PSB Reports Second Quarter 2020 Earnings of $3.2 Million or $0.72 Per Share; Earnings Supported By Record Mortgage Refinancings; Total Assets Exceed $1.0 Billion

WAUSAU, Wis., July 27, 2020 (GLOBE NEWSWIRE) -- PSB Holdings, Inc. (“PSB”) (OTCQX: PSBQ), the holding company for Peoples State Bank serving North Central and Southeastern Wisconsin, reported second quarter earnings ending June 30, 2020 of $0.72 per share on net income of $3.19 million, compared to earnings of $0.36 per share on net income of $1.61 million during the March 31, 2020 quarter, and $0.57 per share on earnings of $2.57 million during the second quarter a year ago.  Second quarter earnings benefitted from record mortgage refinance income and lower compensation and benefit expenses related to expense deferrals on the origination of Paycheck Protection Program (“PPP”) loans offset in part by higher loan loss provisions and a lower net interest margin. 

“We are pleased with the success of our operations during the first full quarter of the COVID-19 pandemic.  During the quarter, we were able to generate record 1^st mortgage originations of $84.2 million, originate over $116.4 million in PPP loans and provide loan accommodations on $143 million of loans despite many staff members working remotely.  Meanwhile, we continued our outreach to borrowers to determine their financial health and adjust our risk-weighting accordingly. Though the balance of our “Watch Risk” loans increased during the quarter, we are currently seeing a large portion of these borrowers making payments or agreeing to return to payments in the third quarter.  We maintained the same loan loss provision during the quarter as in the previous quarter and continued strong core operating income that supported an increase in our reserve ratio to 1.32% of gross loans less our PPP loans,” stated Scott Cattanach, President and CEO.

Loan Accommodations: As of June 30, 2020, PSB has provided 114 loan accommodations totaling $143 million to defer payments or make interest only payments for 90 days in response to challenges for borrowers resulting from COVID-19.  As the initial 90-day accommodation period now ends, we expect approximately 90 of the loans totaling $97.3 million to return to making regularly scheduled payments in the third quarter.  The remaining 24 loans totaling $45.7 million have, or are expected to, request an extended deferral of an additional 90 days, including $19.9 million of loans requesting a full payment deferral.  “For each relationship, we assign a risk weighting to identify and quantify the risk of loss prior to origination of the loan and periodically afterwards.  As requests for payment deferrals or modifications for interest only payments are made, we review the credit risk rating and adjust as forward-looking circumstances warrant.  We believe this system helps us monitor the risks inherent in our loan portfolio and appropriately track the impact caused by the pandemic and the resulting slowing economy.  As shown in the table below, our “impaired loans” and “substandard risk” loans did not change materially from the prior quarter.  However, we did move approximately $38.6 million of loans to the “Watch Risk” category in 2020, which are largely related to businesses materially affected by the mandatory closing of their operation by executive order.  Thirteen of the loans where we anticipate extended deferrals totaling $28.6 million are weighted as average or acceptable risk, ten loans totaling $16.9 million are weighted as watch, and one loan totaling less than $200,000 is considered impaired,” continued Cattanach.

As of June 30, 2020, the bank had granted a 90-day payment deferral on 88 residential related loans totaling $10.3 million. As with the commercial loan deferrals, the majority of customers are expected to return to regular principal and interest payments during the third quarter 2020.

Commercial, Commercial Real Estate, Construction & Development, Agricultural and Government Loans
($000)
Risk Rating				12/2015			12/2016			12/2017			12/2018			12/2019			03/2020			06/2020
Rating 1		"High Quality"	$	79		$	-		$	-		$	-		$	-		$	71		$	55
Rating 2		"Minimal Risk"		59,882			67,468			76,710			85,382			57,904			59,101			72,601
Rating 3		"Average Risk"		227,020			253,673			292,496			323,627			349,002			324,378			374,709
Rating 4		"Acceptable Risk"		85,206			91,367			65,024			79,271			128,932			123,296			154,302
Rating 5		"Watch Risk"		12,520			10,774			18,049			15,551			15,933			33,999			54,522
Rating 6		"Substandard Risk"		621			2,678			500			489			2,568			2,732			4,545
Rating 7		"Impaired Loans"		9,877			7,758			9,952			8,707			5,518			7,811			6,130
			$	395,205		$	433,718		$	462,731		$	513,027		$	559,857		$	551,388		$	666,864
Includes undisbursed Construction & Development lines of credit. PPP loan balances are assigned a risk-weighting of "3".

Industry Exposure: PSB has identified the following fifteen industries with the highest portfolio concentrations, and identified Hotels, Restaurants, Retail Stores and Services as concentrations that may be adversely impacted by the Safer-At-Home Order and the on-going pandemic.  Though these industries may change, management believes these industries are where PSB may have exposure or where credit weightings are elevated. Percentages and weightings are of the total commercial related portfolio credit extensions including PPP loans.

The following table indicates PSB’s Top Industry Risk Exposure sorted by weighted average risk rating as of June 30, 2020:

Total Industry Risk Exposure
Industry	No. of Loans	Total Loans	% of Ln Portfolio		Weighted Avg Risk Rating
Hotels	48	34,479,059	4.39	%	4.23
Restaurant	136	22,837,436	2.91	%	3.90
Agricultural	90	10,751,676	1.37	%	3.87
Other	11	7,310,552	0.93	%	3.76
Recreation	59	8,343,848	1.06	%	3.67
Wood, Log, Sawmill, Lumber	61	12,167,298	1.55	%	3.66
Retail Stores	97	23,574,361	3.00	%	3.58
Non-Owner Occupied (Residential)	324	103,744,629	13.22	%	3.52
Lessors of Residential Buildings and Dwellings Multi-Family	28	69,104,242	8.80	%
Lessors of Residential Buildings and Dwellings	296	34,640,387	4.42	%
Automotive and Marine Dealerships (Includes Maint.)	99	22,159,323	2.82	%	3.36
Religious Organizations	31	3,124,871	0.40	%	3.25
Non-Owner Occupied (Commercial)	194	94,049,521	11.98	%	3.23
Lessors of Nonresidential Buildings (except Miniwarehouses)	144	79,063,621	10.07	%
Lessors of Miniwarehouses and Self-Storage Units	25	9,724,152	1.24	%
Lessors of Other Real Estate Property	25	5,261,748	0.67	%
Trucking	122	46,100,112	5.87	%	3.17
Land (Res. And Com.)	35	8,565,878	1.09	%	3.16
Manufacturing	218	129,082,341	16.44	%	3.16
Services	420	70,119,129	8.93	%	3.14
Loan portfolio includes unused loan commitments. Balances do not include any consumer loans.

Weighted average loan to collateral values at June 30, 2020 were 64%, 64% and 72% in the Hotels, Restaurant and Retail industry categories, respectively. 

Loan Loss Reserve:  For the quarter ended June 30, 2020, PSB added provisions for loan losses totaling $1.8 million, the same level provided during the prior quarter.  The provision replaced existing specific reserves related to a charge-off of approximately $500,000 on a Shopko store loan moved into foreclosed property in addition to provisions taken due to changes in risk ratings associated with loan classifications as a result of the ongoing pandemic. Loan loss provisions are expected to remain elevated in the third quarter as better clarity on the impact of the economic slowdown from the COVID-19 pandemic materializes.  Allowance for loan losses totaled $9.17 million at June 30, 2020 which includes $3.18 million of allowances for loans with risk weightings at 5 and above (“Watch and Impaired”) and $5.99 million for loans with risk weightings at 4 and below (“Acceptable and Average”).  At June 30, 2020, allowance for loan losses totaled 1.12% of gross loans and 1.32% of gross loans less PPP loans guaranteed through the SBA.

Net Interest Margin Impact:  PSB’s net interest margin declined to 3.09% for the quarter ended June 30, 2020 from 3.45% the prior quarter due to the swift reduction in short term interest rates in March, and the resulting effect of loans and investments repricing at lower rates, and the addition of PPP loans with 1% coupon yields.  “The addition of PPP loans combined with a large liquid position fueled in part by strong deposit growth in a low interest rate market influenced the net interest margin.  Excluding the impact of our PPP lending, the net interest margin would have been 3.25% for the most recent quarter,” said Mark C. Oldenberg, Chief Financial Officer.

Paycheck Protection Program Participation and Deposit Growth:  During the second quarter of 2020, PSB originated 718 loans, 152 to new customers, for a total of $116.4 million in PPP loans and generated total loan fees receivable of $3.9 million.  These fees are currently deferred and will be realized over the life of the loan or will be recognized in proportion to the amount of loan when forgiven by the SBA.  We expect customers to begin the process of requesting loan forgiveness during the third quarter and receipt of the loan funds from the SBA to begin taking place during the fourth quarter. Additionally, during the June 2020 quarter, PSB deferred direct salary and compensation expenses associated with the origination of the loans totaling $861,000 and will recognize this expense during the period in which the origination fee is recognized in income.  These factors combined during the quarter resulting in total net deferred loan fees at June 30, 2020 of $2.6 million compared to net deferred costs of $388,000 at March 31, 2020.

Main Street Lending Program:  We have reviewed the requirements for the program and stand ready to participate on behalf of our customers who need and qualify for the program. As of June 30, 2020, we have not received any borrower requests that could benefit from the program.

Capital Management:  At June 30, 2020, the holding company’s tangible equity to asset ratio was 8.95% and the bank’s capital was well in-excess of all regulatory requirements.  As the PPP loans paydown or are forgiven resulting in a declining asset base, management expects capital ratios to return to historical levels exceeding 9.00%.

June 2020 Quarterly Financial Highlights (at or for the periods ended June 30, 2020, compared to March 31, 2020 and / or June 30, 2019, as applicable):

• Return on shareholders’ equity was 13.38% for the quarter compared to 6.84% one quarter earlier and 11.90% for the second quarter one year earlier.  Return on average assets was 1.20% for the second quarter of 2020, compared to 0.67% the previous quarter and 1.15% for the second quarter one year earlier. 
   
• Gains on the sale of mortgage loans increased to $1.75 million for the quarter ended June 30, 2020 from $987,000 the previous quarter and $432,000 for the same quarter ended one year earlier.  The gains were slightly offset by a decline in net mortgage loan servicing rights to a loss of $165,000 compared to a loss of $23,000 the prior quarter and a gain of $84,000 for the same quarter ended one year earlier.  Through the beginning of the third quarter of fiscal 2020, mortgage banking activity remains robust.
   
• PSB realized a sizable increase in the value of investments held for sale as the market value improved for four collateralized loan obligations.  During the quarter ended June 30, 2020, the net unrealized gain on securities available for sale increased $2.61 million from a loss of $342,000 during the March 2020 quarter, mostly due to the recovery in value related to $20 million of Collateralized Loan Obligations Peoples State Bank holds with ratings of A or better.  These obligations had been impacted by unusual volatility in the bond market and temporary illiquidity during the prior quarter.  
   
• Tangible net book value was $21.97 per share at June 30, 2020, compared to $20.89 per share as of March 31, 2020, and $19.41 per share at June 30, 2019.  Over the past year, tangible book value per share has grown 13.19%.

Balance Sheet and Asset Quality Review

Total assets were $1.093 billion as of June 30, 2020, compared to $970 million as of March 31, 2020, an increase of $123 million, or 12.7%.  Total loans receivable increased by $101.0 million, or 14.3% due primarily to the addition of PPP loans.  With the addition of PPP loans to the commercial/agricultural non-real estate loan portfolio, commercial/agricultural non-real estate loans became the largest loan concentration.  The commercial/agricultural non-real estate loan portfolio increased to $252.0 million at June 30, 2020 from $139.2 million three months earlier.  Commercial/agricultural non-real estate loans represented 30.8% of gross loans at June 30, 2020, followed by non-owner occupied commercial real estate loans at 26.5%, owner occupied commercial/agricultural real estate loans at 22.1%, residential real estate loans at 20.1%, and consumer loans at 0.5%.  Total agricultural related loans represent 0.9% of the total loan portfolio.    

The allowance for loan losses increased to 1.12% of gross loans at June 30, 2020 and 1.32% of gross loans less the PPP guaranteed loans.  The annualized net charge-offs to average loans was 0.25% for the quarter ended June 30, 2020, compared to 0.49% the previous quarter and 0.00% one year earlier.  The charge-offs in the most recent quarter related to the previously disclosed bankruptcy of the retailer Shopko, where approximately $500,000 was charged-off, and a $50,000 write-down was taken on a former branch office held for sale that is in foreclosed assets.  Non-performing assets decreased to 0.49% of total assets at June 30, 2020, compared to 0.54% at March 31, 2020, and 0.42% at June 30, 2019.  At June 30, 2020, non-performing assets consisted of $3.0 million in non-accrual loans, $244,000 in non-accrual restructured loans, $650,000 in restructured loans not on non-accrual, and $1.53 million in other real estate owned. 

Accrued interest receivable increased during the quarter to $3.6 million from $2.8 million in the first quarter of 2020, due to the loan payment deferrals and interest-only payments related to COVID-19 accommodations.  We expect the accrued interest receivable levels to decline in the third quarter as borrowers return to regular payments.

At June 30, 2020, cash and cash equivalents totaled $60.3 million compared to $48.1 million at March 31, 2020 and $18.7 million one year earlier.  Current cash levels are elevated due to the depositing of PPP funds and to accommodate potential cash needs related to the pandemic.  Investment securities totaled $178.6 million at June 30, 2020 compared to $171.1 million at March 31, 2020 and $165.7 million one year earlier.  All investment securities during the prior three quarters were considered available for sale and carried at market value.   

Foreclosed assets increased to $1.53 million at June 30, 2020 from $425,000 at March 31, 2020 and $172,000 one year earlier.  The increase primarily reflects our foreclosure on the Shopko property which is currently listed for sale and carried at an appraised value obtained in May 2020. 

Total deposits increased 15.3% to $882.2 million at June 30, 2020 compared to $765.3 million at March 31, 2020, led by an $83.4 million increase in non-interest demand deposits.  A large portion of the increase was related to PPP funds deposited at the Bank.  At June 30, 2020, interest-bearing demand and savings deposits accounted for 30.4% of total deposits, followed by noninterest-bearing demand deposits at 27.4%, money market deposits at 23.0%, and retail and local time deposits at 14.6%.  Broker and national time deposits accounted for 4.6% of total deposits at June 30, 2020 versus 3.9% the prior quarter and 5.9% one year earlier. As a result of the Safer-At-Home Order and ongoing pandemic, we have seen customer increase mobile banking enrollment by 12% and active mobile deposit product usage of 24%.

FHLB advances decreased to $87.0 million at June 30, 2020 compared to $88.7 million at March 31, 2020 and other borrowings increased to $3.9 million from $3.5 million over the same time period.

For the quarter ended June 30, 2020, stockholders’ equity increased $4.8 million to $98.0 million, compared to $93.2 million at March 31, 2020.  Stockholders’ equity was impacted by earnings, our recently declared $0.21 per share dividend payment and other comprehensive income adjustments, including the change in unrealized gains and losses on securities available for sale.  Tangible net book value per share increased to $21.97 per share, at June 30, 2020, compared to $20.89 per share at March 31, 2020.  PSB’s tangible equity to total assets was 8.95% at June 30, 2020 compared to 9.59% at March 31, 2020.  Adjusted for $116.4 million of PPP loans, tangible equity would have been 10.03% at June 30, 2020. As previously disclosed, we have suspended our share repurchase program and will consider reinstatement of the program at a future date.

Operations Review

Net interest income totaled $7.8 million (on a net margin of 3.09%) for the second quarter of 2020, compared to $7.8 million (on net margin of 3.45%) for the first quarter of 2020 and $7.8 million (on a net margin of 3.72%) for the second quarter of 2019.  For the six months ended June 30, 2020, net interest income was $15.6 million compared to $15.4 million for the same six-month period one year earlier.  Compared to the preceding quarter, loans and investment yields decreased 61 basis points to 3.69% during the second quarter of 2020 from 4.30% one quarter earlier while deposit and borrowing costs declined 26 basis points to 0.84% from 1.10% over the same period.  The decline in loan and investment yields was partially due to a larger average balance of cash and cash equivalents held during the quarter, a decrease in the prime lending rate due to actions by the Federal Reserve and the addition of PPP loans with coupon yields of 1.00%.  Loan yields decreased to 4.14% during the quarter, 4.45% adjusted to exclude the PPP loan volume, from 4.78% during the first quarter of 2020, as many floating rate loans repriced lower as the prime rate declined towards the end of the first quarter.  “We expect the net-interest margin adjusted for low yielding PPP loans to stabilize in the third quarter near the 3.25% level as we intend to reduce the elevated level of liquidity during the quarter,” stated Oldenberg.

The cost of interest-bearing liabilities decreased during the quarter, reflecting lower rates associated with money market accounts and time deposits.  Deposit costs decreased to $1.08 million for the second quarter of 2020 from $1.48 million the previous quarter.  Interest costs on borrowings declined $5,000 for the second quarter of 2020 to $448,000 from $453,000 the previous quarter.

The provision for loan losses totaled $1.8 million during the second quarter of 2020 compared to $1.8 million for the prior linked quarter.  The provision primarily relates to our charge-off on a Shopko related loan and an increased need for reserves related to anticipated losses related to a more difficult economic climate.  For the six months ended June 30, 2020, provision for loan losses totaled $3.6 million compared to $550,000 for the same period one year earlier.

For the six months ended June 30, 2020, total noninterest income was $5.5 million compared to $4.0 million for the six-months ended June 30, 2019.  The six-month increase was largely due to gains on the sale of mortgage loans.  Total noninterest income for the second quarter of 2020 increased to $3.1 million from $2.4 million for the first quarter of 2020.  Gains on sale of mortgage loans increased to $1.7 million for the second quarter from $987,000 in the first quarter of 2020 and remained strong as lower long-term U.S. Treasury rates have spurred mortgage refinance activity by borrowers.  We expect active mortgage originations during the third quarter though the wave of refinancing activity appears to have peaked.  The gains on sale of mortgage loans were partially offset by a loss on mortgage loan servicing of $165,000 for the second quarter of 2020 compared to a loss of $23,000 the previous quarter. 

Deposit and service fee income in the second quarter were down to $278,000 compared to $391,000 during the preceding quarter of 2020.  The service fee income was down as Peoples State Bank provided waivers on service fees through June 30, 2020 and recorded less overdraft income as depositors had higher average balances from stimulus money received.  Net gains on sale of securities was $194,000 for the second quarter of 2020 compared to $123,000 for the first quarter of 2020 and $121,000 for the quarter one year earlier.  Commissions on customer investment and insurance sales decreased to $259,000 from $349,000 the prior quarter as sales activity slowed during the pandemic and advisory fees tied to market values declined.  At June 30, 2020, Peoples State Bank had wealth assets under management totaling $234.4 million compared to $217.5 million at March 31, 2020 and $236.6 million at June 30, 2019.  The volatility over the past year in assets under management was has been primarily related to stock market value declines.  Other non-interest income for the second quarter was higher year over year due to $332,000 of fee income earned on loans originated with swap like features originated during the quarter.

Noninterest expense was $4.9 million for the second quarter of 2020, compared to $6.3 million for the first quarter of 2020.  For the second quarter of 2020, noninterest expense decreased due to lower salaries and employee benefits costs related to the deferral of $861,000 in loan origination costs associated with the PPP loans.  The deferred expenses will be recognized over the life of the loan or, in the case of PPP loans, when forgiven by the SBA.  Salary and employee benefit expenses were $2.6 million for the second quarter compared to $3.8 million in the first quarter of 2020, from the deferred costs and a separate $375,000 reduction related to lower benefits expenses.  Second quarter expenses were also $115,000 less than first quarter on lower donations expense.  The second quarter 2020 results reflect renewed FDIC insurance premiums compared to zero during the prior three quarters as the FDIC insurance fund had reached its targeted level.  It is expected FDIC insurance premiums will continue to be incurred throughout the pandemic.  For the six-months ended June 30, 2020, total noninterest expense was $11.2 million compared to $11.9 million for the same period one year earlier.

About PSB Holdings, Inc.

PSB Holdings, Inc. is the parent company of Peoples State Bank. Peoples is a community bank headquartered in Wausau, Wisconsin, serving north central and southeastern Wisconsin from nine full-service banking locations in Marathon, Oneida, Vilas and Milwaukee counties and a loan production office in Stevens Point, Wisconsin. Peoples also provides investment and insurance products, along with retirement planning services, through Peoples Wealth Management, a division of Peoples.  PSB Holdings, Inc. is traded under the stock symbol PSBQ on the OTCQX Market.  More information about PSB, its management, and its financial performance may be found at www.psbholdingsinc.com.

Forward-Looking Statements

Certain matters discussed in this news release, including without limitation those relating to potential loan and deposit growth, future profits, changes in noninterest income and expenses, pro-forma impacts to income from non-recurring or unusual income and expense items, and future interest rates, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in this release. Among other things, these risks and uncertainties include the strength of the economy, the effects of government policies, including, in particular, interest rate policies, and other risks and assumptions. Risk and uncertainties also include the effect of the COVID-19 pandemic, including the bank’s credit quality and business operations, as well as its impact on general economic and financial market conditions. PSB Holdings, Inc. assumes no obligation to update or supplement forward-looking statements that become untrue because of events subsequent to this press release.

Investor Relations Contact
PSB Holdings, Inc.
1905 Stewart Avenue
Wausau, WI 54401
888.929.9902
[e-mail]

PSB Holdings, Inc.
Quarterly Financial Summary
(dollars in thousands, except per share data)				Quarter ended
				Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,
Earnings and dividends:				2020			2020			2019			2019			2019
	Interest income			$	9,291		$	9,726		$	9,988		$	10,098		$	9,839
	Interest expense			$	1,528		$	1,935		$	2,019		$	2,154		$	2,041
	Net interest income			$	7,763		$	7,791		$	7,969		$	7,944		$	7,798
	Provision for loan losses			$	1,800		$	1,800		$	150		$	150		$	150
	Other noninterest income			$	3,138		$	2,355		$	1,839		$	1,802		$	1,903
	Other noninterest expense			$	4,879		$	6,330		$	5,947		$	5,437		$	6,167
	Net income			$	3,190		$	1,610		$	2,813		$	3,131		$	2,572
	Basic earnings per share (3)			$	0.72		$	0.36		$	0.63		$	0.70		$	0.57
	Diluted earnings per share (3)			$	0.72		$	0.36		$	0.63		$	0.70		$	0.57
	Dividends declared per share (3)			$	0.21		$	-		$	0.20		$	-		$	0.20
	Tangible net book value per share (4)			$	21.97		$	20.89		$	20.72		$	20.24		$	19.41
	Semi-annual dividend payout ratio				14.50	%		n/a			15.04	%		n/a			16.95	%
	Average common shares outstanding				4,453,225			4,464,956			4,471,173			4,473,583			4,486,022
Balance sheet - average balances:
	Loans receivable, net of allowances for loss			$	786,785		$	705,333		$	700,469		$	689,057		$	666,008
	Assets			$	1,067,466		$	963,191		$	951,409		$	928,282		$	893,998
	Deposits			$	855,155		$	761,268		$	745,455		$	721,788		$	713,910
	Stockholders' equity			$	95,909		$	94,735		$	93,189		$	89,139		$	86,656
Performance ratios:
	Return on average assets (1)				1.20	%		0.67	%		1.17	%		1.34	%		1.15	%
	Return on average stockholders' equity (1)				13.38	%		6.84	%		11.98	%		13.94	%		11.90	%
	Average stockholders' equity less accumulated
	other comprehensive income (loss) to
	average assets				8.83	%		9.75	%		9.68	%		9.52	%		9.68	%
	Net loan charge-offs to average loans (1)				0.25	%		0.49	%		0.01	%		0.01	%		0.00	%
	Nonperforming loans to gross loans				0.47	%		0.67	%		0.68	%		0.70	%		0.53	%
	Nonperforming assets to total assets				0.49	%		0.54	%		0.55	%		0.57	%		0.42	%
	Allowance for loan losses to gross loans				1.13	%		1.10	%		0.97	%		0.97	%		0.97	%
	Nonperforming assets to tangible equity
	plus the allowance for loan losses (4)				5.11	%		5.24	%		5.45	%		5.69	%		4.13	%
	Net interest rate margin (1)(2)				3.09	%		3.45	%		3.53	%		3.60	%		3.72	%
	Net interest rate spread (1)(2)				2.85	%		3.20	%		3.24	%		3.31	%		3.42	%
	Service fee revenue as a percent of
	average demand deposits (1)				0.49	%		1.04	%		1.00	%		0.90	%		1.14	%
	Noninterest income as a percent
	of gross revenue				25.25	%		19.49	%		15.55	%		15.14	%		16.21	%
	Efficiency ratio (2)				44.23	%		61.59	%		59.90	%		55.14	%		62.83	%
	Noninterest expenses to average assets (1)				1.84	%		2.64	%		2.48	%		2.32	%		2.77	%
	Tangible equity to actual assets				8.95	%		9.59	%		9.50	%		9.53	%		9.65	%
Stock price information:
	High			$	24.75		$	28.25		$	28.25		$	27.50		$	24.75
	Low			$	18.55		$	19.50		$	26.00		$	23.55		$	22.00
	Last trade value at quarter-end			$	18.55		$	24.75		$	27.50		$	26.49		$	24.00
(1) Annualized
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent
	basis using a federal tax rate of 21%.
(3) Due to rounding, cumulative quarterly per share performance may not equal annual per share totals.
(4) Tangible stockholders' equity excludes intangible assets.

PSB Holdings, Inc.
Consolidated Statements of Income
				Quarter Ended
(dollars in thousands,				Jun. 30,			Mar. 31,			Dec. 31,		Sep. 30,		Jun. 30,
except per share data - unaudited)				2020			2020			2019		2019		2019
Interest and dividend income:
Loans, including fees				$	8,175		$	8,445		$	8,691	$	8,823	$	8,629
Securities:
Taxable					622			733			768		769		730
Tax-exempt					446			431			387		378		389
Other interest and dividends					48			117			142		128		91
Total interest and dividend income					9,291			9,726			9,988		10,098		9,839
Interest expense:
Deposits					1,080			1,482			1,544		1,654		1,634
FHLB advances					323			320			328		323		230
Other borrowings					6			14			26		58		57
Senior subordinated notes					28			28			29		28		28
Junior subordinated debentures					91			91			92		91		92
Total interest expense					1,528			1,935			2,019		2,154		2,041
Net interest income					7,763			7,791			7,969		7,944		7,798
Provision for loan losses					1,800			1,800			150		150		150
Net interest income after provision for loan losses					5,963			5,991			7,819		7,794		7,648
Noninterest income:
Service fees					278			391			411		348		403
Gain on sale of mortgage loans					1,747			987			452		463		432
Mortgage loan servicing, net					(165	)		(23	)		57		89		84
Investment and insurance sales commissions					259			349			301		276		310
Net gain on sale of securities					194			123			71		-		121
Increase in cash surrender value of life insurance					104			104			104		105		101
Other noninterest income					721			424			443		521		452
Total noninterest income					3,138			2,355			1,839		1,802		1,903
Noninterest expense:
Salaries and employee benefits					2,583			3,819			3,523		3,372		3,322
Occupancy and facilities					508			544			506		510		591
Loss on foreclosed assets					23			71			69		4		3
Data processing and other office operations					675			644			739		654		646
Advertising and promotion					94			141			182		107		120
FDIC insurance premiums					23			-			-		-		63
Other noninterest expenses					973			1,111			928		790		1,422
Total noninterest expense					4,879			6,330			5,947		5,437		6,167
Income before provision for income taxes					4,222			2,016			3,711		4,159		3,384
Provision for income taxes					1,032			406			898		1,028		812
Net income				$	3,190		$	1,610		$	2,813	$	3,131	$	2,572
Basic earnings per share				$	0.72		$	0.36		$	0.63	$	0.70	$	0.57
Diluted earnings per share				$	0.72		$	0.36		$	0.63	$	0.70	$	0.57

PSB Holdings, Inc.
Consolidated Statements of Income
				Three Months Ended					Six Months Ended
(dollars in thousands,				June					June
except per share data - unaudited)				2020		2019			2020		2019
Interest and dividend income:
Loans, including fees				$	8,175	$	8,629		$	16,620	$	16,963
Securities:
Taxable					622		730			1,355		1,443
Tax-exempt					446		389			877		785
Other interest and dividends					48		91			165		252
Total interest and dividend income					9,291		9,839			19,017		19,443
Interest expense:
Deposits					1,080		1,634			2,562		3,187
FHLB advances					323		230			643		539
Other borrowings					6		57			20		108
Senior subordinated notes					28		28			56		56
Junior subordinated debentures					91		92			182		183
Total interest expense					1,528		2,041			3,463		4,073
Net interest income					7,763		7,798			15,554		15,370
Provision for loan losses					1,800		150			3,600		550
Net interest income after provision for loan losses					5,963		7,648			11,954		14,820
Noninterest income:
Service fees					278		403			669		784
Gain on sale of mortgage loans					-		-			-		-
Mortgage banking income					1,582		516			2,546		816
Investment and insurance sales commissions					259		310			608		643
Net gain on sale of securities					194		121			317		139
Increase in cash surrender value of life insurance					104		101			208		199
Other noninterest income					721		452			1,145		1,439
Total noninterest income					3,138		1,903			5,493		4,020
Noninterest expense:
Salaries and employee benefits					2,583		3,322			6,402		6,750
Occupancy and facilities					508		591			1,052		1,192
Loss on foreclosed assets					23		3			94		7
Data processing and other office operations					675		646			1,319		1,223
Advertising and promotion					94		120			235		220
FDIC insurance premiums					23		63			23		122
Other noninterest expenses					973		1,422			2,084		2,398
Total noninterest expense					4,879		6,167			11,209		11,912
Income before provision for income taxes					4,222		3,384			6,238		6,928
Provision for income taxes					1,032		812			1,438		1,625
Net income				$	3,190	$	2,572		$	4,800	$	5,303
Basic earnings per share				$	0.72	$	0.57		$	1.08	$	1.18
Diluted earnings per share				$	0.72	$	0.57		$	1.08	$	1.18

PSB Holdings, Inc.
Consolidated Statements of Comprehensive Income
				Three Months Ended							Six Months Ended
				June 30,							June 30,
(dollars in thousands - unaudited)					2020			2019				2020			2019
Net income				$	3,190		$	2,572			$	4,800		$	5,303
Other comprehensive income, net of tax:
	Unrealized gain on securities available
		for sale			2,608			995				2,266			2,510
	Reclassification adjustment for security
		gain included in net income			(141	)		(88	)			(230	)		(101	)
	Amortization of unrealized gain included in net
		income on securities available for sale
		transferred to securities held to maturity			-			(1	)			-			(6	)
	Unrealized loss on interest rate swap				(3	)		(142	)			(343	)		(218	)
	Reclassification adjustment of interest rate
		swap settlements included in earnings			32			6				50			9
Other comprehensive income					2,496			770				1,743			2,194
Comprehensive income				$	5,686		$	3,342			$	6,543		$	7,497

PSB Holdings, Inc.
Consolidated Balance Sheets
June 30, and March 31, 2020, September 30, and June 30, 2019, unaudited, December 31, 2019 derived from audited financial statements
	Jun. 30,			Mar. 31,			Dec. 31,			Sep. 30,			Jun. 30,
(dollars in thousands, except per share data)	2020			2020			2019			2019			2019
Assets
Cash and due from banks	$	13,016		$	9,665		$	23,005		$	17,954		$	11,825
Interest-bearing deposits		1,483			1,349			839			1,059			2,306
Federal funds sold		45,796			37,071			25,184			30,415			4,552
Cash and cash equivalents		60,295			48,085			49,028			49,428			18,683
Securities available for sale (at fair value)		178,635			171,054			174,448			127,587			123,586
Securities held to maturity (fair values of $0, $0, $0, $41,311 and
$42,511 respectively)		-			-			-			40,791			42,074
Bank certificates of deposit (at cost)		1,738			3,234			4,983			1,984			1,984
Loans held for sale		3,755			1,394			545			335			50
Loans receivable, net		805,243			706,584			707,651			691,289			678,247
Accrued interest receivable		3,590			2,847			2,776			2,803			2,844
Foreclosed assets		1,525			425			460			572			172
Premises and equipment, net		11,067			11,098			10,457			10,212			9,749
Mortgage servicing rights, net		1,623			1,668			1,747			1,720			1,738
Federal Home Loan Bank stock (at cost)		2,283			2,283			2,073			2,173			1,662
Cash surrender value of bank-owned life insurance		16,981			16,877			16,773			16,668			16,564
Other assets		6,611			4,330			3,952			4,101			3,961
TOTAL ASSETS	$	1,093,346		$	969,879		$	974,893		$	949,663		$	901,314
Liabilities
Non-interest-bearing deposits	$	241,914		$	158,505		$	177,002		$	159,897		$	143,423
Interest-bearing deposits		640,307			606,781			604,788			576,288			571,794
Total deposits		882,221			765,286			781,790			736,185			715,217
Federal Home Loan Bank advances		87,000			88,682			73,496			85,496			59,915
Other borrowings		3,941			3,504			6,131			17,411			19,179
Senior subordinated notes		2,500			2,500			2,500			2,500			2,500
Junior subordinated debentures		7,732			7,732			7,732			7,732			7,732
Accrued expenses and other liabilities		11,998			9,024			10,553			9,715			9,668
Total liabilities		995,392			876,728			882,202			859,039			814,211
Stockholders' equity
Preferred stock - no par value:
Authorized - 30,000 shares; no shares issued or outstanding		-			-			-			-			-
Common stock - no par value with a stated value of $1.00 per share:
Authorized - 6,000,000 shares; Issued - 5,490,798 shares
Outstanding - 4,452,287, 4,453,472, 4,467,217, 4,471,216 and
4,480,585 shares, respectively		1,830			1,830			1,830			1,830			1,830
Additional paid-in capital		7,712			7,632			7,597			7,543			7,490
Retained earnings		98,901			96,646			95,037			93,117			89,986
Accumulated other comprehensive income, net of tax		3,045			550			1,302			1,103			543
Treasury stock, at cost - 1,038,511, 1,037,326, 1,023,581, 1,019,582 and
1,010,213 shares, respectively		(13,534	)		(13,507	)		(13,075	)		(12,969	)		(12,746	)
Total stockholders' equity		97,954			93,151			92,691			90,624			87,103
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,093,346		$	969,879		$	974,893		$	949,663		$	901,314

PSB Holding, Inc.
Loan Composition by Purpose
Quarter-ended (dollars in thousands)		Jun 30, 2020			Mar 31, 2020			Dec 31, 2019			Sep 30, 2019			Jun 30, 2019
Total Loans
Residential real estate
	One to four family	$	118,049		$	122,276		$	121,548		$	119,620		$	117,093
	HELOC loans		19,550			20,795			21,668			22,855			22,158
	Residential construction & development		23,129			22,963			23,633			21,273			20,937
	Residential vacant land		3,417			3,745			3,908			4,299			4,680
	Total Residential real estate		164,145			169,779			170,757			168,047			164,868
Commercial/Agricultural real estate
	Owner occupied
	Commercial real estate		164,483			164,851			156,275			158,423			149,507
	SBA commercial real estate		1,539			1,571			1,647			1,367			1,386
	Agriculture real estate		4,885			5,041			5,901			5,139			5,764
	Construction and land development		7,294			8,297			13,228			12,742			7,832
	Commercial vacant land		2,241			1,560			929			-			-
	Total Owner occupied		180,442			181,320			177,980			177,671			164,489
	Non-owner occupied
	Commercial real estate		193,550			188,525			192,160			179,136			168,809
	SBA commercial real estate		793			824			844			863			141
	Agricultural real estate		-			-			-			-			-
	Construction and land development		11,927			16,406			17,061			13,301			22,159
	Commercial vacant land		10,135			13,965			14,280			14,532			14,702
	Total Non-owner occupied		216,405			219,720			224,345			207,832			205,811
Commercial/Agricultural non-real estate
	Municipal non-real estate		7,826			5,933			11,601			6,384			9,017
	Commercial line		55,317			59,266			54,538			62,991			65,252
	Other commercial non-real estate		69,267			70,467			65,690			64,418			65,500
	SBA commercial non-real estate		117,436			1,453			1,733			1,819			2,252
	Agricultural non-real estate		2,148			2,075			2,402			3,606			3,491
	Total Commercial/Agricultural non-real estate		251,994			139,194			135,964			139,218			145,512
Consumer non-real estate
	Consumer installment		3,512			3,344			3,454			3,319			3,093
	Consumer line		243			328			1,354			1,343			304
	Other consumer		160			183			189			197			195
	Total Consumer non-real estate		3,915			3,855			4,997			4,859			3,592
Gross loans			816,901			713,868			714,043			697,627			684,272
	Net deferred loan (fees) costs		(2,617	)		388			326			295			300
	Overdrafts		133			199			221			168			339
	Allowance for loan losses		(9,174	)		(7,871	)		(6,939	)		(6,801	)		(6,664	)
Total loans receivable		$	805,243		$	706,584		$	707,651		$	691,289		$	678,247

PSB Holdings, Inc.
Nonperforming Assets as of:
		June								December 31,
(dollars in thousands)			2020			2019				2019
Nonaccrual loans (excluding restructured loans)		$	2,964		$	2,306				$	3,697
Nonaccrual restructured loans			244			270					499
Restructured loans not on nonaccrual			650			1,048					676
Accruing loans past due 90 days or more			-			-					-
Total nonperforming loans			3,858			3,624					4,872
Other real estate owned			1,525			172					460
Total nonperforming assets		$	5,383		$	3,796				$	5,332
Nonperforming loans as a % of gross loans receivable			0.47	%		0.53	%				0.68	%
Total nonperforming assets as a % of total assets			0.49	%		0.42	%				0.55	%
Allowance for loan losses as a % of nonperforming loans			237.79	%		183.89	%				142.43	%

PSB Holdings, Inc.
Deposit Composition
			June 30,									December 31,
(dollars in thousands)	2020						2019					2019
	$		%				$		%			$		%
Non-interest bearing demand	$	241,914	27.40	%			$	143,423	20.10	%		$	177,002	22.60	%
Interest-bearing demand and savings		267,874	30.40	%				237,922	33.30	%			257,486	32.90	%
Money market deposits		202,708	23.00	%				165,918	23.20	%			183,370	23.50	%
Retail and local time deposits <= $250		103,917	11.80	%				100,560	14.00	%			104,455	13.40	%
Total core deposits		816,413	92.60	%				647,823	90.60	%			722,313	92.40	%
Retail and local time deposits > $250		24,399	2.80	%				25,077	3.50	%			25,431	3.30	%
Broker & national time deposits <= $250		15,376	1.70	%				3,470	0.50	%			5,457	0.70	%
Broker & national time deposits > $250		26,033	2.90	%				38,847	5.40	%			28,589	3.60	%
Totals	$	882,221	100.00	%			$	715,217	100.00	%		$	781,790	100.00	%

PSB Holdings, Inc.
Average Balances ($000) and Interest Rates
(dollars in thousands)
			Quarter ended June 30, 2020								Quarter ended March 31, 2020								Quarter ended June 30, 2019
			Average					Yield /			Average					Yield /			Average					Yield /
			Balance			Interest		Rate			Balance			Interest		Rate			Balance			Interest		Rate
Assets
Interest-earning assets:
Loans (1)(2)			$	795,337		$	8,186	4.14	%		$	712,402		$	8,461	4.78	%		$	672,576		$	8,641	5.15	%
Taxable securities				99,621			622	2.51	%			110,980			733	2.66	%			106,737			730	2.74	%
Tax-exempt securities (2)				70,105			565	3.24	%			66,958			546	3.28	%			61,851			492	3.19	%
FHLB stock				2,283			25	4.40	%			2,121			26	4.93	%			1,593			24	6.04	%
Other				58,776			23	0.16	%			30,253			91	1.21	%			11,470			67	2.34	%
Total (2)				1,026,122			9,421	3.69	%			922,714			9,857	4.30	%			854,227			9,954	4.67	%
Non-interest-earning assets:
Cash and due from banks				10,760								11,621								10,837
Premises and equipment,
net				11,116								10,779								10,422
Cash surrender value ins				16,918								16,811								16,506
Other assets				11,102								8,335								8,574
Allowance for loan
losses				(8,552	)							(7,069	)							(6,568	)
Total			$	1,067,466							$	963,191							$	893,998
Liabilities & stockholders' equity
Interest-bearing liabilities:
Savings and demand
deposits			$	261,942		$	127	0.20	%		$	261,704		$	330	0.51	%		$	239,929		$	417	0.70	%
Money market deposits				197,571			213	0.43	%			188,507			373	0.80	%			161,070			392	0.98	%
Time deposits				169,398			740	1.76	%			159,294			779	1.97	%			171,501			825	1.93	%
FHLB borrowings				90,623			323	1.43	%			80,486			320	1.60	%			51,014			230	1.81	%
Other borrowings				5,857			6	0.41	%			6,394			14	0.88	%			22,302			57	1.03	%
Senior sub. notes				2,500			28	4.50	%			2,500			28	4.50	%			2,500			28	4.49	%
Junior sub. debentures				7,732			91	4.73	%			7,732			91	4.73	%			7,732			92	4.77	%
Total				735,623			1,528	0.84	%			706,617			1,935	1.10	%			656,048			2,041	1.25	%
Non-interest-bearing liabilities:
Demand deposits				226,244								151,763								141,410
Other liabilities				9,690								10,076								9,884
Stockholders' equity				95,909								94,735								86,656
Total			$	1,067,466							$	963,191							$	893,998
Net interest income						$	7,893							$	7,922							$	7,913
Rate spread								2.85	%							3.20	%							3.42	%
Net yield on interest-earning assets								3.09	%							3.45	%							3.72	%
(1) Nonaccrual loans are included in the daily average loan balances outstanding.
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent
basis using a federal tax rate of 21%.

PSB Holdings, Inc.
Average Balances ($000) and Interest Rates
(dollars in thousands)
			Six months ended June 30, 2020								Six months ended June 30, 2019
			Average					Yield/			Average					Yield/
			Balance			Interest		Rate			Balance			Interest		Rate
Assets
Interest-earning assets:
Loans (1)(2)			$	753,869		$	16,647	4.44	%		$	668,732		$	16,986	5.12	%
Taxable securities				105,300			1,355	2.59	%			105,933			1,443	2.75	%
Tax-exempt securities (2)				68,532			1,110	3.26	%			63,472			994	3.16	%
FHLB stock				2,202			51	4.66	%			1,803			59	6.60	%
Other				45,051			114	0.51	%			16,701			193	2.33	%
Total (2)				974,954			19,277	3.98	%			856,641			19,675	4.63	%
Non-interest-earning assets:
Cash and due from banks				11,190								11,080
Premises and equipment,
net				10,948								10,402
Cash surrender value ins				16,864								16,456
Other assets				9,717								8,782
Allowance for loan
losses				(7,810	)							(6,415	)
Total			$	1,015,863							$	896,946
Liabilities & stockholders' equity
Interest-bearing liabilities:
Savings and demand
deposits			$	261,823		$	457	0.35	%		$	246,577		$	889	0.73	%
Money market deposits				193,329			586	0.61	%			153,988			691	0.90	%
Time deposits				164,346			1,519	1.86	%			173,515			1,607	1.87	%
FHLB borrowings				85,555			643	1.51	%			57,635			539	1.89	%
Other borrowings				6,125			20	0.66	%			21,052			108	1.03	%
Senior sub. notes				2,500			56	4.50	%			2,500			56	4.52	%
Junior sub. debentures				7,732			182	4.73	%			7,732			183	4.77	%
Total				721,410			3,463	0.97	%			662,999			4,073	1.24	%
Non-interest-bearing liabilities:
Demand deposits				189,004								139,623
Other liabilities				10,008								9,670
Stockholders' equity				95,441								84,654
Total			$	1,015,863							$	896,946
Net interest income						$	15,814							$	15,602
Rate spread								3.01	%							3.39	%
Net yield on interest-earning assets								3.26	%							3.67	%
(1) Nonaccrual loans are included in the daily average loan balances outstanding.
(2) The yield on tax-exempt loans and securities is computed on a tax-equivalent
basis using a tax rate of 21%.