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PSB Holdings Inc. (PSBH) Quietly Goes About Generating Respectable Earnings

As the larger banks go about digging themselves out of the mess they have made, and the US government haggles over this and that, there are several smaller banks that are quietly going about making a nice little return without making any noise. They do not make huge profits but they are making profit. Perhaps one of the ways they go about making these profits is by staying under the radar and tending to their own knitting-as it were. Investors that can sniff out these hidden gems may have nice small little profit centres that they can let sit and earn with little worry.

PSB Holdings Inc. is a bank holding company operated to manage Putnam Bank. The bank operates primarily in Eastern Connecticut and has 7 branches. Putnam offers a full range of financial services and was founded in 1862.

In a general sense, the company operates in the way that banks of old did. Big profits were not the way to proceed. Respectable profits that were a result of depositors and responsible investments were. This is how Putnam Bank operates. It derives its profit from interest gained on deposits, mortgage interest and other rather mundane sources. This is not to suggest that company has not been exposed to economic conditions found in the market of late but rather that they were quite a bit less affected. For a case in point, the Federal Reserve’s restructuring of its housing function of Fannie May and Freddie Mac caused a bit of a loss for the company as did its exposure to the demise of Lehman Brothers. The point being, however, that the bank still maintained a positive position because it primarily relies on its core revenue generators proven to be stable and reliable.

As one might expect, net interest and dividend income decreased in the last part of 2009. Deposits, however, increased 5.2% while liabilities decreased over $430 million. As this is the primary revenue area of the company, a general perspective might suggest that the company performed well in the second half of 2009. Net income in this regard was $931,000, or $0.15 per share. PSB Holdings is not a sexy small bank stock but goes about its business in an old world “Yankee” type fashion. By this it is meant that one does not get fancy with their money and is more than happy to make a reasonable profit slowly and steadily. An investor may not make a huge profit with this one but will not have to worry about the shenanigans that the larger banks may be hiding.

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