SOURCE: Princeton National Bancorp, Inc.

Princeton National Bancorp, Inc.

March 30, 2011 15:00 ET

Princeton National Bancorp, Inc. Releases 2010 Results

PRINCETON, IL--(Marketwire - March 30, 2011) - Princeton National Bancorp, Inc. ("PNBC" or "the Corporation") (NASDAQ: PNBC) announced a loss for the fourth quarter and full year of 2010 as a result of an increased provision for loan losses.

The Corporation ended the year with a net loss available to common stockholders of $18.3 million, or $5.52 per common share on a fully diluted basis. The net loss available to common stockholders for the quarter was $16.1 million or $4.86 per common share on a fully diluted basis. Net income available to common stockholders, excluding provision for loan loss expense, goodwill impairment and net tax benefits totaled $10.4 million for 2010, compared to $11.7 million in 2009.

"The Corporation recorded a provision for loan loss expense of $40.6 million for the year," said Thomas D. Ogaard, President & CEO. "The heightened provision was significantly impacted by the level of problem loan assets with diminished collateral values and, in part, is impacted by liquidations by other financial institutions. Based on the number of properties with suppressed values, Citizens First National Bank (the "Subsidiary Bank") identified a need to increase its loan loss provisioning, which has materially impacted its performance."

In the fourth quarter of 2010, the Subsidiary Bank wrote down the value of collateral and provided additional provision for future loan losses of $27.3 million. The Subsidiary Bank's borrowers continue to be negatively impacted by the slow moving economy. Given the current market conditions, it will take much longer for values to move up than originally anticipated.

"The net interest margin continued to be one of the Corporation's strengths in 2010," said Ogaard. "The net interest margin for the year was 3.98%, a 54 basis point increase compared to 3.44% in 2009. There is strength in our ability to drive revenue at a higher level in order to offset increased expenses."

As a result of the lower interest rate environment and the decrease in average interest earning assets, total interest income declined; however, total interest expense also declined significantly. The resulting net interest income of $37.3 million represents a 7.7% increase over $34.7 million in 2009. This improvement is extremely noteworthy when you consider the Subsidiary Bank reduced total assets by $164.9 million in the past year as part of the continued plan to restructure the balance sheet to improve the Corporation's capital position. PNBC was able to capitalize on opportunities to decrease interest expense throughout the year, reducing the cost of interest bearing liabilities 85 basis points from 2.14% to 1.29%.

Non-interest income was $11.5 million in 2010, down from $13.2 million in 2009. In 2010, there was $722,000 in security gains generated from the sales of investments, compared to $1.8 million in 2009. Also impacting the Corporation's non-interest income in 2010 was the impairment of mortgage servicing rights of $110,000 and decreases in trust & farm management fees and deposit fees (fewer customer overdrafts).

Non-interest expense totaled $37.2 million, down from $59.6 million in 2009. Negatively impacting other expense in 2010 were increases in other real estate owned and compliance expenses; and in 2009, the Corporation recorded a goodwill impairment charge of $24.5 million which eliminated all goodwill from the Corporation's balance sheet.

Net loan charge-offs during 2010 totaled $22.9 million, an increase from $4.1 million in 2009. The majority of the increase was concentrated in commercial real estate development loans, primarily the result of depressed land values and excess properties for sale. Other real estate owed as of December 31, 2010 totaled $20.6 million, an increase from $17.7 million at year-end 2009. Reflective of the current economic conditions, we have increased our provision for loan losses, bringing our level of reserves to 4.22% of total loans, an increase from 1.51% one year ago. At year-end 2010, the balance in the allowance for loan losses totaled $29.7 million and there were specific loss provisions for individual credits totaling $12.2 million, compared to $12.1 million and $4.5 million, respectively, at December 31, 2009. The Subsidiary Bank evaluates the risk characteristics of the loan portfolio on a monthly basis and believes the allowance for loan losses is adequate to cover estimates of future losses.

Stockholders' equity was $56.9 million at December 31, 2010, down from $74.7 million at December 31, 2009, resulting in a tier one capital ratio of 5.76% for 2010 and risk based regulatory capital ratio of 9.68%.

The Corporation ended 2010 with total assets of $1.096 billion, a decrease of $164.9 million (13.1%). This was due to the restructuring of the balance sheet mentioned above. Additionally, total deposits of $963.0 million decreased $113.0 million from $1.076 million at year-end 2009.

The price of PNBC stock closed at $3.64 at December 31, 2010, compared to $10.81 on December 31, 2009. Many community banks continue to be impacted by the consistent lack of earnings due to the current credit cycle. As stated previously, we believe the Subsidiary Bank's level of credit-related costs, while elevated will begin to return to more historical levels during 2011.

The Corporation maintains its focus on ensuring adequate controls are in place to comply with disclosure and financial certification requirements as well as fairly disclosing all aspects of its business in a timely and appropriate fashion.

Regulation G Disclosure

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission (the "SEC"). The Corporation believes that these non-GAAP financial measures provide information that is useful to the users of its financial information regarding the Corporation's financial condition and results of operations. Additionally, the Corporation uses these non-GAAP measures to evaluate its past performance and prospects for future performance. The Corporation believes that this non-GAAP financial information is helpful in understanding the results of operations separate and apart from items that may, or could, have a disproportional positive or negative impact in any particular period.

During 2010, the Corporation recorded provision expense of $40.6 million and a net tax benefit of $11.9 million. During 2009, the Company recorded a non-cash goodwill impairment charge. The Corporation believes that excluding the after-tax effect of the provision expense and the net income tax benefit from its discussion of the core operating results will provide investors with a basis to compare the operating results without material distortions. The following table reconciles the non-GAAP financial measure "Net Income, excluding the provision for loan losses and the net income tax benefits" with net loss available to common stockholders calculated and presented in accordance with GAAP.

                          Year Ended  Diluted EPS   Year Ended  Diluted EPS
                           12/31/10      Impact      12/31/09      Impact
Net income (loss)
 available to common
 stockholders, as
 reported               $   (18,262) $     (5.52) $   (22,329) $     (6.76)

Goodwill Impairment
 and provision for loan
 loss expense (net of
 income tax)                 28,646         8.66       33,983        10.29
                        -----------  -----------  -----------  -----------

Net income available to
 common stockholders,
 excluding income tax
 benefits and provision
 expense                $    10,384  $      3.14  $    11,654  $      3.53

This press release contains certain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements are identified by the use of words such as 1) believes, 2) anticipates, 3) estimates, 4) expects, 5) projects or similar words. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature, extent and timing of governmental actions and reforms; and extended disruption of vital infrastructure. The figures included in this press release are unaudited and may vary from audited results.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)       December 31,  December 31,
                                                    2010          2009
                                                (unaudited)
                                                ------------  ------------

ASSETS

Cash and due from banks                         $     12,992  $     15,546
Interest-bearing deposits with financial
 institutions                                         30,888        55,527
                                                ------------  ------------
     Total cash and cash equivalents                  43,880        71,073

Loans held for sale, at lower of cost or market        5,515         3,296

Investment securities available-for-sale, at
 fair value                                          248,752       288,474
Investment securities held-to-maturity, at
 amortized cost                                       12,187        12,793
                                                ------------  ------------
     Total investment securities                     260,939       301,267

Loans, net of unearned interest                      704,074       798,074
Allowance for loan losses                            (29,726)      (12,075)
                                                ------------  ------------
     Net loans                                       674,348       785,999

Premises and equipment, net                           26,901        28,269
Land held for sale, at lower of cost or market         2,244         2,354
Federal Reserve and Federal Home Loan Bank
 stock                                                 4,498         4,230
Bank-owned life insurance                             23,416        22,540
Interest receivable                                    7,482         9,267
Deferred income taxes                                 10,512           608
Intangible assets, net of accumulated
 amortization                                          2,531         3,347
Other real estate owned                               20,652        17,658
Other assets                                          13,553        11,430
                                                ------------  ------------

     TOTAL ASSETS                               $  1,096,471  $  1,261,338
                                                ============  ============

                                                ------------  ------------

LIABILITIES

Demand deposits                                 $    138,683  $    136,026
Interest-bearing demand deposits                     383,126       374,624
Savings deposits                                      74,817        68,292
Time deposits                                        366,335       496,597
                                                ------------  ------------
     Total deposits                                  962,961     1,075,539

Customer repurchase agreements                        35,806        47,327
Advances from the Federal Home Loan Bank               9,000        31,500
Interest-bearing demand notes issued to the
 U.S. Treasury                                         1,753         1,021
Trust Preferred securities                            25,000        25,000
                                                ------------  ------------
     Total borrowings                                 71,559       104,848

Other liabilities                                      5,090         6,291
                                                ------------  ------------
     Total liabilities                             1,039,610     1,186,678
                                                ------------  ------------

STOCKHOLDERS' EQUITY

Preferred stock                                       24,986        24,958
Common stock                                          22,391        22,391
Common stock warrants                                    150           150
Additional paid-in capital                            18,275        18,423
Retained earnings                                     11,589        29,851
Accumulated other comprehensive income (loss),
 net of tax                                            3,064         2,816
Less:  Treasury stock                                (23,594)      (23,929)
                                                ------------  ------------
     Total stockholders' equity                       56,861        74,660
                                                ------------  ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY        $  1,096,471  $  1,261,338
                                                ============  ============


CAPITAL STATISTICS  (UNAUDITED)

YTD average equity to average assets                    6.62%         7.84%
Tier 1 leverage capital ratio                           5.76%         7.48%
Tier 1 risk-based capital ratio                         8.40%        10.25%
Total risk-based capital ratio                          9.68%        11.50%
Common book value per share                     $       9.58  $      15.03
Closing market price per share                  $       3.64  $      10.81
End of period shares outstanding                   3,325,941     3,306,369
End of period treasury shares outstanding          1,152,354     1,171,926




CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)


                           THREE        THREE        TWELVE       TWELVE
                           MONTHS       MONTHS       MONTHS       MONTHS
                           ENDED        ENDED        ENDED        ENDED
                          December     December     December     December
                          31, 2010     31, 2009     31, 2010     31, 2009
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
                        -----------  -----------  -----------  -----------

INTEREST INCOME

Interest and fees on
 loans                  $     9,251  $    10,225  $    39,310  $    43,719
Interest and dividends
 on investment
 securities                   2,403        3,309       10,117       12,903
Interest on
 interest-bearing time
 deposits in other
 banks                           36           38          139          114
                        -----------  -----------  -----------  -----------
     Total Interest
      Income                 11,690       13,573       49,566       56,736
                        -----------  -----------  -----------  -----------

INTEREST EXPENSE

Interest on deposits          2,038        4,142       10,385       19,220
Interest on borrowings          237          687        1,853        2,865
                        -----------  -----------  -----------  -----------
     Total Interest
      Expense                 2,275        4,828       12,238       22,085
                        -----------  -----------  -----------  -----------

Net interest income           9,415        8,744       37,328       34,651
Provision for loan
 losses                      27,250        6,017       40,550       11,062
                        -----------  -----------  -----------  -----------

Net interest income
 after provision            (17,835)       2,727       (3,222)      23,590
                        -----------  -----------  -----------  -----------

NON-INTEREST INCOME
Trust & farm management
 fees                           298          330        1,148        1,334
Service charges on
 deposit accounts               842          958        3,695        3,961
Other service charges           477          479        1,913        1,826
Gain on sales of
 securities
 available-for-sale               0          982          722        1,781
Brokerage fee income            207          217          754          857
Mortgage servicing
 rights recovery
 (impairment)                   812          371         (110)        (185)
Mortgage banking income         926          607        2,383        2,590
Bank-owned life
 insurance income               227          233          910          941
Other operating income            9           20           77          139
                        -----------  -----------  -----------  -----------
     Total Non-Interest
      Income                  3,798        4,197       11,492       13,244
                        -----------  -----------  -----------  -----------

NON-INTEREST EXPENSE
Salaries and employee
 benefits                     4,717        4,497       18,211       18,011
Occupancy                       657          646        2,635        2,598
Equipment expense               821          767        3,117        3,071
Federal insurance
 assessments                    683          495        2,519        2,584
Goodwill impairment
 losses                           0       24,521            0       24,521
Intangible assets
 amortization                   203          196          808          816
Data processing                 340          317        1,327        1,290
Advertising                     160          173          696          751
ORE Expenses, net             1,018          243        2,586        1,064
Loan collection
 expenses                       199          255          691          581
Write-down of land
 held-for-sale                    0            0          110            0
Other operating expense       1,207        1,019        4,453        4,273
                        -----------  -----------  -----------  -----------
     Total Non-Interest
      Expense                10,005       33,128       37,153       59,560
                        -----------  -----------  -----------  -----------

Income before income
 taxes                      (24,042)     (26,203)     (28,883)     (22,727)
Income tax expense           (8,295)      (1,263)     (11,904)      (1,600)
                        -----------  -----------  -----------  -----------

Net income                  (15,747)     (24,940)     (16,979)     (21,127)

Preferred stock dividends       314          311        1,255        1,178
Accretion of preferred
 stock discount                   7            7           28           25
                        -----------  -----------  -----------  -----------

Net income available to
 common stockholders    ($   16,068) ($   25,257) ($   18,262) ($   22,329)
                        ===========  ===========  ===========  ===========

Net income (loss) per
 share available to
 common stockholders:
     BASIC              ($     4.86) ($     7.65) ($     5.52) ($     6.76)
     DILUTED            ($     4.86) ($     7.64) ($     5.52) ($     6.76)

Basic weighted average
 shares outstanding       3,315,512    3,303,594    3,311,291    3,301,016
Diluted weighted
 average shares
 outstanding              3,315,512    3,303,736    3,311,291    3,301,462


PERFORMANCE RATIOS
 (annualized)

Net Income (Loss)
 Available to Common
 Stockholders to
 Average Assets               -5.67%       -7.78%       -1.58%       -1.79%
Net Income (Loss)
 Available to Common
 Stockholders to
 Average Equity              -84.88%      -97.78%      -23.82%      -22.81%
Net interest margin
 (tax-equivalent)              4.16%        3.39%        3.98%        3.44%
Efficiency ratio
 (tax-equivalent)             72.85%      241.51%       72.93%      117.31%


ASSET QUALITY

Net loan charge-offs    $    16,076  $     1,702  $    22,947  $     4,052
Total non-performing
 loans (non-accrual,
 past due over 90 days,
 troubled debt
 restructuring)         $    97,351  $    58,621  $    97,351  $    58,621
Non-performing loans as
 a % of total loans           13.83%        7.35%       13.83%        7.35%

Contact Information

  • Inquiries should be directed to:
    Lou Ann Birkey
    Vice President - Investor Relations
    Princeton National Bancorp, Inc.
    (815) 875-4444
    E-Mail address: Email Contact