SOURCE: Princeton National Bancorp, Inc.

Princeton National Bancorp, Inc.

November 10, 2011 16:30 ET

Princeton National Bancorp, Inc. Releases Third Quarter Results November 10, 2011

PRINCETON, IL--(Marketwire - Nov 10, 2011) - Princeton National Bancorp, Inc. (the "Corporation") (NASDAQ: PNBC), parent corporation of Citizens First National Bank ("Subsidiary Bank"), announced a net loss available to common stockholders for the third quarter of 2011 of $19,146,000 or $(5.75) per basic and diluted common share ("EPS"), compared to a loss of $2,232,000 or $(0.67) EPS in the third quarter of 2010. The net loss was caused by the recording of a net deferred tax asset valuation allowance of $14,584,000; a provision for loan losses expense of $7,975,000 (resulting from the continued collateral de-valuation in troubled real estate markets); increasing costs to carry and manage other real estate owned properties of $853,000; and recognition of an impairment on originated mortgage servicing rights of $817,000 due to the historically low interest rate environment.

During the third quarter, the Corporation recorded a valuation allowance for its net deferred tax asset due to the losses experienced over the last three years as well as revised downward earnings forecasts in the immediate future from the acceleration of provision for loan losses and loan collection and other real estate owned expenses. Therefore, as of September 30, 2011, the carrying value of the Corporation's net deferred tax assets was reduced to $0.00 through the recognition of a $14,584,000 valuation allowance. Each quarter the Corporation will evaluate whether the current conditions support a change in the valuation allowance against deferred tax assets. Any reduction in the estimated valuation allowance in future quarters would lower the amount of income tax expense recognized by the Corporation.

Non-performing loans amounted to 14.51% of total loans at September 30, 2011 compared to 13.83% at December 31, 2010. This increase reflects continued stress on the commercial real estate market, primarily from persistent economic issues and their impact on consumer spending and the housing industry. The provision for loan loss expense recorded each quarter is determined by management's evaluation of the risk characteristics of the loan portfolio. The Corporation recorded a provision for loan loss of $7,975,000 in the third quarter of 2011 compared to $6,725,000 in the third quarter of 2010.

"The aggressive identification and resolution of problem loans remains an ongoing effort," stated Thomas D. Ogaard, President & CEO. "It is expected that these aggressive tactics will be beneficial in shortening the timeframe to when the Bank can return to a more normalized operating environment."

Net charge-offs increased during the third quarter of 2011 to $10,593,000, compared to net charge-offs of $4,147,000 for the third quarter of 2010. The Corporation's net charge-offs have grown and remain high due to the continued downward pressure on real estate values, particularly development properties. The growth trends in charge-offs and corresponding provision for loan losses are expected to begin to diminish due to the Corporation's aggressive efforts to identify and resolve problem loans and as signs of economic stabilization begin to appear in the commercial real estate market.

Princeton National Bancorp, Inc.'s net interest income before the provision for loan losses was $8,365,000 for the third quarter of 2011, compared to $9,245,000 for the third quarter of 2010 due to a decrease in the average interest-earning base of $113.5 million. The net interest margin decreased to 3.92% in the third quarter of 2011 from 4.14% in the third quarter of 2010, from the impact of a high level of non-accrual loans, a decrease in loans from the lack of sufficient quality loan demand and the historically low interest rate environment.

Non-interest income totaled $2,089,000 in the third quarter of 2011, compared to $2,474,000 in the third quarter of 2010. This decrease was primarily due to the recognition of impairment on originated mortgage servicing rights of $817,000 in the third quarter of 2011 compared to impairment of $333,000 in the third quarter of 2010. Annualized non-interest income as a percentage of total average assets decreased to 0.77% for the third quarter of 2011, from 0.87% for the same period in 2010.

Total non-interest expense for the third quarter of 2011 was $10,089,000, an increase from $9,047,000 in the third quarter of 2010. The primary difference between the two quarters was an increase in expenses related to other real estate owned of $407,000, due to updated property valuations, and an increase in loan collection expenses of $459,000. Annualized non-interest expense as a percentage of total average assets increased to 3.72% for the third quarter of 2011, compared to 3.19% for the same period in 2010.

Stockholders' equity as of September 30, 2011 decreased to $39,184,000 from $56,861,000 at December 31, 2010. Total stockholders' equity to total assets at September 30, 2011 decreased to 3.66% from 5.19% at December 31, 2010.

On October 27, 2011, the Corporation entered into a Written Agreement with the Federal Reserve Bank (the "FRB"). The Corporation has taken steps to address the issues raised in the Written Agreement and intends to fully comply with the requirements set forth. For details on the Written Agreement please refer to the Form 8-K which was filed on November 2, 2011.

Princeton National Bancorp, Inc., through its wholly owned subsidiary Citizens First National Bank, operates community banking offices with strategic locations in 8 counties in northern Illinois. Total assets at September 30, 2011 decreased to $1.070 billion from $1.096 billion at December 31, 2010. Total loan balances decreased by $65.5 million during the nine month period to $638.6 million due to seasonal pay downs in the agricultural portfolio and general decline in the overall demand for new low-risk credit. The decrease in assets reflects the Corporation's 2011 capital management objectives.

The Corporation offers stockholders the opportunity to participate in the Princeton National Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan, which allows for optional cash contributions to purchase stock. To obtain information about the stock purchase plan, please contact us at 815-872-6131.

Princeton National Bancorp, Inc.'s Web Address: www.pnbc-inc.com.

FORWARD-LOOKING INFORMATION:

This press release may contain certain forward-looking statements, including certain plans, revenues, earnings, 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 "believe," "anticipate," "estimate," "expect," "intend," "plan," "project" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may."

Forward-looking statements by their very nature are subject to risks and uncertainties. A number of factors, many of which are beyond the Corporation's control, could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The Corporation's most recent reports filed with the Securities and Exchange Commission describe some of these factors, including certain credit, market, operational, liquidity and interest rate risks associated with the Corporation's business and operations. Other factors described in these reports include changes in business and economic conditions, competition, fiscal and monetary policies, disintermediation, legislation including the Sarbanes-Oxley Act of 2002 and the Gramm-Leach-Bliley Act of 1999, and mergers and acquisitions.

Forward-looking statements speak only as of the date they are made. The Corporation does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date forward-looking statements are made.

CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data) September 30, December 31,
2011 2010
(unaudited)
ASSETS
Cash and due from banks $ 18,400 $ 12,992
Interest-bearing deposits with financial institutions 65,969 30,888
Total cash and cash equivalents 84,369 43,880
Loans held for sale, at lower of cost or market 2,113 5,515
Investment securities available-for-sale, at fair value 254,267 248,752
Investment securities held-to-maturity, at amortized cost 11,344 12,187
Total investment securities 265,611 260,939
Loans, net of unearned interest 638,553 704,074
Allowance for loan losses (16,511 ) (29,726 )
Net loans 622,042 674,348
Premises and equipment, net 25,937 26,901
Land held for sale, at lower of cost or market 2,244 2,244
Federal Reserve and Federal Home Loan Bank stock 4,500 4,498
Bank-owned life insurance 24,103 23,416
Interest receivable 7,179 7,482
Deferred income taxes 0 10,512
Intangible assets, net of accumulated amortization 2,020 2,531
Other real estate owned 18,502 20,652
Other assets 11,163 13,553
TOTAL ASSETS $ 1,069,783 $ 1,096,471
LIABILITIES
Demand deposits $ 149,361 $ 138,683
Interest-bearing demand deposits 386,348 383,126
Savings deposits 79,635 74,817
Time deposits 323,881 366,335
Total deposits 939,225 962,961
Customer repurchase agreements 54,262 35,806
Advances from the Federal Home Loan Bank 5,000 9,000
Interest-bearing demand notes issued to the U.S. Treasury 1,538 1,753
Trust Preferred securities 25,000 25,000
Total borrowings 85,800 71,559
Other liabilities 5,574 5,090
Total liabilities 1,030,599 1,039,610
STOCKHOLDERS' EQUITY
Preferred stock 25,008 24,986
Common stock 22,391 22,391
Common stock warrants 150 150
Additional paid-in capital 18,221 18,275
Retained earnings (deficit) (8,448 ) 11,589
Accumulated other comprehensive income (loss), net of tax 5,319 3,064
Less: Treasury stock (23,457 ) (23,594 )
Total stockholders' equity 39,184 56,861
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,069,783 $ 1,096,471
CAPITAL STATISTICS (UNAUDITED)
YTD average equity to average assets 5.27 % 6.62 %
Tier 1 leverage capital ratio 4.26 % 5.93 %
Tier 1 risk-based capital ratio 6.38 % 8.40 %
Total risk-based capital ratio 7.64 % 9.68 %
Common book value per share $ 4.25 $ 9.58
Closing market price per share $ 3.18 $ 3.64
End of period shares outstanding 3,333,890 3,325,941
End of period treasury shares outstanding 1,144,405 1,152,354
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
September 30, 2011 September 30, 2010 September 30, 2011 September 30, 2010
(unaudited) (unaudited) (unaudited) (unaudited)
INTEREST INCOME
Interest and fees on loans $ 7,874 $ 9,632 $ 24,919 $ 30,059
Interest and dividends on investment securities 2,173 2,378 6,941 7,713
Interest on interest-bearing time deposits in other banks 37 32 93 104
Total Interest Income 10,084 12,042 31,953 37,876
INTEREST EXPENSE
Interest on deposits 1,522 2,318 4,894 8,348
Interest on borrowings 197 479 581 1,615
Total Interest Expense 1,719 2,797 5,475 9,963
Net interest income 8,365 9,245 26,478 27,913
Provision for loan losses 7,975 6,725 17,900 13,300
Net interest income after provision 390 2,520 8,578 14,613
NON-INTEREST INCOME
Trust & farm management fees 256 269 815 850
Service charges on deposit accounts 1,087 1,004 3,032 2,853
Other service charges 565 469 1,391 1,436
Gain on sales of securities available-for-sale 11 0 2,693 722
Brokerage fee income 148 134 494 547
Mortgage servicing rights recovery (impairment) (817 ) (333 ) (817 ) (922 )
Mortgage banking income 572 694 1,312 1,457
Bank-owned life insurance income 231 227 677 684
Other operating income 36 10 119 68
Total Non-Interest Income 2,089 2,474 9,716 7,695
NON-INTEREST EXPENSE
Salaries and employee benefits 4,659 4,628 13,804 13,494
Occupancy 677 645 1,989 1,978
Equipment expense 754 782 2,316 2,296
Federal insurance assessments 681 603 1,768 1,835
Intangible assets amortization 144 204 513 606
Data processing 301 355 1,016 987
Marketing 151 154 445 536
ORE Expenses, net 853 446 2,868 1,567
Loan collection expenses 563 104 1,097 492
Write-down of land held-for-sale 0 110 0 110
Other operating expense 1,306 1,016 3,941 3,248
Total Non-Interest Expense 10,089 9,047 29,757 27,149
Loss before income taxes (7,610 ) (4,053 ) (11,463 ) (4,841 )
Income tax expense (benefit) 11,215 (2,142 ) 8,552 (3,609 )
Net loss (18,825 ) (1,911 ) (20,015 ) (1,232 )
Preferred stock dividends 0 314 0 941
Dividends in arrears on preferred stock 314 0 941 0
Accretion of preferred stock discount 7 7 22 21
Net loss available to common stockholders $ (19,146 ) $ (2,232 ) $ (20,978 ) $ (2,194 )
Net loss per share available to common stockholders:
BASIC $ (5.75 ) $ (0.67 ) $ (6.30 ) $ (0.66 )
DILUTED $ (5.75 ) $ (0.67 ) $ (6.30 ) $ (0.66 )
Basic weighted average shares outstanding 3,330,080 3,313,029 3,328,041 3,309,869
Diluted weighted average shares outstanding 3,330,080 3,313,029 3,328,041 3,309,869
PERFORMANCE RATIOS (annualized)
Net Income (Loss) Available to Common Stockholders to Average Assets -7.06 % -0.79 % -2.58 % -0.25 %
Net Income (Loss) Available to Common Stockholders to Average Equity -135.49 % -11.28 % -49.04 % -3.80 %
Net interest margin (tax-equivalent) 3.92 % 4.14 % 4.15 % 4.00 %
Efficiency ratio (tax-equivalent) 93.35 % 72.69 % 79.40 % 71.84 %
ASSET QUALITY
Net loan charge-offs $ 10,593 $ 4,148 $ 31,115 $ 6,871
Total non-performing loans (non-accrual, past due over 90 days, troubled debt restructuring) $
92,660
$
82,655
$
92,660
$
82,655
Non-performing loans as a % of total loans 14.51 % 11.36 % 14.51 % 11.36 %

Contact Information

  • Inquiries should be directed to:
    Lou Ann Birkey
    Vice President - Investor Relations,
    Princeton National Bancorp, Inc.
    (815) 872-6131
    E-Mail address: Email Contact