##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
    
    Commission File No.: 000-50301
 PSB GROUP, INC.
  Michigan
    
    42-1591104(State or other jurisdiction of
    
    (I.R.S. Employer I.D. No.)incorporation or organization)
 1800 East Twelve Mile Road, Madison Heights, Michigan 48071
 (248) 548-2900
  þ o
  o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ  o þ




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##### 



TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    17ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    21ITEM 4T: CONTROLS AND PROCEDURES
    
    
    22PART II.  OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24EX-31.1EX-31.2EX-32.1EX-32.2
  Information Concerning Forward-Looking Statements
 Statements contained in this Form 10-Q which are not historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements involve important known and unknown risks,
uncertainties and other factors and can be identified by phrases using estimate, anticipate,
believe, project, expect, intend, predict, potential, future, may, should and
similar expressions or words. Such forward-looking statements are subject to risk and
uncertainties which could cause actual results to differ materially from those projected. Such
risks and uncertainties include potential changes in interest rates, competitive factors in the
financial services industry, general economic conditions, the effect of new legislation and other
risks detailed in documents filed by the Company with the Securities and Exchange Commission from
time to time.
 2




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##### Table of Contents



PART I FINANCIAL INFORMATION
 
  Application of Critical Accounting Policies
 Allowance for Loan Losses 
  Accounting for Goodwill th
 Accounting for Deferred Taxes 
 3




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##### Table of Contents



PSB Group, Inc.
Consolidated Balance Sheet
  March 31,2009
    
    
    December 31,(unaudited)
    
    
    2008AssetsCash and cash equivalents
    
    $
    20,433
    
    
    $
    12,268Securities available for sale
    
    
    70,383
    
    
    
    52,254Loans
    
    
    369,799
    
    
    
    374,809Less allowance for possible loan loss
    
    
    (7,769
    )
    
    
    (7,116
    )Net loans
    
    
    362,030
    
    
    
    367,693Loans held for sale
    
    
    1,255
    
    
    
    1,082Bank premises and equipment
    
    
    13,837
    
    
    
    14,107Accrued interest receivable
    
    
    2,327
    
    
    
    2,159Other real estate owned
    
    
    8,292
    
    
    
    8,459Other assets
    
    
    2,037
    
    
    
    2,494Total assets
    
    $
    480,594
    
    
    $
    460,516LiabilitiesDeposits:Non-interest bearing
    
    $
    53,638
    
    
    $
    49,661Interest bearing
    
    
    380,705
    
    
    
    362,781Total deposits
    
    
    434,343
    
    
    
    412,442FHLB Advances
    
    
    15,000
    
    
    
    15,000Long-term debt
    
    
    282
    
    
    
    436Accrued taxes, interest and other liabilities
    
    
    2,444
    
    
    
    2,536Total liabilities
    
    
    452,069
    
    
    
    430,414Shareholders EquityCommon stock  no par value  5,000,000
authorized   3,476,510 shares issued and
outstanding at March 31, 2009 and 3,442,060
at December 31, 2008
    
    
    23,696
    
    
    
    23,607Unearned ESOP benefits
    
    
    (282
    )
    
    
    (436
    )Common stock held in trust
    
    
    (410
    )
    
    
    (410
    )Deferred compensation obligation
    
    
    410
    
    
    
    410Additional paid in capital  stock
options/awards
    
    
    821
    
    
    
    707Unearned compensation
    
    
    (1,163
    )
    
    
    (976
    )Retained earnings
    
    
    4,413
    
    
    
    6,191Accumulated other comprehensive income/(loss)
    
    
    1,040
    
    
    
    1,009Total shareholders equity
    
    
    28,525
    
    
    
    30,102Total liabilities and stockholders equity
    
    $
    480,594
    
    
    $
    460,516
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PSB Group, Inc.
Consolidated Statement of Income (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Interest Income:Interest and fees on loans
    
    $
    5,846
    
    
    $
    6,714Securities:Taxable
    
    
    602
    
    
    
    646Tax-exempt
    
    
    55
    
    
    
    102Federal funds sold
    
    
    
    
    
    
    5Total interest income
    
    
    6,503
    
    
    
    7,467Interest expense:Deposits
    
    
    2,290
    
    
    
    2,969Interest on borrowings
    
    
    103
    
    
    
    160Total interest expense
    
    
    2,393
    
    
    
    3,129Net interest income
    
    
    4,110
    
    
    
    4,338Provision for loan loss
    
    
    2,217
    
    
    
    2,063Net interest income after provision for
loan losses
    
    
    1,893
    
    
    
    2,275Other operating income:Service charges on deposit accounts
    
    
    569
    
    
    
    551Gain on the sale of investment securities
    
    
    261
    
    
    
    187Other income
    
    
    367
    
    
    
    577Total other income
    
    
    1,197
    
    
    
    1,315Other operating expense:Salaries and employee benefits
    
    
    2,171
    
    
    
    2,653Occupancy costs
    
    
    771
    
    
    
    917Legal and professional
    
    
    433
    
    
    
    397Other real estate expense
    
    
    520
    
    
    
    1,260Marketing expense
    
    
    135
    
    
    
    79FDIC insurance
    
    
    195
    
    
    
    13Other operating expense
    
    
    620
    
    
    
    590Total other operating expenses
    
    
    4,845
    
    
    
    5,909Loss  before federal income tax (benefit)
    
    
    (1,755
    )
    
    
    (2,319
    )Federal income tax (benefit) expense
    
    
    23
    
    
    
    (816
    )Net loss
    
    $
    (1,778
    )
    
    $
    (1,503
    )Loss per average outstanding share of
common stock   Basic
    
    $
    (0.51
    )
    
    $
    (0.49
    )Fully diluted
    
    
    (0.51
    )
    
    
    (0.49
    )Cash dividend per share
    
    $
    0.00
    
    
    $
    0.04
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PSB Group, Inc.
Consolidated Statement of Comprehensive Income (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Net (loss) income
    
    $
    (1,778
    )
    
    $
    (1,503
    )Other comprehensive income:Change in unrealized gain on securities
available for sale, net of tax
    
    
    31
    
    
    
    191Comprehensive (loss) income
    
    $
    (1,747
    )
    
    $
    (1,312
    )
 6




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##### Table of Contents



PSB Group, Inc.
Consolidated Statement of Changes in Shareholders Equity (Unaudited)
Three Months Ended March 31, 2009
(in thousands, except share data)
 Unearned
    
    
    Common
    
    
    Deferred
    
    
    Addl Paid in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon
    
    
    ESOP
    
    
    Stock
    
    
    Comp.
    
    
    Capital  Stock
    
    
    Unearned
    
    
    Retained
    
    
    Accumulated
    
    
    ShareholdersStock
    
    
    Benefits
    
    
    Held in Trust
    
    
    Obligation
    
    
    Options/Awards
    
    
    Compensation
    
    
    Earnings
    
    
    OCI
    
    
    EquityBalance  December 31, 2008
    
    $
    23,607
    
    
    
    ($436
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    707
    
    
    
    ($976
    )
    
    $
    6,191
    
    
    $
    1,009
    
    
    $
    30,102Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,778
    )
    
    
    
    
    
    
    (1,778
    )Change in unrealized gain
on securities available
for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31Earned ESOP Benefit
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Restricted Stock Awards
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141Repurchase of common stock
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52
    )Additional paid in capital
stock options and awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    (187
    )
    
    
    
    
    
    
    
    
    
    
    (73
    )Balance  March 31, 2009
    
    $
    23,696
    
    
    
    ($282
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    821
    
    
    
    ($1,163
    )
    
    $
    4,413
    
    
    $
    1,040
    
    
    $
    28,525
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PSB Group, Inc.
Consolidated Statement of Cash Flows (Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008Net cash provided by (used) in operating activities:
    
    $
    801
    
    
    $
    (4,402
    )Cash flow from investing activities:Purchase of securities available for sale
    
    
    (30,690
    )
    
    
    (20,848
    )Proceeds from maturities of securities available for sale
    
    
    2,515
    
    
    
    5,008Proceeds from sale of securities available for sale
    
    
    10,274
    
    
    
    18,679Net decrease in loans
    
    
    3,446
    
    
    
    4,195Capital expenditures
    
    
    (30
    )
    
    
    (118
    )Net cash provided by (used in) investing activities
    
    
    (14,485
    )
    
    
    6,916Cash flow from financing activities:Net increase (decrease) in deposits
    
    
    21,901
    
    
    
    (13,041
    )Net decrease in short-term borrowings
    
    
    
    
    
    
    (6,405
    )Net increase in FHLB advances
    
    
    
    
    
    
    15,000Issuance of common stock
    
    
    
    
    
    
    1,057Cash dividends
    
    
    
    
    
    
    (124
    )Repurchase of common stock
    
    
    (52
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    21,849
    
    
    
    (3,513
    )Net increase (decrease) in cash
    
    
    8,165
    
    
    
    (999
    )Cash and Cash Equivalents  Beginning of period
    
    
    12,268
    
    
    
    12,762Cash and Cash Equivalents  End of period
    
    $
    20,433
    
    
    $
    11,763Supplemental Information Cash paid (received) for:Interest
    
    $
    2,426
    
    
    $
    3,163Taxes
    
    $
    (250
    )
    
    $
    (716
    )
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PSB Group, Inc.  Notes to Consolidated Financial Statements (Unaudited)
 Note 1  Basis of Presentation
       9




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Note 2  Securities
  March 31, 2009Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale securities:U.S. treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    61,957
    
    
    $
    1,285
    
    
    $
    (41
    )
    
    $
    63,201Obligations of state and political
subdivisions
    
    
    5,354
    
    
    
    1
    
    
    
    (155
    )
    
    
    5,200Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    69,343
    
    
    $
    1,286
    
    
    $
    (246
    )
    
    $
    70,383
 December 31, 2008Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailable-for-sale securities:U.S. Treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    43,833
    
    
    $
    1,318
    
    
    $
    (5
    )
    
    $
    45,146Obligations of state and political
subdivisions
    
    
    5,380
    
    
    
    6
    
    
    
    (260
    )
    
    
    5,126Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    51,245
    
    
    $
    1,324
    
    
    $
    (315
    )
    
    $
    52,254
  10




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Available for SaleAmortized
    
    
    MarketCost
    
    
    ValueDue in one year or less
    
    $
    2,142
    
    
    $
    2,134Due in one year through five years
    
    
    9,835
    
    
    
    9,866Due after five years through ten years
    
    
    3,393
    
    
    
    3,353Due after ten years
    
    
    3,906
    
    
    
    3,73819,276
    
    
    
    19,091Federal agency pools
    
    
    48,535
    
    
    
    49,760Other
    
    
    1,532
    
    
    
    1,532Total
    
    $
    69,343
    
    
    $
    70,383
  Note 3  Loans
  March 31,
    
    
    December 31,2009
    
    
    2008Commercial Real Estate
    
    $
    244,999
    
    
    $
    249,133Residential Mortgages
    
    
    80,702
    
    
    
    81,138Commercial
    
    
    37,085
    
    
    
    37,243Consumer
    
    
    7,013
    
    
    
    7,295Total
    
    $
    369,799
    
    
    $
    374,809
  11




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March 31,
    
    
    December 31,2009
    
    
    2008Non-accrual loans
    
    $
    16,265
    
    
    $
    8,738Loans past due 90 or more days
    
    
    497
    
    
    
    543Restructured debt
    
    
    6,585
    
    
    
    4,746Total non-performing loans
    
    
    23,347
    
    
    
    14,027Other real estate owned
    
    
    8,292
    
    
    
    8,459Total non-performing assets
    
    $
    31,639
    
    
    $
    22,486Total non-performing loans to total loans
    
    
    6.31
    %
    
    
    3.74
    %Total non-performing assets to total assets
    
    
    6.58
    %
    
    
    4.88
    %
 Note 4  Allowance for Possible Loan Losses
  Three MonthsEnded
    
    
    Year EndedMarch 31,
    
    
    December 31,2009
    
    
    2008Loan loss balance  Beginning of period
    
    $
    7,116
    
    
    $
    5,184Provision
    
    
    2,217
    
    
    
    9,956Charge-offs
    
    
    (1,644
    )
    
    
    (8,387
    )Recoveries
    
    
    80
    
    
    
    363Loan loss balance  End of period
    
    $
    7,769
    
    
    $
    7,116
  12




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Note 5  Fair Value Measurements
       Assets and Liabilities Measured at Fair Value on a Recurring Basis at March 31, 2009
(dollars in thousands)
 Quoted Prices in
    
    SignificantActive
    
    Other
    
    SignificantMarkets for
    
    Observable
    
    UnobservableIdentical
    
    Inputs
    
    Inputs
    
    Balance atAssets (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    March 31, 2009AssetsInvestment
securities
available-for-sale
    
    $
    
    
    
    $
    69,677
    
    
    $
    706
    
    
    $
    70,383
 13




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Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis
(dollars in thousands)
 Investmentsecurities - available-for-saleBalance at December 31, 2008
    
    $
    730Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized gains (losses) included in other comprehensive
income
    
    
    1Net purchases, sales, calls and maturities
    
    
    (25
    )Net transfers in/out of Level 3
    
    
    Balance at March 31, 2009
    
    $
    706
 Investment Securities Available for Sale.
     14




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Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2009
(dollars in thousands)
 Quoted Prices in
    
    SignificantActive
    
    Other
    
    Significant
    
    Total LossesMarkets for
    
    Observable
    
    Unobservable
    
    for theBalance
    
    Identical
    
    Inputs
    
    Inputs
    
    period endedMarch 31, 2009
    
    Assets (Level 1)
    
    (Level 2)
    
    (Level 3)
    
    March 31, 2009AssetsImpaired loans
accounted for under
FAS 114
    
    $
    17,894
    
    
    $
    
    
    
    $
    17,894
    
    
    $
    
    
    
    $
    1 ,179Other Real Estate
Owned
    
    $
    8,292
    
    
    $
    
    
    
    $
    8,292
    
    
    $
    
    
    
    $
    357
 Impaired Loans.
 Other Real Estate
  15




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Note 6  Earnings per Share
   Three Months EndedMarch 31,2009
    
    
    2008Net loss
    
    $
    (1,778
    )
    
    $
    (1,503
    )Average number of common shares outstanding used
to calculate basic earnings per common share
    
    
    3,475,864
    
    
    
    3,086,135Effect of dilutive securities
    
    
    
    
    
    
    Average number of common shares outstanding used
to calculate diluted earnings per common share
    
    
    3,475,864
    
    
    
    3,086,135Number of anit-dilutive stock options excluded from
diluted earnings per share computation
    
    
    148,293
    
    
    
    137,293
 16




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
 .
     17




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Financial Condition
    18




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Financial Results
 Three Months Ended March 31, 2009
     19




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Liquidity
   20




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Off Balance Sheet Arrangements and Contractual Obligations
  Capital Resources
  Tier 1 capital
    
    $
    27,974Total capital
    
    $
    32,663Tier 1 capital to risk-weighted assets
    
    
    7.52
    %Total capital to risk-weighted assets
    
    
    8.78
    %Tier 1 capital to average assets
    
    
    5.81
    %
 
      21




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(a) Disclosure controls and procedures.
 (b) Internal controls.
 22




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  Exhibit 31.1
    
    Certification of Michael J. Tierney required by Rule 13a  14(a)Exhibit 31.2
    
    Certification of David A. Wilson required by Rule 13a  14(a)Exhibit 32.1
    
    Certification of Michael J. Tierney required by Rule 13a 
14(b) and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C.
Section 1350Exhibit 32.2
    
    Certification of David A. Wilson required by Rule 13a  14(b)
and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C. Section
1350
 23




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SIGNATURES
  PSB GROUP, INC.Date: May 15, 2009
    /s/ Michael J. TierneyMichael J. TierneyPresident and Chief Executive OfficerDate: May 15, 2009
    /s/ David A. WilsonDavid A. WilsonChief Financial Officer 24




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##### Table of Contents



EXHIBIT INDEX
 Exhibit 31.1
    
    Certification of Michael J. Tierney required by Rule 13a  14(a)Exhibit 31.2
    
    Certification of David A. Wilson required by Rule 13a  14(a)Exhibit 32.1
    
    Certification of Michael J. Tierney required by Rule 13a  14(b) and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C. Section 1350Exhibit 32.2
    
    Certification of David A. Wilson required by Rule 13a  14(b) and Section 906 of the Sarbanes  Oxley Act of 2002, 18 U.S.C. Section 1350
 25