##### Table of Contents



UNITED STATES
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, 2010
 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 o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a Smaller reporting company)
  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
    
    
    18ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    23ITEM 4T: CONTROLS AND PROCEDURES
    
    
    24PART II.  OTHER INFORMATION
    
    
    25Item 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    25Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. [Reserved]
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26
  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, local and national 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 Deferred Taxes 
 3




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##### Table of Contents



PSB Group, Inc.
Consolidated Balance Sheet
  March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)AssetsCash and cash equivalents
    
    $
    19,309
    
    
    $
    29,260Securities available for sale
    
    
    68,047
    
    
    
    60,031Loans
    
    
    352,369
    
    
    
    354,263Less allowance for possible loan loss
    
    
    (9,037
    )
    
    
    (9,469
    )Net loans
    
    
    343,332
    
    
    
    344,794Loans held for sale
    
    
    428
    
    
    
    774Bank premises and equipment
    
    
    15,768
    
    
    
    15,937Accrued interest receivable
    
    
    2,423
    
    
    
    2,244Other real estate owned
    
    
    6,329
    
    
    
    6,235Other assets
    
    
    2,545
    
    
    
    2,754Total assets
    
    $
    458,181
    
    
    $
    462,029LiabilitiesDeposits:Non-interest bearing
    
    $
    56,972
    
    
    $
    54,647Interest bearing
    
    
    381,636
    
    
    
    388,098Total deposits
    
    
    438,608
    
    
    
    442,745Long-term debt
    
    
    128
    
    
    
    282Accrued taxes, interest and other liabilities
    
    
    2,285
    
    
    
    2,284Total liabilities
    
    
    441,021
    
    
    
    445,311Shareholders EquityCommon stock  no par value 
10,000,000 authorized - 3,498,184 shares
issued and outstanding at March 31, 2010 and
3,480,110 at December 31, 2009
    
    
    23,667
    
    
    
    23,692Unearned ESOP benefits
    
    
    (128
    )
    
    
    (282
    )Common stock held in trust
    
    
    (410
    )
    
    
    (410
    )Deferred compensation obligation
    
    
    410
    
    
    
    410Additional paid in capital  stock
options/awards
    
    
    1,250
    
    
    
    1,096Unearned compensation
    
    
    (1,287
    )
    
    
    (1,182
    )Retained earnings
    
    
    (6,657
    )
    
    
    (6,740
    )Accumulated other comprehensive income
    
    
    315
    
    
    
    134Total shareholders equity
    
    
    17,160
    
    
    
    16,718Total liabilities and stockholders equity
    
    $
    458,181
    
    
    $
    462,029
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##### Table of Contents



PSB Group, Inc.  Consolidated Statement of Income (Unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Interest Income:Interest and fees on loans
    
    $
    4,968
    
    
    $
    5,846Securities:Taxable
    
    
    542
    
    
    
    602Tax-exempt
    
    
    26
    
    
    
    55Total interest income
    
    
    5,536
    
    
    
    6,503Interest expense:Deposits
    
    
    1,389
    
    
    
    2,290Interest on borrowings
    
    
    
    
    
    
    103Total interest expense
    
    
    1,389
    
    
    
    2,393Net interest income
    
    
    4,147
    
    
    
    4,110Provision for loan loss
    
    
    386
    
    
    
    2,217Net interest income after provision for
loan losses
    
    
    3,761
    
    
    
    1,893Other operating income:Service charges on deposit accounts
    
    
    608
    
    
    
    569Gain on the sale of investment securities
    
    
    4
    
    
    
    261Other income
    
    
    527
    
    
    
    367Total other income
    
    
    1,139
    
    
    
    1,197Other operating expense:Salaries and employee benefits
    
    
    1,782
    
    
    
    2,171Occupancy costs
    
    
    752
    
    
    
    771Legal and professional
    
    
    566
    
    
    
    433Other real estate expense
    
    
    292
    
    
    
    520Marketing expense
    
    
    51
    
    
    
    135FDIC insurance
    
    
    662
    
    
    
    195Other operating expense
    
    
    712
    
    
    
    620Total other operating expenses
    
    
    4,817
    
    
    
    4,845Income (Loss)  before federal income
tax (benefit)
    
    
    83
    
    
    
    (1,755
    )Federal income tax (benefit) expense
    
    
    
    
    
    
    23Net income (loss)
    
    $
    83
    
    
    $
    (1,778
    )Income (Loss) per average outstanding
share of common stock  Basic
    
    $
    0.02
    
    
    $
    (0.51
    )Fully diluted
    
    
    0.02
    
    
    
    (0.51
    )
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PSB Group, Inc.  Consolidated Statement of Comprehensive Income (unaudited)
 Three Months EndedMarch 31,2010
    
    
    2009Net income (loss)
    
    $
    83
    
    
    $
    (1,778
    )Other comprehensive income:Change in unrealized loss on securities
available for sale, net of tax
    
    
    185
    
    
    
    292Less reclassification adjustment for gains
included in net loss, net of tax
    
    
    (4
    )
    
    
    (261
    )Other comprehensive income
    
    
    181
    
    
    
    31Comprehensive income (loss)
    
    $
    264
    
    
    $
    (1,747
    )
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##### Table of Contents



PSB Group, Inc.  Consolidated Statement of Changes in Shareholders Equity (Unaudited)
Three Months Ended March 31, 2010
(in thousands, except share data)
 Unearned
    
    
    Common
    
    
    Deferred
    
    
    Addl Paid in
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalNumber of
    
    
    Common
    
    
    ESOP
    
    
    Stock
    
    
    Comp.
    
    
    Capital - Stock
    
    
    Unearned
    
    
    Retained
    
    
    Accumulated
    
    
    ShareholdersShares
    
    
    Stock
    
    
    Benefits
    
    
    Held in Trust
    
    
    Obligation
    
    
    Options/Awards
    
    
    Compensation
    
    
    Earnings
    
    
    OCI
    
    
    EquityBalance  December 31, 2009
    
    
    3,480,110
    
    
    $
    23,692
    
    
    
    ($282
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    1,096
    
    
    
    ($1,182
    )
    
    
    ($6,740
    )
    
    $
    134
    
    
    $
    16,718Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    
    
    
    
    83Change in Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    181Comprehensive IncomeEarned ESOP Benefit
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154Restricted Stock Awards
(net cancellations)
    
    
    18,074
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25
    )Additional paid in capital
stock options and awards
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154
    
    
    
    (105
    )
    
    
    
    
    
    
    
    
    
    
    49Balance  March 31, 2010
    
    
    3,498,184
    
    
    $
    23,667
    
    
    
    ($128
    )
    
    
    ($410
    )
    
    $
    410
    
    
    $
    1,250
    
    
    
    ($1,287
    )
    
    
    ($6,657
    )
    
    $
    315
    
    
    $
    17,160
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PSB Group, Inc.  Consolidated Statement of Cash Flows (Unaudited)
 Three Months EndedMarch 312010
    
    
    2009Net cash provided by operating activities:
    
    $
    786
    
    
    $
    801Cash flow from investing activities:Purchase of securities available for sale
    
    
    (25,795
    )
    
    
    (30,690
    )Proceeds from maturities of securities available for sale
    
    
    1,241
    
    
    
    2,515Proceeds from sale of securities available for sale
    
    
    16,616
    
    
    
    10,274Net decrease in loans
    
    
    1,422
    
    
    
    3,446Capital expenditures
    
    
    (84
    )
    
    
    (30
    )Net cash (used in) provided by investing activities
    
    
    (6,600
    )
    
    
    (14,485
    )Cash flow from financing activities:Net increase (decrease) in deposits
    
    
    (4,137
    )
    
    
    21,901Repurchase of common stock
    
    
    
    
    
    
    (52
    )Net cash provided by (used in ) financing activities
    
    
    (4,137
    )
    
    
    21,849Net increase (decrease) in cash
    
    
    (9,951
    )
    
    
    8,165Cash and Cash Equivalents  Beginning of period
    
    
    29,260
    
    
    
    12,268Cash and Cash Equivalents  End of period
    
    $
    19,309
    
    
    $
    20,433Supplemental Information Cash paid (received) for:Interest
    
    $
    1,425
    
    
    $
    2,426Taxes
    
    $
    
    
    
    $
    (250
    )
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PSB Group, Inc.
Notes to Consolidated Financial Statements (unaudited)
 Note 1  Basis of Presentation
   Note 2  Securities
  March 31, 2010Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    MarketCost
    
    
    Gains
    
    
    Losses
    
    
    ValueAvailablefor-sale securities:U.S. treasury securities and
obligations of U.S. government
corporations and agencies
    
    $
    48,776
    
    
    $
    260
    
    
    $
    (136
    )
    
    $
    48,900Obligations of state and political
subdivisions
    
    
    16,924
    
    
    
    248
    
    
    
    (7
    )
    
    
    17,165Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    67,732
    
    
    $
    508
    
    
    $
    (193
    )
    
    $
    68,047
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December 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
    
    $
    39,946
    
    
    $
    302
    
    
    $
    (93
    )
    
    $
    40,155Obligations
of state and political subdivisions
    
    
    17,919
    
    
    
    116
    
    
    
    (141
    )
    
    
    17,894Corporate debt securities
    
    
    500
    
    
    
    
    
    
    
    (50
    )
    
    
    450Other
    
    
    1,532
    
    
    
    
    
    
    
    
    
    
    
    1,532Total available-for-sale securities
    
    $
    59,897
    
    
    $
    418
    
    
    $
    (284
    )
    
    $
    60,031
  Available for SaleAmortized
    
    
    MarketCost
    
    
    ValueDue in one year or less
    
    $
    11,576
    
    
    $
    11,541Due in one year through five years
    
    
    7,834
    
    
    
    7,889Due after five years through ten years
    
    
    6,317
    
    
    
    6,280Due after ten years
    
    
    7,130
    
    
    
    7,22532,857
    
    
    
    32,935Federal agency pools
    
    
    33,343
    
    
    
    33,580Other
    
    
    1,532
    
    
    
    1,532Total
    
    $
    67,732
    
    
    $
    68,047
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Note 3  Loans
  March 31,
    
    
    December 31,2010
    
    
    2009Commercial Real Estate
    
    $
    228,417
    
    
    $
    230,053Residential Mortgages
    
    
    83,194
    
    
    
    81,887Commercial
    
    
    34,921
    
    
    
    36,268Consumer
    
    
    5,837
    
    
    
    6,055Total
    
    $
    352,369
    
    
    $
    354,263
  March 31,
    
    
    December 31,2010
    
    
    2009Non-accrual loans
    
    $
    39,414
    
    
    $
    38,026Loans past due 90 or more days
    
    
    2,798
    
    
    
    8Restructured debt
    
    
    30,917
    
    
    
    25,118Total non-performing loans
    
    
    73,129
    
    
    
    63,152Other real estate owned
    
    
    6,329
    
    
    
    6,235Total non-performing assets
    
    $
    79,458
    
    
    $
    69,387Total non-performing loans to total loans
    
    
    20.75
    %
    
    
    17.83
    %Total non-performing assets to total assets
    
    
    17.34
    %
    
    
    15.02
    %
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Note 4  Allowance for Possible Loan Losses
  Three Months Ended
    
    
    Year EndedMarch 31, 2010
    
    
    December 31, 2009Loan loss balance  Beginning of period
    
    $
    9,469
    
    
    $
    $7,116Provision for loan losses
    
    
    386
    
    
    
    16,169Charge-offs
    
    
    (980
    )
    
    
    (14,270
    )Recoveries
    
    
    162
    
    
    
    454Loan loss balance  End of period
    
    $
    9,037
    
    
    $
    9,469Allowance as a % of total loans
    
    
    2.56
    %
    
    
    2.67
    %Allowance as a % of total non-performing loans
    
    
    12.36
    %
    
    
    14.99
    %
  Note 5  Fair Value Measurements
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SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive
    
    
    Observable
    
    
    UnobservableMarkets for Identical
    
    
    Inputs
    
    
    Inputs
    
    
    Balance atAssets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    March 31, 2010AssetsInvestment
securities
available-for-sale
    
    $
    1,005
    
    
    $
    66,592
    
    
    $
    450
    
    
    $
    68,047
 
 Investmentsecurities - available-for-saleBalance at December 31, 2009
    
    $
    450Total realized and unrealized gains (losses) included in income
    
    
    Total unrealized gains (losses) included in other
comprehensive income
    
    
    Net purchases, sales, calls and maturities
    
    
    Net transfers in/out of Level 3
    
    
    Balance at March 31, 2010
    
    $
    450
 Investment Securities Available for Sale.
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SignificantQuoted Prices in
    
    
    Other
    
    
    Significant
    
    
    Total LossesActive Markets
    
    
    Observable
    
    
    Unobservable
    
    
    for theBalance
    
    
    for Identical
    
    
    Inputs
    
    
    Inputs
    
    
    period endedMarch 31, 2010
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    March 31, 2010AssetsImpaired loans
accounted for under
FAS 114
    
    $
    39,486
    
    
    $
    
    
    
    $
    
    
    
    $
    39,486
    
    
    $
    747Other Real Estate
Owned
    
    $
    6,329
    
    
    $
    
    
    
    $
    6,329
    
    
    $
    
    
    
    $
    128
 Impaired Loans.
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Other Real Estate
  Note 6  Earnings per Share
  15




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Three Months EndedMarch 31,2010
    
    
    2009Net income (loss)
    
    $
    83
    
    
    $
    (1,778
    )Average number of common shares outstanding
used to calculate basic earnings per common share
    
    
    3,495,055
    
    
    
    3,475,864Effect of dilutive securities
    
    
    
    
    
    
    Average number of common shares outstanding
used to calculate diluted earnings per common share
    
    
    3,495,055
    
    
    
    3,475,864Number of anti-dilutive stock options
excluded from diluted earnings per share computation
    
    
    131,293
    
    
    
    148,293
 Note 7  Fair Value of Financial Instruments
   Cash and Cash Equivalents
 Securities
 Loans Held for Sale
 Loans Receivable
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Deposit Liabilities
 Long-term Borrowings
 Short-term Borrowings
 Accrued Interest
 Other Instruments
  17




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March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Estimated
    
    
    Carrying
    
    
    EstimatedAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssets:Cash and short-term
investments
    
    $
    19,309
    
    
    $
    19,309
    
    
    $
    29,260
    
    
    $
    29,260Securities
    
    
    68,047
    
    
    
    68,047
    
    
    
    60,031
    
    
    
    60,031Loans
    
    
    343,332
    
    
    
    356,283
    
    
    
    344,794
    
    
    
    357,800Loans held for sale
    
    
    428
    
    
    
    439
    
    
    
    774
    
    
    
    794Accrued interest receivable
    
    
    2,423
    
    
    
    2,423
    
    
    
    2,244
    
    
    
    2,244Liabilities:Noninterest-bearing deposits
    
    
    56,972
    
    
    
    56,972
    
    
    
    54,647
    
    
    
    54,647Interest-bearing deposits
    
    
    381,636
    
    
    
    383,832
    
    
    
    388,098
    
    
    
    390,331Long-term debt
    
    
    128
    
    
    
    128
    
    
    
    282
    
    
    
    282Accrued interest payable
    
    
    185
    
    
    
    185
    
    
    
    221
    
    
    
    221
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
 .
   18




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Recent Events
   19




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
    
    The Bank shall have and retain qualified management.
    
    The Board of directors shall assume full responsibility for the approval of sound
policies and objectives and for the supervision of all of the Banks activities.
    
    Increase the Banks level of Tier 1 capital as a percentage of total assets to at least
8 percent.
    
    Charge off any loans classified as loss.
    
    Prohibit the extension of credit to borrowers that have had loans with the Bank that
were classified substandard, doubtful or special mention without prior board
approval.
    
    Prohibit the extension of credit to borrowers that have had loans charged off or
classified as loss in exam reports.
    
    The Bank may not declare or pay any cash dividend without prior written consent of the
FDIC and OFIR.
    
    Prior to submission or publication of all Reports of Condition, the Board shall review
the adequacy of the Banks Allowance for Loan and Lease Losses.
    
    Within 30 days of the effective date of the Stipulation and Order, the Bank shall
eliminate and/or correct all violations of law, rule, and regulations.
    
    Within 60 days from the effective date of the Stipulation and Order, the Bank shall
correct all deficiencies in the loans listed for Special Mention.
    
    Prepare and submit progress reports the FDIC and OFIR.
  Financial Condition
   20




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Financial Results
 Three Months Ended March 31, 2010
   21




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Liquidity
  22




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Off Balance Sheet Arrangements and Contractual Obligations
  Capital Resources
  Tier 1 capital
    
    $
    17,255Total capital
    
    $
    21,710Tier 1 capital to risk-weighted assets
    
    
    4.90
    %Total capital to risk-weighted assets
    
    
    6.17
    %Tier 1 capital to average assets
    
    
    3.71
    %
  
   23




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(a) Disclosure controls and procedures.
 (b) Internal controls.
 24




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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. [Reserved]
 
 Item 5. Other Information
  
 Item 6. Exhibits
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SIGNATURES
  PSB GROUP, INC.Date:  April 22, 2010

/s/ David L. WoodDavid L. WoodInterim President and Chief Executive OfficerDate:  April 22, 2010

/s/ David A. WilsonDavid A. WilsonChief Financial Officer 26




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EXHIBIT INDEX
     27