SOURCE: Princeton National Bancorp, Inc.

Princeton National Bancorp, Inc.

March 15, 2010 17:18 ET

Princeton National Bancorp, Inc. Releases 4th Quarter 2009 Results

PRINCETON, IL--(Marketwire - March 15, 2010) - Princeton National Bancorp, Inc. ("Princeton" or "the Company") (NASDAQ: PNBC) announced a loss for the fourth quarter and full year of 2009 as a result of a write-down of goodwill assets and an increased provision for possible loan losses.

The net loss to common stockholders for the fourth quarter was $25.3 million, or $7.65 per fully diluted common share. The net loss to common stockholders for the year amounted to $22.3 million, or $6.76 per common share on a fully diluted basis. Without the goodwill write-down, the Company would have recorded net income for 2009. The provision for possible loan losses amounted to $6.0 million in the fourth quarter and totaled $11.1 million for 2009, compared to $3.0 million in 2008.

The goodwill impairment charge amounted to $24.5 million and eliminated all goodwill from the Company's balance sheet. It represented a one-time, non-cash charge and had no effect on liquidity, cash flows, or operations. The goodwill amount resulted from several bank acquisitions over the past two decades. It represented the excess of the prices paid for the acquisitions over the fair value of their net assets. If the implied fair value of goodwill is less than its carrying amount, the amount of goodwill is deemed "impaired" and must be written down to its implied value. In 2009, the Company's stock traded at a market price below its book value, triggering the goodwill impairment and prompting the write-down.

"The one-time goodwill impairment charge eliminated all goodwill from our balance sheet," said Thomas D. Ogaard, President and CEO. "The Company continued to maintain a favorable overall operating position and generate positive operating earnings for the full year 2009 -- impressive achievements in view of the economic environment state and nationwide."

The Company reported net interest income for 2009 rose to $34.7 million from $31.5 million for 2008. Non-interest income also increased to $13.2 million from $11.6 million in the previous year.

"Our basic operating earnings remained strong," said Thomas D. Ogaard, President and CEO. "Net interest income and non-interest income both grew last year from 2008 levels in the midst of continuing tough economic conditions."

The Company's total assets increased slightly to $1.261 billion at year-end 2009 from $1.163 billion a year earlier. Total loans also rose to $794.8 million from $790.8 million. The allowance for loan losses stood at $12.1 million on December 31, 2009, an increase of 138% from its level of $5.1 million on December 31, 2008. At year-end 2009, non-performing loans were 6.74% of total loans, compared to 4.18% of total loans at the end of 2008. Loan charge-offs for 2009 were $4.1 million, up from $1.2 million for 2008. The ratio of Tier 1 Capital to adjusted total assets was 7.48% on December 31, 2009, up from 6.22% a year earlier. The ratio of Total Risk-Based Capital to assets rose to 11.50% at the end of last year, compared to 8.30% at the end of 2008.

"The increased loan-loss allowance strengthens our reserves and helps us deal effectively with problem loans," said Ogaard. "While our charge-offs increased in 2009, on a percentage basis they were below the industry average."

As a further step in bolstering its capital strength, the Company is also announcing the suspension of its quarterly common stock dividend. The most recent dividend, paid in the fourth quarter of 2009 for the third quarter, was 14 cents per share of common stock.

"By retaining all of our earnings, we are able to increase our capital at a faster rate than if we had paid out a portion of our earnings to shareholders in the form of dividends," said Ogaard. "Reinvesting all earnings benefits shareholders, customers and employees by enabling us to maintain a strong and profitable institution." He said the Company will continue to evaluate its capital position on a regular basis to determine when the dividend can be reinstated.

The Company also announced that Citizens First National Bank ("the Bank"), its subsidiary bank, has entered into a formal agreement with the Office of the Comptroller of the Currency (OCC), its principal regulator. The agreement, dated March 15, 2010, requires the Bank to establish a program to ensure an adequate loan loss allowance is maintained, and to review the program at least once each quarter. The Bank is also required within 30 days to develop individual workout plans for certain substandard loans and to improve its loan risk rating.

"We view the terms of the OCC agreement as reasonable and very manageable, and are ahead of schedule to meet or exceed the deadlines established in the formal agreement," said Ogaard.

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 Company believes that these non-GAAP financial measures provide information that is useful to the users of its financial information regarding the Company's financial condition and results of operations. Additionally, the Company uses these non-GAAP measures to evaluate its past performance and prospects for future performance. The Company 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 the fourth quarter of 2009, the Company recorded a non-cash goodwill impairment charge. The Company believes that excluding the after-tax effects of these charges from its discussion of the core operating results will provide investors with a basis to compare the operating results without material distortions caused by this non-operating charge. The following table reconciles the non-GAAP financial measure "Net Income, excluding goodwill impairment charge" with Net Income (Loss) available to common stockholders calculated and presented in accordance with GAAP.

                                                  Year Ended
                                                 December 31,  Diluted EPS
                                                     2009        Impact

Net income (loss) available to common
 stockholders, as reported                        $   (22,329) $     (6.76)
Goodwill impairment charge, net of income tax          24,521         7.43
                                                  -----------  -----------
Net income available to common stockholders,
 excluding goodwill impairment charge             $     2,192         0.67

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,
                                                    2009          2008
                                                (unaudited)
                                                ------------  ------------

ASSETS

Cash and due from banks                         $     18,833  $     20,163
Interest-bearing deposits with financial
 institutions                                         55,527            98
Federal funds sold                                         0             0
                                                ------------  ------------
     Total cash and cash equivalents                  74,360        20,261

Loans held for sale, at lower of cost or market        3,296         2,155

Investment securities available-for-sale, at
 fair value                                          288,474       236,883
Investment securities held-to-maturity, at
 amortized cost                                       12,793        14,232
                                                ------------  ------------
     Total investment securities                     301,267       251,115

Loans, net of unearned interest                      794,787       790,837
Allowance for loan losses                            (12,075)       (5,064)
                                                ------------  ------------
     Net loans                                       782,712       785,773

Premises and equipment, net                           28,269        29,297
Land held for sale, at lower of cost or market         2,354         2,354
Federal Reserve and Federal Home Loan Bank
 stock                                                 4,230         4,211
Bank-owned life insurance                             22,540        21,588
Interest receivable                                    9,267         9,693
Goodwill, net of accumulated amortization                  0        24,521
Intangible assets, net of accumulated
 amortization                                          3,347         4,207
Other real estate owned                               17,658         2,487
Other assets                                          11,430         5,468
                                                ------------  ------------

     TOTAL ASSETS                               $  1,260,730  $  1,163,130
                                                ============  ============

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

LIABILITIES

Demand deposits                                 $    136,026  $    110,559
Interest-bearing demand deposits                     374,624       246,714
Savings deposits                                      68,292        61,089
Time deposits                                        496,597       543,770
                                                ------------  ------------
     Total deposits                                1,075,539       962,132

Customer repurchase agreements                        47,327        35,532
Advances from the Federal Home Loan Bank              31,500        32,493
Interest-bearing demand notes issued to the
 U.S. Treasury                                         1,021         2,441
Federal funds purchased                                    0         6,500
Trust Preferred securities                            25,000        25,000
Note payable                                               0        16,050
                                                ------------  ------------
     Total borrowings                                104,848       118,016

Other liabilities                                      5,683        10,511
                                                ------------  ------------
     Total liabilities                             1,186,070     1,090,659
                                                ------------  ------------

STOCKHOLDERS' EQUITY

Preferred stock                                       24,958             0
Common stock                                          22,391        22,391
Common stock warrants                                    150             0
Additional paid-in capital                            18,423        18,420
Retained earnings                                     29,851        54,329
Accumulated other comprehensive income (loss),
 net of tax                                            2,816         1,402
Less:  Treasury stock                                (23,929)      (24,071)
                                                ------------  ------------
     Total stockholders' equity                       74,661        72,471
                                                ------------  ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY        $  1,260,730  $  1,163,130
                                                ============  ============


CAPITAL STATISTICS  (UNAUDITED)

YTD average equity to average assets                    7.84%         6.25%
Tier 1 leverage capital ratio                           7.48%         6.22%
Tier 1 risk-based capital ratio                        10.25%         7.72%
Total risk-based capital ratio                         11.50%         8.30%
Common book value per share                     $      15.03  $      21.97
Closing market price per share                  $      10.81  $      22.14
End of period shares outstanding                   3,306,369     3,298,041
End of period treasury shares outstanding          1,171,926     1,180,254




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, 2009    30, 2008    31, 2009    30, 2008
                           (unaudited) (unaudited) (unaudited) (unaudited)
                            ----------  ----------  ----------  ----------

INTEREST INCOME

Interest and fees on loans  $   10,225  $   11,586  $   43,719  $   47,715
Interest and dividends on
 investment securities           3,309       2,872      12,903      10,982
Interest on federal funds
 sold                                0           5           0          71
Interest on
 interest-bearing time
 deposits in other banks            38           8         114          54
                            ----------  ----------  ----------  ----------
     Total Interest Income      13,573      14,471      56,736      58,822
                            ----------  ----------  ----------  ----------

INTEREST EXPENSE

Interest on deposits             4,142       5,532      19,220      23,782
Interest on borrowings             687         861       2,865       3,519
                            ----------  ----------  ----------  ----------
     Total Interest Expense      4,828       6,393      22,085      27,301
                            ----------  ----------  ----------  ----------

Net interest income              8,744       8,078      34,651      31,521
Provision for loan losses        6,017       1,600      11,062       2,968
                            ----------  ----------  ----------  ----------

Net interest income after
 provision                       2,727       6,478      23,590      28,553
                            ----------  ----------  ----------  ----------

NON-INTEREST INCOME
Trust & farm management
 fees                              330         410       1,334       1,530
Service charges on deposit
 accounts                          958       1,032       3,961       4,408
Other service charges              506         550       1,954       2,137
Gain on sales of securities
 available-for-sale                982          74       1,781         405
Brokerage fee income               217         237         857         913
Mortgage banking income            952         190       2,277       1,069
Bank-owned life insurance          233         226         941         874
Other operating income              20         118         139         257
                            ----------  ----------  ----------  ----------
     Total Non-Interest
      Income                     4,197       2,837      13,244      11,593
                            ----------  ----------  ----------  ----------

NON-INTEREST EXPENSE
Salaries and employee
 benefits                        4,497       4,611      18,011      17,692
Occupancy                          646         651       2,598       2,559
Equipment expense                  767         828       3,071       2,996
Federal insurance
 assessments                       495         578       2,584         845
Goodwill impairment losses      24,521           0      24,521           0
Intangible assets
 amortization                      196         178         816         714
Data processing                    317         300       1,290       1,151
Advertising                        173         218         751         742
ORE Expenses, net                  243          52       1,064         201
Other operating expense          1,274       1,011       4,854       4,223
                            ----------  ----------  ----------  ----------
     Total Non-Interest
      Expense                   33,128       8,427      59,560      31,123
                            ----------  ----------  ----------  ----------

Income before income taxes     (26,204)        888     (22,727)      9,023
Income tax expense              (1,263)       (139)     (1,600)      1,697
                            ----------  ----------  ----------  ----------

Net income                     (24,941)      1,027     (21,127)      7,326

Preferred stock dividends          311           0       1,178           0
Accretion of preferred
 stock discount                      7           0          25           0
                            ----------  ----------  ----------  ----------

Net income available to
 common stockholders        $  (25,258) $    1,027  $  (22,329) $    7,326
                            ==========  ==========  ==========  ==========

Net income per share:
     BASIC                  $    (7.65) $     0.31 $     (6.76) $     2.22
     DILUTED                $    (7.65) $     0.31 $     (6.76) $     2.21

Basic weighted average
 shares outstanding          3,303,594   3,296,743   3,301,016   3,297,990
Diluted weighted average
 shares outstanding          3,303,736   3,301,233   3,301,462   3,314,439


PERFORMANCE RATIOS
 (annualized)

Return on average assets         -7.68%       0.36%      -1.69%       0.66%
Return on average equity        -96.54%       5.90%     -21.58%      10.59%
Net interest margin
 (tax-equivalent)                 3.39%       3.38%       3.44%       3.44%
Efficiency ratio
 (tax-equivalent)               241.51%      73.21%     117.31%      68.66%


ASSET QUALITY

Net loan charge-offs        $    1,702  $      378  $    4,052  $    1,151
Total non-performing loans  $   53,537  $   33,038  $   53,537  $   33,038
Non-performing loans as a %
 of total loans                   6.74%       4.18%       6.74%       4.18%

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