PSB HOLDING CORP. REPORTS 2022 RESULTS

Rhea-AI Summary

PSB Holding Corp. reported a net income of $4.39 million for 2022, down from $5.28 million in 2021, with a diluted earnings per share of $2.87. For Q4 2022, net income rose to $1.16 million from $1.02 million year-over-year. The Company’s merger with Summit Financial Group is expected to finalize by Q2 2023. Notably, net interest income declined due to reduced income from the SBA Payroll Protection Program, dropping from $3.13 million in 2021 to $49,000 in 2022. Despite these challenges, net interest margin improved from 2.99% to 3.33% due to rising loan rates. Total assets decreased slightly to $579.9 million.

Positive

• Net interest margin increased from 2.99% to 3.33%.
• Loan growth of $24.0 million or 6.7% (exclusive of PPP loans).
• Non-performing assets decreased to 0.20% of total assets.

Negative

• Net income declined from $5.28 million in 2021 to $4.39 million in 2022.
• Significant drop in PPP-related income from $3.13 million to $49,000.
• Stockholders' equity decreased from $51.6 million to $39.7 million.

PRESTON, Md., Jan. 27, 2023 /PRNewswire/ -- PSB Holding Corp. (OTCQX:PSBP) (the "Company"), the parent company of Provident State Bank, Inc. ("Provident" or the "Bank"), reported net income of $4.39 million ($2.87 per diluted common share) for the year ended December 31, 2022, compared to $5.28 million ($3.45 per diluted common share) for the same period of 2021.  For the three months ended December 31, 2022, net income totaled $1.16 million ($.76 per diluted common share), compared to $1.02 million ($.66 per diluted common share) for the three months ended December 31, 2021.

Performance Review

Merger Announcement
On December 12, 2022, the Company and Summit Financial Group, Inc. ("Summit") (NASDAQ:SMMF) announced the signing of a definitive merger agreement.  Following consummation of the merger, expected to occur prior to the end of the second quarter of 2023, the Company and the Bank will be merged into Summit and Summit Community Bank, Inc., respectively.  During the fourth quarter of 2022, the Company incurred $435,000 in merger related costs.  Exclusive of merger related costs, net of taxes, net income was $4.73 million ($3.09 per diluted common share) for the year ended December 31, 2022 and $1.50 million ($.98 per diluted common share) for the fourth quarter 2022.

Small Business Administration ("SBA") Payroll Protection Program ("PPP")
The Bank's participation in the SBA's PPP, established in April 2020, contributed more significantly to financial performance during 2021 as compared to 2022. During the year ended December 31, 2021, Provident recognized fee income net of costs (amortized as a loan yield adjustment) of $3.13 million. During the same period of 2022, Provident recognized $49,000 of fee income, net of costs. For the three months ended December 31, 2021, net fee income recognized totaled $418,000. During the same period in 2022, no net fee income was recognized as all outstanding PPP loans had been forgiven or repaid as of March 31, 2022.

Year Ended 2022 compared to 2021
Net interest income declined $516,000 million in 2022 compared to 2021.  The decline was largely attributable to the reduced PPP income and merger related costs referenced above, offset by an increase in the net interest margin ("NIM"), exclusive of the influence of PPP activity, from an estimated 2.99% to 3.33%. Improvement in the NIM resulted from increasing loan rates influenced by actions of the Federal Reserve and a decline in deposit and other borrowing costs of $688,000. While loans rates increased quickly in response to Federal Reserve actions, increases in deposit rates lagged. Net income during 2022 was further affected by lower gain on sale of loans of $904,000, offset by an increase in other noninterest income of $224,000 and a decline in the provision for loan losses of $460,000. Gain on sale of loans declined as rising interest rates slowed residential mortgage origination activity. Other noninterest income included a $150,000 prepayment penalty associated with the early pay-off of a $5.5 million lending relationship. The decline in the provision for loan losses reflected continuing strength in asset quality metrics.

Fourth Quarter 2022 Compared to Fourth Quarter 2021
Net interest income increased $580,000 in 2022 compared to 2021. The increase was largely attributable to an increase in the NIM, exclusive of the influence of PPP activity, from an estimated 2.89% to 3.59%, offset by the reduced PPP income referenced above. Improvement in the NIM was driven by increasing loan rates influenced by actions of the Federal Reserve. Net income during the fourth quarter 2022 was further affected by lower gain on sale of loans of $272,000, an increase in other noninterest expense of $450,000 and the recapture of the provision for loan losses of $90,000. Gain on sale of loans declined as rising interest rates slowed residential mortgage origination activity. Other noninterest expense included $435,000 of merger related costs.  The recapture of previously recorded provision for loan losses reflected continuing strength in asset quality metrics.

Balance Sheet and Asset Quality

Assets totaled $579.9 million on December 31, 2022, decreasing $5.1 million or .9% compared to December 31, 2021. Gross loans totaled $380.7 million on December 31, 2022, representing an increase of $24.0 million or 6.7% compared to December 31, 2021, exclusive of PPP loans. Deposits and repurchase agreements totaled $526.9 million on December 31, 2022, compared to $510.6 million on December 31, 2021, representing growth of 3.2%.  Stockholders' Equity totaled $39.7 million on December 31, 2022, compared to $51.6 million on December 31, 2021. The decrease in stockholders' equity was driven by growth in unrealized losses associated with the Bank's investment portfolio held as available for sale ("AFS"). As of December 31, 2022, accumulated other comprehensive losses associated with the AFS portfolio totaled $16.8 million compared to $846,000 on December 31, 2021. The significant increase in unrealized losses as of December 31, 2022, was driven by a dramatic jump in market rates during 2022 as the Federal Reserve battled inflationary pressures. These unrealized losses are not included in regulatory capital and the Bank remained well capitalized on December 31, 2022. As of December 31, 2022, non-performing assets and past due loans 30 days or more were .20% of total assets compared to .38% at the end of 2021. 

President and Chief Executive Officer Melissa Quirk commented on the Company's performance and strategic alignment with Summit stating, "We are extremely proud of our performance during 2022, which followed record performance in 2021.  Solid loan growth and an increased net interest margin nearly offset the loss of revenue associated with the Payroll Protection Program.  We are also excited about our pending combination with Summit. Summit's long history of commitment to community, breadth of products and services and growth orientation will serve our customers, communities, team members and shareholders well in the years to come."

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
(unaudited)
	December 31,				Percent
	2022		2021		Change
Assets
Cash and cash equivalents	$    27,224,563		$    36,100,150		-24.6 %
Investment securities	144,517,834		167,167,082		-13.5 %
Loans held for sale	129,790		1,879,591		-93.1 %
Loans receivable	380,675,118		357,800,695		6.4 %
Less allowance for loan losses	4,095,149		3,892,115		5.2 %
Loans, net of allowance for loan losses	376,579,969		353,908,580		6.4 %
Property and equipment	6,231,507		6,879,131		-8.7 %
Bank-owned life insurance	12,215,923		11,918,526		2.5 %
Lease assets	2,339,774		2,720,578		-14.0 %
Accrued interest receivable	1,590,461		1,344,283		18.3 %
Other assets	9,113,405		3,119,329		190.6 %
Total assets	$  579,943,226		$  585,037,250		-0.9 %
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing	$  171,183,577		$  191,144,058		-10.4 %
Interest-bearing	338,529,875		303,379,512		11.6 %
Total deposits	509,713,452		494,523,570		3.1 %
Repurchase agreements	17,157,020		16,104,671		6.5 %
FHLB advances and other borrowing	8,778,502		18,220,887		-51.8 %
Lease liabilities	2,569,464		2,930,961		-12.3 %
Other liabilities	1,983,493		1,677,656		18.2 %
Total liabilities	540,201,931		533,457,745		1.3 %
Stockholders' equity:
Common stock, additional paid-in capital
and retained earnings	56,586,209		52,425,553		7.9 %
Accumulated other comprehensive (loss)
income	(16,844,914)		(846,048)
Total stockholders' equity	39,741,295		51,579,505		-23.0 %
Total liabilities and equity	$  579,943,226		$  585,037,250		-0.9 %
Book value per common share	$               26.09		$               33.86		-23.0 %

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
	Three Months Ended						Year Ended
	December 31,						December 31,
	2022		2021		% Change		2022		2021		% Change
Interest income
Loans, including fee income	$       4,604,085		$      4,361,123		5.6 %		$    16,876,491		$    19,292,572		-12.5 %
Investment securities	759,110		566,608		34.0 %		2,915,889		,978,770		47.4 %
Other interest income	177,102		13,907		1173.5 %		314,767		40,279		681.5 %
Total interest income	5,540,297		4,941,638		12.1 %		20,107,147		21,311,621		-5.7 %
Interest expense
Deposits	509,869		434,397		17.4 %		1,571,138		1,967,103		-20.1 %
Repurchase agreements	1,646		1,375		19.7 %		5,613		4,811		16.7 %
FHLB advances	46,845		101,800		-54.0 %		271,726		550,706		-50.7 %
Other borrowings	28,817		31,250		-7.8 %		119,460		133,495		-10.5 %
Total interest expense	587,177		568,822		3.2 %		1,967,937		2,656,115		-25.9 %
Net interest income	4,953,120		4,372,816		13.3 %		18,139,210		18,655,506		-2.8 %
Provision for loan losses	(90,000)		230,000		-139.1 %		100,000		560,000		-82.1 %
Net interest income after provision	5,043,120		4,142,816		21.7 %		18,039,210		18,095,506		-0.3 %
Noninterest income
Service charges	489,079		485,620		0.7 %		1,988,848		1,829,012		8.7 %
Gain on sale of loans	42,898		314,859		-86.4 %		415,934		1,320,073		-68.5 %
Gain on sale of securities	-		-		0.0 %		-		4,310		0.0 %
Other noninterest income	82,172		82,327		-0.2 %		504,683		280,407		80.0 %
Total noninterest income	614,149		882,806		-30.4 %		2,909,465		3,433,802		-15.3 %
Noninterest expense
Salaries and benefits	1,972,982		1,977,495		-0.2 %		7,770,069		7,669,758		1.3 %
Occupancy and equipment	479,893		590,861		-18.8 %		1,951,072		2,124,876		-8.2 %
Data processing and software	369,853		311,239		18.8 %		1,363,740		1,340,576		1.7 %
Other noninterest expense	1,333,518		883,183		51.0 %		4,147,416		3,407,221		21.7 %
Total noninterest expense	4,156,246		3,762,778		10.5 %		15,232,297		14,542,431		4.7 %
Net income before tax	1,501,023		1,262,844		18.9 %		5,716,378		6,986,877		-18.2 %
Tax expense	342,278		247,113		38.5 %		1,330,369		1,703,140		-21.9 %
Net income	$       1,158,745		$      1,015,731		14.1 %		$      4,386,009		$      5,283,737		-17.0 %
Net income per diluted share	$                 0.76		$                0.66		14.1 %		$                2.87		$                3.45		-16.9 %

 

HISTORICAL TRENDS - QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SUPPLEMENTAL DATA (unaudited)
	2022								2022		2021
	Q4		Q3		Q2		Q1		Q4 vs. Q3		Q4		Q3		Q2		Q1
Interest income
Loans, including fee income	$    4,604,085		$    4,320,361		$  4,035,473		$  3,916,572		6.6 %		$  4,361,123		$  5,200,935		$   4,967,402		$  4,763,112
Investment securities	759,110		748,819		748,082		659,878		1.4 %		566,608		502,460		485,823		423,879
Other interest income	177,102		102,959		26,809		7,897		72.0 %		13,907		13,540		6,688		6,144
Total interest income	5,540,297		5,172,139		4,810,364		4,584,347		7.1 %		4,941,638		5,716,935		5,459,913		5,193,135
Interest expense
Deposits	509,869		362,435		336,029		362,805		40.7 %		434,397		490,718		507,708		534,280
Repurchase agreements	1,646		1,374		1,300		1,293		19.8 %		1,375		1,466		891		1,079
FHLB advances	46,845		51,666		81,527		91,688		-9.3 %		101,800		109,882		163,552		175,472
Other borrowings	28,817		30,959		30,121		29,563		-6.9 %		31,250		32,967		34,341		34,937
Total interest expense	587,177		446,434		448,977		485,349		31.5 %		568,823		635,033		706,492		745,768
Net interest income	4,953,120		4,725,705		4,361,387		4,098,998		4.8 %		4,372,815		5,081,902		4,753,421		4,447,367
Provision for loan losses	(90,000)		100,000		65,000		25,000		-190.0 %		230,000		120,000		120,000		90,000
Net interest income after provision	5,043,120		4,625,705		4,296,387		4,073,998		9.0 %		4,142,815		4,961,902		4,633,421		4,357,367
Noninterest income
Service charges	489,079		519,203		505,473		475,093		-5.8 %		485,620		480,290		445,963		417,139
Gain on sale of loans	42,898		73,284		105,506		194,246		-41.5 %		314,859		407,328		337,422		260,464
Gain on sale of securities	-		-		-		-		Na		-		-		4,310		-
Other noninterest income	82,172		246,512		93,737		82,262		-66.7 %		82,327		80,747		64,069		53,264
Total noninterest income	614,149		838,999		704,716		751,601		-26.8 %		882,806		968,365		851,764		730,867
Noninterest expense
Salaries and benefits	1,972,982		1,944,298		1,892,130		1,960,659		1.5 %		1,977,495		2,063,437		1,820,550		1,808,276
Occupancy and equipment	479,893		500,853		507,800		462,526		-4.2 %		590,861		512,155		508,652		513,208
Data processing and software	369,853		345,447		332,429		316,011		7.1 %		311,239		408,523		308,194		312,620
Other noninterest expense	1,333,518		1,100,503		925,680		787,715		21.2 %		883,183		893,689		790,844		839,505
Total noninterest expense	4,156,246		3,891,101		3,658,039		3,526,911		6.8 %		3,762,777		3,877,804		3,428,240		3,473,609
Net income before tax	1,501,023		1,573,603		1,343,064		1,298,688		-4.6 %		1,262,844		2,052,463		2,056,945		1,614,625
Tax expense	342,278		373,544		316,794		297,753		-8.4 %		247,113		528,699		525,953		401,375
Net income	$    1,158,745		$    1,200,059		$  1,026,270		$  1,000,935		-3.4 %		$  1,015,731		$  1,523,764		$   1,530,992		$  1,213,250
Net income per diluted share	$   0.76		$   0.79		$   0.67		$   0.65		-3.8 %		$   0.66		$   1.00		$   1.00		$   0.80
Supplemental Data
PPP loans - net fee income	$                    -		$                    -		$                   -		$        49,492				$      418,004		$   1,207,559		$      832,733		$      667,482
PPP loans - balance at period end	$                    -		$                    -		$                   -		$                  -				$   1,096,939		$ 11,536,310		$ 29,298,232		$ 48,411,520
Merger related costs	$        435,150		$                    -		$                   -		$                  -				$                  -		$                  -		$                  -		$                  -

 

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SOURCE PSB Holding Corp.

FAQ

What was PSB Holding Corp.'s net income for 2022?

PSB Holding Corp. reported a net income of $4.39 million for the year ended December 31, 2022.

How did net income for Q4 2022 compare to Q4 2021 for PSB Holding Corp.?

Net income for Q4 2022 was $1.16 million, compared to $1.02 million for Q4 2021.

What is the expected timeline for the merger between PSB Holding Corp. and Summit Financial Group?

The merger is expected to be finalized by the end of the second quarter of 2023.

What impact did the Payroll Protection Program have on PSB Holding Corp.'s financial performance in 2022?

The income from the SBA's Payroll Protection Program dropped significantly from $3.13 million in 2021 to $49,000 in 2022.

What were the total assets reported by PSB Holding Corp. at the end of 2022?

The total assets of PSB Holding Corp. were $579.9 million as of December 31, 2022.