Plan for growth nets top job at Wisconsin bank

Scott Cattanach

When Peter Knitt announced plans to retire as president and CEO of PSB Holdings Inc., the Wausau, Wis.-based holding company for Peoples State Bank teamed with Korn Ferry International to find his successor. As leadership worked its way through the process of considering both internal and external candidates, Knitt’s potential successors were invited to demonstrate how they planned to move the franchise forward.

A roadmap, if you will, was what Scott Cattanach had in mind. He was senior vice president and CFO at Peoples State at that time. With more than a decade in management at the company, Cattanach felt well qualified to take the reins. So he prepared a roadmap to show the hiring team what he planned to do to make PSB and Peoples State more robust.

His plan took advantage of the bank’s strengths while recognizing important strategies to increase shareholder value, he said. “I was pleased they agreed with my assessment of the bank and my five year plan for growth and value,” said Cattanach, who assumed the role of president and CEO of PSB and Peoples State late last year.

So, just what is this roadmap? Basically it’s a five-year plan to grow the business, and maybe pull off a merger or two as Cattanach strives to nearly double the bank’s size from its current level of $850 million.

Year one will be spent “building a foundation for growth by investing in both the people and processes” needed to ensure success.

“I felt it was important to establish clear accountability by breaking bank management into seven product lines and operational areas,” said Cattanach. “At the top of each line is a person directly accountable for results.” This part of the roadmap has required some management reorganization, in order to get the right people matched with the correct focus. Cattanach said four of the seven department leaders are either completely new to the bank or new to their post.  They meet weekly to discuss operations and ensure that the company keeps firing on all cylinders.

Years two and three will see Peoples State “grow in new markets with existing resources,” Cattanach predicted. That would include branch acquisitions, possibly a small acquisition, and a buildout of loan production offices. In fact, Peoples State is getting ready to open a loan production office in Stevens Point, which is about 40 miles south of Wausau (all current branches lie in Wausau or to the north).

Peoples State can only hope that the Stevens Point LPO enjoys the same success as its current LPO, in Milwaukee. In the two years ending on April 30, Cattanach said the Milwaukee office alone accounted for two-thirds of the total loan growth.

The Milwaukee office has brought some diversity to the loan portfolio, as well. It works on healthcare lending, equipment financing, business lines of credit and cash management services. It also has focused on commercial real estate, which has partially offset a slowdown of unknown duration in residential lending activity.

Cattanach put it this way in his earnings report for fourth quarter 2017:

“Growth in the local residential mortgage market has been difficult due to a lack of available homes for sale. However, growth from our commercial loan business continues to produce higher net interest income and resulted in improved pro forma year-over-year earnings.

“Our Milwaukee commercial lending office continues to produce the majority of our new loan growth as we continue to look for additional ways to expand our footprint.”

Then we have years three through five. There may be a new capital issue (acquisition funding, anyone?). And that’s when Cattanach and his team will work to get more investor recognition for PSB. There is a potential for SEC re-registration, with an eye on joining the NASDAQ market for trading its shares. PSB currently trades on the pink sheets. According to Merrill Lynch, a paltry 92 company shares are traded every day. That’s a pittance compared to many community bank operators of similar market capitalization and outstanding share balances. The thinking is that with a higher listing there would be wider investment group interest, resulting in greater trading volume.

So what might be in store for PSB, Peoples State and its customers and investors in years six and beyond? Much of that depends on how well Cattanach’s roadmap is followed – and whether it is the best course. But assuming it is, the company will be nearly twice the size, will sport a higher PE ratio, may have an acquisition under its belt and may well have new branches beyond its current core area of north central Wisconsin.