747		64,069		53,264		26.0%		66,597		69,745				71,046				74,609
Total noninterest income	968,365		851,764		730,867		13.7%		1,004,279		879,371				714,817				661,531
Noninterest expense
Salaries and benefits	2,063,437		1,820,550		1,808,276		13.3%		1,905,737		1,843,439				1,706,479				1,771,823
Occupancy	512,155		508,652		513,208		0.7%		507,121		488,246				492,731				521,550
Data processing and software	408,523		308,194		312,620		32.6%		294,390		287,995				268,884				234,771
Other noninterest expense	893,689		790,844		839,505		13.0%		894,306		715,565				746,696				783,748
Total noninterest expense	3,877,804		3,428,240		3,473,609		13.1%		3,601,554		3,335,245				3,214,790				3,311,892
Net income before tax	2,052,463		2,056,945		1,614,625		-0.2%		1,920,774		1,672,549				1,514,222				1,243,323
Tax expense	528,699		525,953		401,375		0.5%		478,399		420,666				376,544				303,494
Net income	$      1,523,764		$      1,530,992		$      1,213,250		-0.5%		$      1,442,375		$      1,251,883				$  1,137,678				$      939,829
Net income per diluted share	$                0.99		$                1.00		$                0.79		-0.6%		$                0.94		$                0.82				$            0.74				$            0.61

 

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SOURCE PSB Holding Corp.