Merger and Acquisition Activity

12 Months Ended

Dec. 31, 2014

Merger and Acquisition Activity [Abstract]

Merger and Acquisition Activity

NOTE 2          Merger and Acquisition Activity

Purchase of the Northwoods National Bank of Rhinelander, Wisconsin, a branch of The Baraboo National Bank

On April 11, 2014, Peoples State Bank, subsidiary of PSB Holdings, Inc., purchased the following assets and assumed liabilities of the Northwoods National Bank, Rhinelander, Wisconsin branch:

Fair value of assets acquired:
Cash and due from banks	$	17,741
Loans receivable, including accrued interest		21,365
Premises and equipment		1,368
Core deposit intangible		231
Goodwill		113
Total fair value of assets acquired	$	40,818
Fair value of liabilities assumed:
Non-interest bearing deposits	$	3,890
Interest-bearing deposits, including accrued interest		36,912
Other liabilities		16
Fair value of liabilities assumed	$	40,818

The core deposit intangible is being amortized over a five year period using a double declining balance method. In the transaction, net cash received by PSB from the seller was reduced by the purchase premium of $654. During 2014, PSB incurred and expensed $371 of non-recurring branch merger and conversion costs with integration of the purchased Northwoods branch, including $224 of data processing conversion costs.

Purchase of Marathon State Bank

On June 14, 2012, PSB purchased Marathon State Bank, a privately owned bank with $107 million in total assets located in the village of Marathon City, Wisconsin (“Marathon”). Under the terms of the agreement, PSB paid $5,505 in cash, which was equal to 100% of Marathon’s tangible net book value following a special dividend by Marathon to its shareholders to reduce its book equity ratio to 6% of total assets. The following table outlines the fair value of Marathon assets acquired and liabilities assumed, including determination of the gain on bargain purchase using an accounting date of June 1, 2012. A core deposit intangible was not recorded on the purchase since the fair value calculation determined it was insignificant.

Cash purchase price	$	5,505
Fair value of assets acquired:
Cash and due from banks		20,392
Securities available for sale		50,547
Loans receivable		23,760
Short-term commercial paper and bankers’ acceptances		11,713
Foreclosed assets		0
Premises and equipment		402
Core deposit intangible		0
Accrued interest receivable and other assets		550
Total fair value of assets acquired		107,364
Fair value of liabilities assumed:
Non-interest-bearing deposits		23,255
Interest-bearing deposits		77,611
Accrued interest payable and other liabilities		142
Total fair value of liabilities assumed		101,008
Fair value of net assets acquired		6,356
Gain on bargain purchase	$	851

PSB recorded a total credit markdown of $490 on Marathon’s loan portfolio on the purchase date, or 2.05% of gross purchased loan principal. Purchased impaired loan principal totaled $310 on which a $21 credit write-down was recorded. Due to the insignificant amount of total purchased impaired loans, the entire $490 credit markdown is accreted to income as a yield adjustment based on contractual cash flows over the remaining life of the purchased loans.

The gain on bargain purchase was due primarily to PSB’s recognition of fair value associated with Marathon’s investment securities and premises and equipment that was not previously recognized by Marathon in its stockholders’ equity, upon which the purchase price was factored.

Pro forma combined results of operations as if the combination occurred at the beginning of the year-to-date period ended December 31, 2012, are as follows:

	(pro forma combined at beginning of period)
	Net Interest		Noninterest		Net		Earnings
	Income		Income		Income		Per Share
PSB Holdings, Inc.	$	19,670	$	5,706	$	5,587	$	3.36
Marathon State Bank		1,158		880		468		0.28
Pro forma totals	$	20,828	$	6,586	$	6,055	$	3.64