PSB HOLDING CORP. REPORTS 2022 RESULTS
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.