-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OoAap0ZTy2nbuz/vAhc/z1xp8JbaNYC+A3Ezklu05mFBmOh5wat1fmg0EGx5m6qN yTCadcwN2b8Q4X7WTQwQ8w== /in/edgar/work/20000811/0000897101-00-000800/0000897101-00-000800.txt : 20000921 0000897101-00-000800.hdr.sgml : 20000921 ACCESSION NUMBER: 0000897101-00-000800 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCETON NATIONAL BANCORP INC CENTRAL INDEX KEY: 0000707855 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 363210283 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20050 FILM NUMBER: 694301 BUSINESS ADDRESS: STREET 1: 606 S MAIN ST CITY: PRINCETON STATE: IL ZIP: 61356 BUSINESS PHONE: 8158754444 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 Commission File No. 0-20050 PRINCETON NATIONAL BANCORP, INC. (Exact name of registrant as specified in its charter) Delaware 36-32110283 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 606 S. Main Street, Princeton, IL 61356 (Address of principal executive offices and Zip Code) (815) 875-4444 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ As of July 31, 2000, the registrant had outstanding 3,486,550 shares of its $5 par value common stock. Page 1 of 15 pages PART I: FINANCIAL INFORMATION The unaudited consolidated financial statements of Princeton National Bancorp, Inc. and Subsidiary and management's discussion and analysis of financial condition and results of operations are presented in the schedules as follows: Schedule 1: Consolidated Balance Sheets Schedule 2: Consolidated Statements of Income and Comprehensive Income Schedule 3: Consolidated Statements of Stockholders' Equity Schedule 4: Consolidated Statements of Cash Flows Schedule 5: Note to Consolidated Financial Statements Schedule 6: Management's Discussion and Analysis of Financial Condition and Results of Operations PART II: OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of Princeton National Bancorp, Inc. was held on April 11, 2000, for the purpose of electing three directors each to serve for a term of three years. Proxies for the meeting were solicited by Management pursuant to Regulation 14A under the Securities Exchange Act of 1934, and there was no solicitation in opposition to Management's solicitation. All three of Management's nominees for director listed in the proxy statement were elected. The results of the vote were as follows: Shares Voted Shares "For" "Withheld" Abstain ------------ -------------- ------------- John R. Ernat 2,632,945 38,076 343,148 Thomas M. Longman 2,636,355 34,666 343,148 Tony J. Sorcic 2,640,946 30,075 343,148 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 - Financial Data Schedule for the period ended June 30, 2000 (b) No reports on Form 8-K were filed by the Corporation for the quarter ending June 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PRINCETON NATIONAL BANCORP, INC. Date: August 9, 2000 By /s/ Tony J. Sorcic ------------------------------------- Tony J. Sorcic President & Chief Executive Officer Date: August 9, 2000 By /s/ Todd D. Fanning ------------------------------------- Todd D. Fanning Chief Financial Officer 2 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Schedule 1 CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands)
JUNE 30, December 31, 2000 1999 ------------ ------------ ASSETS Cash and due from banks $ 12,045 $ 19,325 Federal funds sold 0 7,900 Loans held for sale, at lower of cost or market 4,850 8,646 Investment securities: Available-for-sale, at fair value 102,335 100,043 Held-to-maturity (fair value of $15,011 and $13,612 at June 30, 2000 and December 31, 1999, respectively) 15,320 13,923 ------------ ------------ Total investment securities 117,655 113,966 ------------ ------------ Loans: Gross loans 324,328 308,356 Less: Unearned interest (4) (9) Allowance for loan losses (2,551) (1,950) ------------ ------------ Net loans 321,773 306,397 ------------ ------------ Premises and equipment, net of accumulated depreciation 12,218 12,127 Interest receivable 5,329 5,799 Goodwill and intangible assets, net of accumulated amortization 4,339 4,600 Other assets 4,637 4,060 ------------ ------------ TOTAL ASSETS $ 482,846 $ 482,820 ============ ============ LIABILITIES Deposits: Demand $ 42,509 $ 45,514 Interest-bearing demand 89,746 93,521 Savings 51,190 52,277 Time 213,845 213,496 ------------ ------------ Total deposits 397,290 404,808 Borrowings: Customer repurchase agreements 17,700 15,663 Advances from Federal Home Loan Bank 12,920 13,320 Federal funds purchased 2,000 0 Interest-bearing demand notes issued to the U.S. Treasury 2,404 2,366 Notes payable 2,050 2,150 ------------ ------------ Total borrowings 37,074 33,499 Other liabilities 4,349 3,567 ------------ ------------ TOTAL LIABILITIES 438,713 441,874 ------------ ------------ STOCKHOLDERS' EQUITY Common stock: $5 par value, 7,000,000 shares authorized; 4,139,841 issued 20,699 20,699 Surplus 6,345 6,335 Retained earnings 27,033 22,118 Accumulated other comprehensive loss, net of tax (793) (1,031) Less: Cost of 653,291 treasury shares at June 30, 2000 and 472,112 treasury shares at December 31, 1999 (9,151) (7,175) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 44,133 40,946 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 482,846 $ 482,820 ============ ============
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 3 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Schedule 2 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
For the Three Months For the Six Months Ended June 30 Ended June 30 2000 1999 2000 1999 ------------ ------------ ------------ ------------ c INTEREST INCOME: Interest and fees on loans $ 7,094 $ 6,058 $ 13,909 $ 12,069 Interest and dividends on investment securities 1,665 1,779 3,274 3,631 Interest on short-term funds 49 61 84 180 ------------ ------------ ------------ ------------ Total interest income 8,808 7,898 17,267 15,880 INTEREST EXPENSE: Interest on deposits 3,720 3,450 7,293 7,050 Interest on borrowings 444 311 858 606 ------------ ------------ ------------ ------------ Total interest expense 4,164 3,761 8,151 7,656 ------------ ------------ ------------ ------------ NET INTEREST INCOME 4,644 4,137 9,116 8,224 Provision for loan losses 205 175 720 185 ------------ ------------ ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,439 3,962 8,396 8,039 NON-INTEREST INCOME: Trust & farm management fees 308 275 612 620 Service charges on deposit accounts 468 401 891 765 Other service charges 228 189 429 345 Loss on sale of loans 0 0 (259) 0 Gain (loss) on sales of securities available-for-sale 0 8 (86) 19 Loan servicing fees and other charges 23 56 44 139 Settlement of trust litigation 0 0 6,235 0 Other operating income 64 53 232 122 ------------ ------------ ------------ ------------ Total non-interest income 1,091 982 8,098 2,010 NON-INTEREST EXPENSE: Salaries and employee benefits 2,185 1,981 4,218 3,869 Occupancy 254 256 503 519 Equipment expense 308 294 631 585 FDIC/OCC assessments 47 48 94 96 Goodwill and intangible assets amortization 109 114 217 231 Data processing 148 137 291 268 Other operating expense 902 843 1,906 1,684 ------------ ------------ ------------ ------------ Total non-interest expense 3,953 3,673 7,860 7,252 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 1,577 1,271 8,634 2,797 Income tax expense 454 300 3,058 691 ------------ ------------ ------------ ------------ NET INCOME $ 1,123 $ 971 $ 5,576 $ 2,106 ============ ============ ============ ============ NET INCOME PER SHARE: Basic 0.32 0.26 1.57 0.55 Diluted 0.32 0.26 1.55 0.55 Basic weighted average shares outstanding 3,485,224 3,785,317 3,551,682 3,802,080 Diluted weighted average shares outstanding 3,519,674 3,798,267 3,586,132 3,815,030 Dividends per share 0.095 0.090 0.185 0.170
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 4 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Schedule 2 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS)
For the Three Months For the Six Months Ended June 30 Ended June 30 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Income $ 1,123 $ 971 $ 5,576 $ 2,106 Other comprehensive income (loss), net of tax Unrealized holding (loss) gain arising during the period (86) (956) 181 (1,249) Less: Reclassification adjustment for realized (losses) gains included in net income 0 (5) 56 (13) ---------- ---------- ---------- ---------- Other comprehensive income (loss) (86) (961) 237 (1,262) ---------- ---------- ---------- ---------- Comprehensive income $ 1,037 $ 10 $ 5,813 $ 844 ========== ========== ========== ==========
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 5 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Schedule 3 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
For the Three Months Ended June 30 2000 1999 ---------- ---------- (IN THOUSANDS) Balance, January 1 $ 40,946 $ 42,606 Net income 5,576 2,106 Cash dividends (661) (648) Other comprehensive income (loss), net of tax 237 (1,262) Purchases of treasury stock (1,990) (848) Sales of treasury stock 25 22 ---------- ---------- Balance, June 30 $ 44,133 $ 41,976 ========== ==========
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 6 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Schedule 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30 (IN THOUSANDS) 2000 1999 ----------- ----------- OPERATING ACTIVITIES: Net income $ 5,576 $ 2,106 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 579 562 Provision for loan losses 720 185 Amortization of goodwill and intangible assets 217 231 Amortization of premiums on investment securities, net of accretion 47 69 Loss (gain) on sales of securities, net 86 (19) Loans originated for sale (2,464) (9,637) Proceeds from sales of loans originated for sale 6,260 7,751 Increase (decrease) in interest payable 35 (103) Decrease in interest receivable 470 814 Increase in other assets (654) (769) Increase in other liabilities 557 17 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 11,429 1,207 ----------- ----------- INVESTING ACTIVITIES: Proceeds from sales of investment securities available-for-sale 1,007 2,990 Proceeds from maturities of investment securities available-for-sale 18,787 19,213 Purchase of investment securities available-for-sale (21,790) (24,051) Proceeds from maturities of investment securities held-to-maturity 864 14,355 Purchase of investment securities held-to-maturity (2,263) (11,071) Proceeds from sales of other real estate owned 121 32 Net increase in loans (16,096) (12,733) Purchases of premises and equipment (670) (1,146) ----------- ----------- NET CASH USED FOR INVESTING ACTIVITIES (20,040) (12,411) ----------- ----------- FINANCING ACTIVITIES: Net decrease in deposits (7,518) (23,536) Net increase in borrowings 3,575 8,484 Dividends paid (661) (648) Purchase of treasury stock (1,990) (848) Sales of treasury stock 25 22 ----------- ----------- NET CASH USED FOR FINANCING ACTIVITIES (6,569) (16,526) ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS (15,180) (27,730) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27,225 54,133 ----------- ----------- CASH AND CASH EQUIVALENTS AT JUNE 30 $ 12,045 $ 26,403 =========== =========== - -------------------------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 8,116 $ 7,759 Income taxes $ 2,383 $ 1,057 Supplemental disclosures of non-cash flow activities: Loans transferred to other real estate owned $ 68 $ 202
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 7 Schedule 5 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY Note to Consolidated Financial Statements (Unaudited) The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information required by generally accepted accounting principles for complete financial statements and related footnote disclosures. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered for a fair presentation of the results for the interim period have been included. For further information, refer to the consolidated financial statements and notes included in the Registrant's 1999 Annual Report on Form 10-K. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the year. 8 Schedule 6 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS JUNE 30, 2000 (UNAUDITED) The following discussion provides information about Princeton National Bancorp, Inc.'s ("PNB" or the "Corporation") financial condition and results of operations for the quarter and six months ended June 30, 2000. This discussion should be read in conjunction with the attached consolidated financial statements and note thereto. Certain statements in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to those statements that include the words "believes", "expects", "anticipates", "estimates", or similar expressions. PNB cautions that such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such risks and uncertainties include potential change in interest rates, competitive factors in the financial services industry, general economic conditions, the effect of new legislation, and other risks detailed in documents filed by the Corporation with the Securities and Exchange Commission from time to time. RESULTS OF OPERATIONS Net income for the second quarter of 2000 was $1,123,000, or basic and diluted earnings per share of $0.32 as compared to net income of $971,000 in the second quarter of 1999, or basic and diluted earnings per share of $0.26. This represents an increase of $152,000 (15.7%) or $.06 per share (23.1%). For the first six months of 2000, net income was $5,576,000 , or diluted earnings per share of $1.55 (basic earnings per share of $1.57), compared to $2,106,000, or basic and diluted earnings per share of $0.55 in the first six months of 1999. The primary reason for the large increase in net income for the six-month period was due to PNB's subsidiary bank receiving $6,235,000 in the first quarter of 2000, representing the settlement proceeds from the lawsuit against Cincinnati Insurance Company stemming from the 1995 Trust Department issue. Annualized return on average assets and return on average equity were 0.94% and 10.45%, respectively, for the second quarter of 2000, compared with 0.85% and 9.20% for the second quarter of 1999. For the six-month periods, the annualized returns on average assets and average equity were 2.34% and 26.41%, respectively, for 2000, compared to 0.92% and 10.02% in 1999. Net interest income before provision for loan losses was $4,644,000 for the second quarter of 2000, compared to $4,137,000 for the second quarter of 1999 (an increase of $507,000 or 12.3%). Additionally, for the six-month periods, net interest income before provision for loan losses was $9,116,000 for 2000, as compared to $8,224,000 for 1999, 9 representing an increase of $892,000 (or 10.9%). This increase is a result of an increase in average interest-earning assets from $426.2 million for the six months ended June 30, 1999, to $441.7 million for the six months ended June 30, 2000, as well as a change in the mix of assets from investments to loans. Specifically, the average balance of loans increased from $277.2 million for the six months ended June 30, 1999 to $321.3 million for the six months ended June 30, 2000, an increase of $44.1 million, while the average balance of investments decreased $19.3 million (from $133.9 million to $114.6 million) over the same period. Because of the change in mix, the net yield on interest-earning assets (on a fully taxable equivalent basis) increased from 4.14% for the second quarter of 1999 to 4.40% for the second quarter of 2000. Additionally, the net yield on interest-earning assets (on a fully taxable equivalent basis) increased from 4.10% for the first six months of 1999 to 4.36% for the first six months of 2000. The loan loss provision recorded by PNB was $205,000 in the second quarter of 2000 compared to $175,000 in the second quarter of 1999. This is a result of continued loan growth and is also determined by the risk characteristics of the loan portfolio. For the first six months of 2000, PNB has recorded $720,000 in loan loss provision compared to $185,000 for the same period in 1999. During the first quarter of 2000, the subsidiary bank had an increase in debt carryover from previous years with regard to its agricultural customers. Also, there was some uncertainty regarding government assistance for the agricultural customers as well as the direction of, and continued, depressed commodity prices These factors, coupled with the uncertainty of the weather and the previously mentioned loan growth, led to the subsidiary bank increasing the allowance for loan losses through the first five months of 2000. As of June 30, however, much of this uncertainty has been removed and it is anticipated that the loan loss provision will be lower in the last six months, compared to the first six months of 2000. Non-interest income totaled $1,091,000 for the second quarter of 2000, as compared to $982,000 during the second quarter of 1999, an increase of $109,000 (or 11.1%). For the first six months of 2000, non-interest income has increased to $8,098,000 from $2,010,000 in the first six months of 1999. Not considering non-recurring transactions from the first quarter of 2000 (loss on sale of loans of $259,000; loss on sales of securities of $86,000; settlement proceeds from trust litigation of $6,235,000), non-interest income has increased by $198,000, or 9.9%. The largest increases were in service charges on deposit accounts (increase of $126,000 or 16.52%), which have increased as the number of deposit accounts has grown, and in other service charges (increase of $84,000 or 24.4%) most notably due to an increase in fee income from Prime Vest brokerage services. Non-interest expenses for the second quarter of 2000 were $3,953,000, an increase of $280,000 (or 7.6%) from $3,673,000 in the second quarter of 1999. Year-to-date non-interest expenses for 2000 of $7,860,000 have increased $608,000 (or 8.4%) from the same period for 1999, but are below expected levels. The most notable increases were in salaries/employee benefits (increase of $349,000 or 9.0%) and other operating expenses (increase of $222,000 or 13.2%). One of the contributing factors to the salaries increase is the addition of another Prime Vest investment executive and the overall increase in Prime Vest sales. Several smaller items comprise the increase in other operating expense and have individually experienced small general increases. 10 INCOME PER SHARE Basic income per share is computed by dividing net income by the weighted average number of shares outstanding which were 3,485,224 and 3,785,317 for the quarters ending June 30, 2000 and 1999, respectively, and 3,551,682 and 3,802,080 for the six-month periods ending June 30, 2000 and 1999, respectively. Diluted income per share is computed by dividing net income by the weighted average number of basic shares plus potential common stock. This total was 3,519,674 and 3,798,267 for the quarters ending June 30, 2000 and 1999, respectively, and 3,586,132 and 3,815,030 for the six-month periods ending June 30, 2000 and 1999. ANALYSIS OF FINANCIAL CONDITION Total assets at June 30, 2000 remained at $482,800,000. Total deposits have decreased by $7,518,000 from December 31, 1999 to June 30, 2000 (or 1.9%). This decrease is attributable mainly to seasonal deposit growth at the end of 1999 followed by a normal drop in the first part of the year. In comparing categories of deposits for the first six months of 2000 to the December 31, 1999, three categories had decreasing balances: demand deposits (decrease of $3.0 million or 6.6%), interest-bearing demand deposits (decrease of $3.8 million or 4.0%), and savings deposits (decrease of $1.1 million or 2.1%); while time deposits increased ($0.3 million or 0.2%). Borrowings, consisting of customer repurchase agreements, notes payable, treasury, tax, and loan deposits, Federal funds purchased, and Federal Home Loan Bank advances, increased from $33,499,000 at December 31, 1999 to $37,074,000 at June 30, 2000 (increase of $3.6 million or 10.7%). This increase is attributable to an increase in customer repurchase agreements as well as Federal funds purchased. Investments totaled $117,655,000 at June 30, 2000, compared to $113,966,000 at December 31, 1999 (an increase of $3.7 million or 3.2%). Loan demand continued to be strong in the first six months of 2000, as loan balances, net of unearned interest, increased to $329,174,000 at June 30, 2000, compared to $316,993,000 at December 31, 1999 (an increase of $12.2 million or 3.8%). Not including loans held for sale, there was a net increase in loans of $16.0 million, or 5.2%. Non-performing loans totaled $1,372,000 or 0.42% of net loans at June 30, 2000, as compared to $1,385,000 or 0.44% of net loans at December 31, 1999. For six months ended June 30, 2000, the subsidiary bank charged off $295,000 of loans and had recoveries of $176,000, compared to charge-offs of $259,000 and recoveries of $154,000 during the six months ended June 30, 1999. The allowance for loan losses is based on factors that include the overall composition of the loan portfolio, types of loans, past loss experience, loan delinquencies, potential substandard and doubtful credits, and such other factors that, in management's reasonable judgment, warrant consideration. The adequacy of the allowance is monitored monthly. At June 30, 2000, the allowance was $2,551,000 which is 185.9% of non-performing loans and 0.77% of total loans, compared with $1,950,000 which is 140.8% of non-performing loans and 0.66% of total loans at December 31, 1999. 11 At June 30, 2000, impaired loans totaled $760,000 compared to $845,000 at December 31, 1999, all of which related to impaired loans which do not have a specific allowance as the carrying value of the loans is less than the discounted present value of expected future cash flows or collateral value. Interest recognized on impaired loans (during both periods that they were impaired) is not considered material. Loans 90 days or more past due and still accruing interest at June 30, 2000 were $24,000, compared to $111,000 at December 31, 1999. CAPITAL RESOURCES Federal regulations require all financial institutions to evaluate capital adequacy by the risk-based capital method, which makes capital requirements more sensitive to the differences in the level of risk assets. At June 30, 2000, total risk-based capital was 12.55%, compared to 12.31% at December 31, 1999. The Tier 1 capital ratio increased from 8.21% at December 31, 1999, to 8.55% at June 30, 2000. Total stockholders' equity to total assets at June 30, 2000 increased to 9.14% from 8.48% at December 31, 1999. During the first quarter of 2000, a stock repurchase program was completed with the Corporation having purchased 183,386 shares at an average cost of $10.85. LIQUIDITY Liquidity is measured by a financial institution's ability to raise funds through deposits, borrowed funds, capital, or the sale of assets. Additional sources of liquidity, including cash flow from the repayment of loans is also considered a liquidity source. Major uses of cash is the origination of loans and purchase of investment securities. Cash flows used by investing and financing activities, offset by those provided by operating activities, resulted in a net decrease in cash and cash equivalents of $15,180,000 from December 31, 1999 to June 30, 2000. This usage was due to net decreases in deposits, as well as a net increase in loans, offset by the trust litigation settlement proceeds and proceeds from the sale of loans. For more detailed cash flow information, see PNB's Consolidated Statements of Cash Flows. CURRENT EVENTS Work continues on the subsidiary bank's new facility in Huntley, Illinois. The facility is adjacent to the new Dell Webb community being constructed in Huntley. It is anticipated the office will be completed in September of this year. The Corporation implemented a dividend reinvestment plan in May of this year, to provide an added convenience to our shareholders as requested. 12 IMPACT OF NEW ACCOUNTING STANDARDS In June 1998, the FASB issued Statement 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133). FAS 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. In June 1999, the FASB issued Statement 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement 133, an Amendment of FASB Statement 133" (FAS 137). FAS 137 defers the effective date to no later than January 1, 2001. In June, 2000, the FASB issued Statement 138,"Accounting for Derivative Instruments and Hedging Activities, an Amendment of FASB Statement 133" (FAS 138). FAS 138 is effective at the later of the first fiscal quarter beginning after June 15, 2000 of upon the adoption of FAS 133, and should be adopted concurrently with FAS 133. Management, at this time, does not anticipate the adoption of this statement will have a material effect on the financial statements of the Corporation LEGAL PROCEEDINGS There are various claims pending against PNB's subsidiary bank, arising in the normal course of business. Management believes, based upon consultation with legal counsel, that liabilities arising from these proceedings, if any, will not be material to PNB's financial condition. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in market risk since December 31, 1999, as reported in PNB's Annual Report on Form 10-K. EFFECTS OF INFLATION The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with generally accepted accounting principles and practices within the banking industry which require the measurement of financial condition and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. 13 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY The following table sets forth details of average balances, interest income, and expense, and resulting annualized rates for the Corporation for the periods indicated, reported on a fully taxable equivalent basis, using a tax rate of 34%.
----------------------------------------------------------------------------- SIX MONTHS ENDED, JUNE 30, 2000 Six Months Ended, June 30, 1999 ----------------------------------------------------------------------------- AVERAGE YIELD/ Average Yield/ BALANCE INTEREST COST Balance Interest Cost ------- -------- ---- ------- -------- ---- AVERAGE INTEREST-EARNING ASSETS Interest-bearing deposits $ 2,799 $ 78 5.57% $ 7,174 $ 164 4.57% Taxable investment securities 78,292 2,356 6.02% 97,504 2,720 5.58% Tax-exempt investment securities 36,289 1,392 7.67% 36,439 1,380 7.57% Federal funds sold 2,942 84 5.71% 7,933 180 4.54% Net loans 321,348 13,861 8.63% 277,171 11,939 8.61% --------- --------- --------- --------- Total interest-earning assets 441,671 17,771 8.05% $ 426,222 16,383 7.69% --------- --------- --------- --------- Average non-interest earning assets 38,379 36,683 --------- --------- Total average assets $ 480,050 $ 462,905 ========= ========= AVERAGE INTEREST-BEARING LIABILITIES Interest-bearing demand deposits $ 92,058 1,100 2.39% $ 92,383 1,102 2.39% Savings deposits 52,573 523 1.99% $ 55,881 575 2.06% Time deposits 212,309 5,670 5.34% 202,936 5,373 5.30% Interest-bearing demand notes issued to the U.S. Treasury 1,410 38 5.39% 955 22 4.51% Federal funds purchased and securities repurchase agreements 13,735 363 5.29% 14,009 291 4.15% Advances from Federal Home Loan Bank 13,201 374 5.67% 9,019 255 5.66% Borrowings 2,115 83 7.85% 1,123 38 6.79% --------- --------- --------- --------- Total interest-bearing liabilities 387,402 8,151 4.21% 376,306 7,656 4.07% --------- --------- --------- --------- Net yield on average interest-earning assets 9,620 4.36% 8,727 4.10% ========= ========= Average non-interest-bearing liabilities 50,186 44,204 Average stockholders' equity 42,463 42,395 --------- --------- Total average liabilities and stockholders' equity $ 480,050 $ 462,905 ========= =========
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 14 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JUN-30-2000 12,045 354,781 0 0 102,335 15,320 15,011 329,174 2,551 482,846 397,290 37,074 4,349 0 0 0 20,699 23,434 482,846 13,909 3,274 84 17,267 7,293 8,151 9,116 720 (86) 7,860 8,634 8,634 0 0 5,576 1.57 1.55 4.36 1,348 24 0 214 1,950 295 176 2,551 2,551 0 0
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