Interview With The President And CEO: Peoples State Bank (PSBQ) - Peter W. Knitt
February 6, 2012 - The Wall Street Transcript has just published Southeast & Midwestern Banks Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Peter W. Knitt is President and CEO of PSB Holdings, Inc., and its subsidiary, Peoples State Bank, Wausau, Wis. Prior to becoming President and CEO in 2006, he had been Peoples' Northern Market President since 2003. Previously, Mr. Knitt was a Bank President for M&I Bank in several southern and northern Wisconsin communities. Mr. Knitt serves on the board of directors for Bankers Bank of Wisconsin, Wisconsin Business Development Corporation and the Wausau Region Chamber of Commerce.
TWST: What is Peoples State Bank?
Mr. Knitt: Peoples is a 600 million in total assets community bank originally formed here in Wausau, Wis., in 1962 to address the lack of access for small business people to a bank in this area. We have kept what I call our blue-collar business background throughout our history. After operating 25 years out of the original bank location, we have since added seven branch locations - four in the Wausau, Wis./Marathon County area, and three northern Wisconsin offices in Rhinelander, Minocqua and Eagle River, Wis. Northern Wisconsin is an outdoor, recreational area enjoyed by many of our customers in Wausau and is a vacation destination for many in Wisconsin and Illinois. Peoples has long offered typical retail and commercial community banking products, and we will celebrate our 50th anniversary this year.
TWST: What is your outlook for the central and northern Wisconsin markets that you serve?
Mr. Knitt: We're in the Midwest, and we operate in a conservative area. This conservative nature has helped to avoid boom and bust cycles, and the bank has provided consistent return on equity levels in the top of our peer group and posted record earnings per share during both 2010 and 2011. We have had some unemployment issues in our markets because the Wausau, Marathon County area is a heavy manufacturing area, including paper production, window manufacturing and industrial fan production. That said, recently announced unemployment levels for Marathon County, Wis., our home market, continue at less than 7%. We were very proactive on addressing asset-quality issues, compared to a lot of other banks, and feel pretty good about our current portfolio quality.
TWST: SNL Financial recently released a list of 35 U.S. publicly traded banks that have paid increasing shareholder cash dividends of at least 1.5% every year for the last 10 years. Peoples State Bank was the only Wisconsin bank to appear on that list. What is it that has enabled the bank to do so well?
Mr. Knitt: I think it goes back to the bank itself being somewhat conservative, but with local focus for the benefit of a significant local shareholder base. Cash dividends have long been an important measure of shareholder return and company performance to our shareholders, and the bank has a history of 47 consecutive years of cash dividends paid. While PSB was recognized by SNL for 10 years of dividends payments, we have paid an increasing annual cash dividend to shareholders of at least 2.50% per year for the past 19 years. It's something our shareholders expect of us: to run a good bank and to be able to provide them a return in the form of a cash dividend.
TWST: You touched on the blue-collar customer base. What are the demographics of your marketplace?
Mr. Knitt: In addition to the manufacturing base I mentioned, Wausau, Wis., also serves as a medical and financial hub for north-central Wisconsin and has a diverse economy. Regarding customer and age demographics, Wisconsin in general suffers a brain drain as local students enjoy a great University of Wisconsin education but leave for work in other states on graduation. Both government and university planners recognize the problem and the negative impact to Wisconsin over the long term. Our primary local medical groups, Aspirus and Marshfield Clinic, plan creatively for ways to attract quality doctors to Wisconsin's rural areas. Our Northern branches do serve an older population including retirees, some of whom enjoyed the area for vacations away from their metro home who return to Northern Wisconsin to retire and enjoy its many lakes.
TWST: What are you seeing in the way of loan demand? Where is the demand coming from, and is this going to be enough to offset the overall real estate negatives that the nation has experienced?
Mr. Knitt: Much of our loan growth during the past two years has come from some of our larger competitors dropping the ball, allowing us to compete for some of their better credits. However, our customers aren't spending a lot of money right now, and the stronger banks, like Peoples, are competing to refinance existing high-quality credits. Many local businesses came through the economic downturn fairly well but just aren't deploying capital until they feel the economy is consistently improving and stable.Generally speaking, the banking environment in Wisconsin is a little unsettled now, following the BMO Harris purchase and merger of M And I Bank. M And I Bank, and now BMO Harris, has the number one deposit market share in every one of our three counties and in most communities in Wisconsin. There are integration issues that come with any merger that they're going through right now, which gives us opportunity for all types of deposits and loans, on both the consumer side and the commercial side.
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