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