PSB Holdings, Wausau, WI (PSBQ)

The Case of a Good Catch on the Wisconsin River


Fishing for community bank stock that can produce a big return? The parent company of Peoples State Bank is one of only 35 banks in the country to have increased their dividend more than 1.5% in each of the last 10 years. And of those 35, PSBQ is one of just 9 whose stock nonsensically declined over this period. I'd say this Fish is a real bargain.

Disclosure: As of this posting, I own shares of PSBQ and may subsequently either dispose of them or purchase more.

Prospective Buyers
I think Peoples State Bank is swimming along so prosperously they needn't bite at any takeover offers, but any of these banking behemoths with overlapping branches should be thrilled to land such a strong franchise.

Associated Banc-Corp, Green Bay, WI (ASBC)
BMO Financial, Toronto, Canada (BMO)
US Bancorp, Minneapolis, MN (USB)
Financial Snapshot
(as of 03/31/2012)

Total assets:
$607M
Tangible book value per share:
$32.51
NPAs to assets:
3.1%
Price to book:
82.3%
Market cap:
$42.4M
Dividend yield:
2.8%
Trailing 12-month return on assets:
0.86%
Trailing 12-month return on equity:
10.4%
Luminaries
William J. Fish, Chairman
Peter W. Knitt, President and CEO
Scott M. Cattanach, Senior VP, Secretary, Treasurer and CFO
Gold Stars
Thanks to the inarguably skilled leadership of Fish, Knitt, and Cattanach, PSB Holdings earns at least Five Stars in my book:
  • Ability to swim upstream. Counter to banking industry trends during the Great Recession, PSBQ's financial performance has been strong across the board — The bank was profitable in every period. Earnings for 2011 were a healthy 29% higher than their pre-recession earnings of 2007. And NPAs never exceeded a low 3.2%.
  • Stellar rise in book value. Since the start of 2007, PSB Holdings' tangible equity has grown by an astounding 56%, while most other banks' per share equity has declined. 
  • Healthy insider ownership. Insiders own over 15% of PSBQ stock. (See also my article in Seeking Alpha on the importance of Insider Ownership)
  • Room for dividend growth. Even though People's State Bank has a healthy 2.8% dividend yield, their payout ratio is still a low 22%, indicating there's plenty of room for dividend growth in the future. 
  • No TARP to hold it down. PSB Holdings never needed TARP funding.
Sources

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