Business & Finance
Business and Finance
Business and Finance
Thu, March 31, 2011
Wed, March 30, 2011 Princeton National Bancorp, Inc. Releases 2010 Results
PRINCETON, IL--(Marketwire - March 30, 2011) - Princeton National Bancorp, Inc. ("PNBC" or "the Corporation") (
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%
