MADISON HEIGHTS, Mich., Oct. 30, 2009 (GLOBE NEWSWIRE) -- PSB Group, Inc., (OTCBB:PSBG), the bank holding company for Peoples State Bank (PSB), a Michigan state-chartered bank with offices in Wayne, Oakland, Macomb and Genesee Counties, today reported a net operating loss of $.673 million or $0.19 per average outstanding share for the three months ended September 30, 2009 compared with a net operating loss of $2.030 million or $0.61 per average outstanding share for the third quarter of 2008 and $1.452 million or $0.42 per average outstanding share for the second quarter of 2009.
Balance Sheet
Total assets at September 30, 2009 were $474.3 million compared to $460.5 million at December 31, 2008 and $470.6 million at September 30, 2008. Total loans were $363.7 million as of September 30, 2009 compared to $374.8 million at December 31, 2008 and $382.9 million at September 30, 2008. Total deposits were $440.1 million as of September 30, 2009 compared to $412.4 million at December 31, 2008 and $395.6 million at September 30, 2008. Deposits grew by 11.2% from the prior year with growth occurring in nearly every product category.
Increased liquidity from the strong deposit growth was invested in securities and used to pay down borrowed funds. The company has attained its long term strategic target of maintaining 15-20% of assets in low risk securities to lower the future risk profile of the bank. Securities sold during the quarter for gains were reinvested at yields at or above the prior rates with more favorable maturities and cash flows. PSB prepaid $15 million in FHLB borrowings with a weighted average rate of 2.76% and incurred a one time prepayment expense of $184 thousand with the proceeds of a portion of the securities sales which should save the company approximately $35 thousand per month in ongoing interest costs.
Peoples State Bank continues to experience favorable deposit growth especially with commercial checking relationships. PSB has no brokered deposits. The net interest margin for the quarter ending September 30, 2009 stood at 3.09%. This compares to a net interest margin of 3.47% for the second quarter of 2009. Higher levels of non-performing loans continue to have an impact on our interest margin. Interest expenses have declined in the last two months as high rate CDs are maturing and renewing at substantially lower rates.
Income Statement
Non-interest income for the quarter was $1.895 million, very much in line with the $1.922 million for the quarter ended June 30, 2009 and 106% above the third quarter of 2008. The strong quarterly results came from three areas: sustained fee income from mortgage originations, gains on sales of securities, and continued growth in the deposit fee income business generated by our cash management products and business DDA growth.
Non-interest expenses continued to improve during the quarter. Total non-interest expenses were $4.488 million for the quarter compared to $4.813 million for the second quarter of 2009 and $6.306 million in third quarter of 2008. This represents a 6.8% improvement from the second quarter and a 29% improvement from the third quarter of 2008. We continue to become more efficient while investing in areas to improve credit quality and grow revenues. Total salary and benefits expense experienced a seventh straight quarter of decline and improved 4.5% over the prior quarter and 16% from the third quarter of last year. Total FTE was 125 at 9/30/2009 down from 147.5 at 9/30/2008. Even with fewer people customer service and responsiveness remains exceptional and is a key driver of our strong deposit growth. We have significantly reduced expenses in all categories except collection related costs and FDIC insurance costs. Our cost of FDIC insurance will rise by over $1.1 million for the full year in 2009, a common theme for all banks and especially those operating in hard hit SE Michigan. Finally, other real estate owned expenses of $.231 million reflect an 87% reduction over the comparable quarter in 2008. We have been able to liquidate over 30 properties this year and our valuations have been validated by market sales prices. Property values are stabilizing in Southeast Michigan as the rate of price decline has slowed dramatically over 2008 levels and sales volumes are moving slowly upward throughout the region.
Asset Quality
The quality of Peoples State Bank's loan portfolio is highly impacted by the unfavorable economic conditions in the Southeast Michigan market. Peoples State Bank maintains a rigorous credit review and monitoring process so that problems are identified early and potential credit quality issues are addressed and remediated. We significantly enhanced our managed asset department this quarter with the addition of three workout specialists. We are already reaping the benefit of this move and we expect to see an even faster pace for resolution of non-performing loans and OREO balances in the next few quarters.
Total non-performing loans including Troubled Debt Restructured (TDR) at quarter end were $52 million vs $ 41.6 million in the second quarter of 2009. Other real estate owned was $7 million vs $8 million at June 30, 2009. For the quarter ended 9/30/2009, total non-performing assets stood at 12.43% of total assets. Two large relationships accounting for nearly $10 million in balances were moved to non-accrual status. These loans are secured and in the process of collection. Loans to residential developers continued to decline this quarter due to a large payoff as a result of litigation and are now less than 2% of total loans and reflect nominal ongoing loss exposure to the bank. This has been a major problem area for many banks and our aggressive actions the last few years have put us in a solid position going forward.
Our provision for loan losses for the quarter was $1.62 million as compared to $2.54 in the second quarter of 2009 and $2.22 million for the first quarter of 2009. The loan loss reserve of $7.33 million represented 2.01% of total loans at September 30, 2009. This compares with a reserve of 1.91% or $7.044 million dollars at June 30, 2009. We feel this reserve level is required given the challenges our customers continue to experience yet it reflects the relatively stronger secured position of our credits and the favorable diversification of our loan portfolio.
Michael J. Tierney, President and CEO commented, "The Southeast Michigan economy continues to face major challenges. We see some signs of stabilization yet our clients are still feeling the effects of the long term decline of the Michigan economy. Our pre-tax pre-provision earnings continue to improve each quarter as our efficiency efforts generate more revenue per dollar spent. We believe the bank is at or near its peak in the decline in asset quality and look for improvement from our ramped up collection efforts in the upcoming quarters. Our sales and service culture and our strong product line have benefitted us tremendously in these uncertain times. As many of the big banks have deemphasized former relationships with SE Michigan businesses and consumers we have been able to win major new business account relationships especially with medical professionals and legal firms. We remain challenged by the economic conditions but we have continued our steady progression on the way back to profitability. "
Except for the historical information contained herein, the matters discussed in the Release may be deemed forward-looking statements that involve risk and uncertainties. Words or phrases "will likely result", "are expected to", "expect", "is anticipated", "estimate", "project", or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Factors which could cause actual results to differ, include, but are not limited to, fluctuations in interest rates, changes in economic conditions of the bank's market area, changes in policies by regulatory agencies, the acceptance of new products, the impact of competitive products and pricing and the other risks detailed from time to time in the Bank's and Corporation's reports. These forward-looking statements represent the Corporation's judgment as of the date of this report. The Corporation disclaims, however, any intent or obligation to update these forward-looking statements.
PSB Group, Inc. is a registered holding company. Its primary subsidiary, Peoples State Bank, currently serves the southeastern Michigan area with 11 full-service banking offices in Farmington Hills, Fenton, Grosse Pointe Woods, Hamtramck, Madison Heights, Southfield, Sterling Heights, Troy and Warren. The bank has operated continuously under local ownership and management since it first opened for business in 1909.
The Peoples State Bank logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5969
PSB Group, Inc.
QUARTERLY STATEMENT OF INCOME
9/30/2009 6/30/2009 3/31/2009 12/31/2008 9/30/2008
--------- --------- -------- ---------- ---------
Total Interest
Income $5,766 $ 6,278 $ 6,503 $ 6,792 $ 6,985
Total Interest
Expense 2,226 2,298 2,393 2,486 2,346
--------- --------- -------- ---------- ---------
Net Interest
Income 3,540 3,980 4,110 4,306 4,639
Provision for
Loan Losses 1,620 2,541 2,217 3,990 2,350
--------- --------- -------- ---------- ---------
Net Interest
Income after
Provision for
Loan Losses 1,920 1,439 1,893 316 2,289
Other Income 1,895 1,922 1,197 937 919
Other Expenses
Salaries and
employee
benefits 1,933 2,025 2,171 2,188 2,301
Occupancy
Costs 792 798 771 734 1,121
ORE Expenses 231 352 520 328 1,779
FDIC
Insurance 294 602 195 91 122
Other 1,238 1,036 1,188 5,495 983
--------- --------- -------- ---------- ---------
Total Other
Operating
Expenses 4,488 4,813 4,845 8,836 6,306
Income before
Taxes (673) (1,452) (1,755) (7,583) (3,098)
Provision for
Taxes 0 0 23 2,036 (1,068)
--------- --------- -------- ---------- ---------
Net Income $ (673) $(1,452) $(1,778) $(9,619) $(2,030)
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PSB Group, Inc.
ASSETS
09/30/09 06/30/09 03/31/09 12/31/08 09/30/08
-------- -------- -------- -------- --------
Cash and Due
from Banks 19,698 15,091 20,433 12,268 11,170
Federal Funds
Sold -- -- -- -- --
Investment
Securities
- available
for sale
at market 69,618 80,466 70,383 52,254 52,065
Loans 363,708 369,580 369,799 374,809 382,876
Less:
Allowance
for Loan
Losses (7,327) (7,044) (7,769) (7,116) (6,807)
-------- -------- -------- -------- --------
Net Loans 356,381 362,536 362,030 367,693 376,069
-------- -------- -------- -------- --------
Loans Held
for Sale 1,733 2,525 1,255 1,082 644
Premises and
Equipment 16,148 16,395 13,837 14,107 12,650
Accrued
Interest
Receivable 2,473 2,770 2,327 2,159 2,020
Other Real
Estate Owned 6,993 8,042 8,292 8,459 5,853
Goodwill -- -- -- -- 4,458
Other Assets 1,255 1,856 2,037 2,494 5,621
-------- -------- -------- -------- --------
Total Assets $474,299 $489,681 $480,594 $460,516 $470,550
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LIABILITIES &
STOCKHOLDERS'
EQUITY
Deposits:
Non -
Interest
Bearing 54,330 55,450 53,638 49,661 51,806
Interest
Bearing 385,721 389,822 380,705 362,781 343,837
-------- -------- -------- -------- --------
Total Deposits 440,051 445,272 434,343 412,442 395,643
-------- -------- -------- -------- --------
FHLB Advances 5,500 15,000 15,000 15,000 25,000
Long Term Debt 282 282 282 436 436
Discount
Window
borrowings -- -- -- -- 8,000
Fed Funds
Purchased -- -- -- -- 850
Accrued
Interest
Payable and
Other
Liabilities 2,351 2,985 2,444 2,536 2,305
-------- -------- -------- -------- --------
Total
Liabilities 448,184 463,539 452,069 430,414 432,234
-------- -------- -------- -------- --------
Stockholders'
Equity:
Common Stock
(no par
value) 23,693 23,693 23,696 23,607 23,511
Unearned
ESOP
Benefits (282) (282) (282) (436) (436)
Common Stock
Held in
Trust (410) (410) (410) (410) (410)
Deferred
Compensation
Obligation 410 410 410 410 410
Add'l Paid
in Capital-
stock
options/
awards 1,015 923 821 707 595
Unearned
Compensation (1,168) (1,168) (1,163) (976) (974)
Undivided
Profits 2,288 2,961 4,413 6,191 15,810
Unrealized
gain/(loss)
on
securities
available
for sale 569 15 1,040 1,009 (190)
-------- -------- -------- -------- --------
Total
Stock-
holders'
Equity 26,115 26,142 28,525 30,102 38,316
-------- -------- -------- -------- --------
Total
Liabilities &
Stockholders'
Equity $474,299 $489,681 $480,594 $460,516 $470,550
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