-----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, VAtcAwF0JOm4YPn4NDLAHexnmLeRxD8FWX4fbASlC3aO9SSyiLipDUFf19//vape sTSGef0K4ElNTfNESmRsSg== /in/edgar/work/0000897101-00-001117/0000897101-00-001117.txt : 20001116 0000897101-00-001117.hdr.sgml : 20001116 ACCESSION NUMBER: 0000897101-00-001117 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 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: 769343 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 September 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 October 23, 2000, the registrant had outstanding 3,487,233 shares of its $5 par value common stock. Page 1 of 16 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 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 - Financial Data Schedule for the period ended September 30, 2000 (b) No reports on Form 8-K were filed by the Corporation for the quarter ending September 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: November 7, 2000 By /s/ Tony J. Sorcic ----------------------------------- Tony J. Sorcic President & Chief Executive Officer Date: November 7, 2000 By /s/ Todd D. Fanning ----------------------------------- Todd D. Fanning Chief Financial Officer 2 Schedule 1 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands)
September 30, December 31, 2000 1999 ------------ ------------ ASSETS Cash and due from banks $ 15,369 $ 19,325 Federal funds sold 0 7,900 Loans held for sale, at lower of cost or market 5,087 8,646 Investment securities: Available-for-sale, at fair value 100,620 100,043 Held-to-maturity (fair value of $15,385 and $13,612 at September 30, 2000 and December 31, 1999, respectively) 15,619 13,923 ------------ ------------ Total investment securities 116,239 113,966 ------------ ------------ Loans: Gross loans 335,823 308,356 Less: Unearned interest (3) (9) Allowance for loan losses (2,624) (1,950) ------------ ------------ Net loans 333,196 306,397 ------------ ------------ Premises and equipment, net of accumulated depreciation 12,960 12,127 Interest receivable 7,169 5,799 Goodwill and intangible assets, net of accumulated amortization 4,211 4,600 Other assets 4,947 4,060 ------------ ------------ TOTAL ASSETS $ 499,178 $ 482,820 ============ ============ LIABILITIES Deposits: Demand $ 44,045 $ 45,514 Interest-bearing demand 98,259 93,521 Savings 48,355 52,277 Time 226,255 213,496 ------------ ------------ Total deposits 416,914 404,808 Borrowings: Customer repurchase agreements 14,383 15,663 Advances from Federal Home Loan Bank 12,405 13,320 Federal funds purchased 1,300 0 Interest-bearing demand notes issued to the U.S. Treasury 1,949 2,366 Notes payable 1,950 2,150 ------------ ------------ Total borrowings 31,987 33,499 Other liabilities 4,891 3,567 ------------ ------------ TOTAL LIABILITIES 453,792 441,874 ------------ ------------ STOCKHOLDERS' EQUITY Common stock: $5 par value, 7,000,000 shares authorized; 4,139,841 issued 20,699 20,699 Surplus 6,350 6,335 Retained earnings 27,932 22,118 Accumulated other comprehensive loss, net of tax (448) (1,031) Less: Cost of 652,608 treasury shares at September 30, 2000 and 472,112 treasury shares at December 31, 1999 (9,147) (7,175) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 45,386 40,946 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 499,178 $ 482,820 ============ ============
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 3 Schedule 2 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
For the Three Months For the None Months Ended September 30 Ended September 30 2000 1999 2000 1999 ----------- ----------- ----------- ----------- INTEREST INCOME: Interest and fees on loans $ 7,473 $ 6,230 $ 21,382 $ 18,299 Interest and dividends on investment securities 1,713 1,690 4,987 5,321 Interest on short-term funds 14 51 98 231 ----------- ----------- ----------- ----------- Total interest income 9,200 7,971 26,467 23,851 INTEREST EXPENSE: Interest on deposits 4,035 3,462 11,328 10,512 Interest on borrowings 517 363 1,375 969 ----------- ----------- ----------- ----------- Total interest expense 4,552 3,825 12,703 11,481 ----------- ----------- ----------- ----------- NET INTEREST INCOME 4,648 4,146 13,764 12,370 Provision for loan losses 50 200 770 385 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,598 3,946 12,994 11,985 NON-INTEREST INCOME: Trust & farm management fees 288 284 900 904 Service charges on deposit accounts 515 421 1,406 1,186 Other service charges 219 177 648 522 Loss on sale of loans 0 0 (259) 0 Gain on sales of securities available-for-sale 124 22 38 41 Loan servicing fees and other charges 24 30 68 169 Settlement of trust litigation 0 0 6,235 0 Other operating income 64 104 296 226 ----------- ----------- ----------- ----------- Total non-interest income 1,234 1,038 9,332 3,048 NON-INTEREST EXPENSE: Salaries and employee benefits 2,203 2,016 6,421 5,885 Occupancy 241 255 744 774 Equipment expense 302 277 933 862 Federal insurance assessments 47 46 141 142 Goodwill and intangible assets amortization 109 108 326 339 Data processing 142 142 433 410 Other operating expense 1,049 887 2,955 2,571 ----------- ----------- ----------- ----------- Total non-interest expense 4,093 3,731 11,953 10,983 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAXES 1,739 1,253 10,373 4,050 Income tax expense 509 526 3,567 1,217 ----------- ----------- ----------- ----------- NET INCOME $ 1,230 $ 727 $ 6,806 $ 2,833 =========== =========== =========== =========== NET INCOME PER SHARE: Basic 0.35 0.19 1.93 0.75 Diluted 0.35 0.19 1.91 0.75 Basic weighted average shares outstanding 3,486,565 3,761,031 3,529,818 3,788,247 Diluted weighted average shares outstanding 3,521,015 3,773,981 3,564,268 3,801,197 Dividends per share 0.095 0.090 0.280 0.260
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 4 Schedule 2 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (IN THOUSANDS)
For the Three Months For the Nine Months Ended September 30 Ended September 30 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Income $ 1,230 $ 727 $ 6,806 $ 2,833 Other comprehensive income (loss), net of tax Unrealized holding (loss) gain arising during the period 421 (336) 606 (1,586) Less: Reclassification adjustment for realized gains included in net income (76) (15) (23) (27) ---------- ---------- ---------- ---------- Other comprehensive income (loss) 345 (351) 583 (1,613) ---------- ---------- ---------- ---------- Comprehensive income $ 1,575 $ 376 $ 7,389 $ 1,220 ========== ========== ========== ==========
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 5 Schedule 3 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS)
For the Nine Months Ended September 30 2000 1999 ---------- ---------- Balance, January 1 $ 40,946 $ 42,606 Net income 6,806 2,833 Cash dividends ($0.28 per share) (992) (988) Other comprehensive income (loss), net of tax 583 (1,613) Purchases of treasury stock (183,386 shares) (1,990) (1,528) Sales of treasury stock (2,890 shares) 33 43 ---------- ---------- Balance, September 30 $ 45,386 $ 41,353 ========== ==========
SEE ACCOMPANYING NOTE TO CONSOLIDATED FINANCIAL STATEMENTS 6 Schedule 4 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
For the Nine Months Ended September 30 2000 1999 ------------ ------------ OPERATING ACTIVITIES: Net income $ 6,806 $ 2,833 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 856 828 Provision for loan losses 770 385 Amortization of goodwill and intangible assets 326 339 Amortization of premiums on investment securities, net of accretion 52 154 Gain on sales of securities, net (38) (41) Loans originated for sale (3,923) (12,303) Proceeds from sales of loans originated for sale 7,482 9,635 Increase (decrease) in interest payable 272 (201) Increase in interest receivable (1,370) (411) Increase in other assets (984) (805) Increase in other liabilities 644 179 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 10,893 592 ------------ ------------ INVESTING ACTIVITIES: Proceeds from sales of investment securities available-for-sale 4,758 4,054 Proceeds from maturities of investment securities available-for-sale 26,224 28,481 Purchase of investment securities available-for-sale (30,581) (26,293) Proceeds from maturities of investment securities held-to-maturity 1,055 14,615 Purchase of investment securities held-to-maturity (2,752) (11,679) Proceeds from sales of other real estate owned 160 102 Net increase in loans (27,569) (31,217) Purchases of premises and equipment (1,689) (1,411) ------------ ------------ NET CASH USED FOR INVESTING ACTIVITIES (30,394) (23,348) ------------ ------------ FINANCING ACTIVITIES: Net increase (decrease) in deposits 12,106 (22,693) Net (decrease) increase in borrowings (1,512) 6,650 Dividends paid (992) (988) Purchases of treasury stock (1,990) (1,528) Sales of treasury stock 33 43 ------------ ------------ NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 7,645 (18,516) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (11,856) (41,272) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 27,225 54,133 ------------ ------------ CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 15,369 $ 12,861 ------------ ------------ - ------------------------------------------------------------------------------------------------------------ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 11,209 $ 11,679 Income taxes $ 3,255 $ 1,399 Supplemental disclosures of non-cash flow activities: Loans transferred to other real estate owned $ 177 $ 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 September 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 nine months ended September 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 third quarter of 2000 was $1,230,000, or basic and diluted earnings per share of $0.35 as compared to net income of $727,000 in the third quarter of 1999, or basic and diluted earnings per share of $0.19. This represents an increase of $503,000 (69.2%) or $.16 per share (84.2%). Continued growth of net interest income, at a time when many banks are seeing compression, along with increases in other income were just some of the highlights of the third quarter. The lower net income for the three months ended September 30, 1999 was the result of the Corporation utilizing all available state net operating loss carry forwards, thereby becoming taxable for state income tax purposes. For the first nine months of 2000, net income was $6,806,000 , or diluted earnings per share of $1.91 (basic earnings per share of $1.93), compared to $2,833,000, or basic and diluted earnings per share of $0.75 in the first nine months of 1999. The primary reason for the large increase in net income for the nine-month period of 2000, 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 0.99% and 11.01%, respectively, for the third quarter of 2000, compared with 0.62% and 6.93% for the third quarter of 1999. For the nine-month periods, the annualized returns on average assets and average equity were 1.88% and 21.08%, respectively, for 2000, compared to 0.82% and 8.99% in 1999. 9 Net interest income before provision for loan losses was $4,648,000 for the third quarter of 2000, compared to $4,146,000 for the third quarter of 1999 (an increase of $502,000 or 12.1%). Additionally, for the nine-month periods, net interest income before provision for loan losses was $13,764,000 for 2000, as compared to $12,370,000 for 1999, representing an increase of $1,394,000 (or 11.3%). This increase is a result of an increase in average interest-earning assets from $425.9 million for the nine months ended September 30, 1999, to $445.3 million for the nine months ended September 30, 2000, as well as a change in the mix of assets from investments to loans. Specifically, the average balance of loans increased from $282.2 million for the nine months ended September 30, 1999 to $325.5 million for the nine months ended September 30, 2000, an increase of $43.3 million, while the average balance of investments decreased $15.1 million (from $130.6 million to $115.5 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 4.11% for the third quarter of 1999 to 4.34% for the third quarter of 2000. Additionally, the net yield on interest-earning assets (on a fully taxable equivalent basis) increased from 4.11% for the first nine months of 1999 to 4.36% for the first nine months of 2000. The loan loss provision recorded by PNB was $50,000 in the third quarter of 2000 compared to $200,000 in the third quarter of 1999. For the first nine months of 2000, PNB has recorded $770,000 in loan loss provision compared to $385,000 for the same period in 1999. This is a result of continued loan growth and is also determined by the risk characteristics of the loan portfolio. 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 had been removed and, accordingly, the loan loss provision was lower in the third quarter. It is anticipated that the loan loss provision will continue to be lower during the last three months of 2000, compared to the level recorded in the comparable period in 1999. Non-interest income totaled $1,234,000 for the third quarter of 2000, as compared to $1,038,000 during the third quarter of 1999, an increase of $196,000 (or 18.9%). For the first nine months of 2000, non-interest income has increased to $9,332,000 from $3,048,000 in the first nine months of 1999. Excluding non-recurring transactions from the first nine months of 2000 (loss on sale of loans of $259,000; net gain on sales of securities of $38,000; settlement proceeds from trust litigation of $6,235,000), non-interest income has increased by $270,000, or 8.9%. The largest increases were in service charges on deposit accounts (increase of $220,000 or 18.6%), which have increased as the number of deposit accounts has grown, and in other service charges (increase of $126,000 or 24.1%) most notably due to an increase in fee income from Prime Vest brokerage services. Non-interest expense for the third quarter of 2000 were $4,093,000, an increase of $362,000 (or 9.7%) from $3,731,000 in the third quarter of 1999. Year-to-date non- interest expenses for 2000 of $11,953,000 have increased $970,000 (or 8.8%) from the 10 same period for 1999. The larger year-to-date increases were in salaries/employee benefits (increase of $536,000 or 9.1%) and other operating expenses (increase of $384,000 or 14.9%). Contributing factors to the salaries increase is an additional $220,000 in profit sharing contributions, and the addition of another Prime Vest investment executive which has increased overall Prime Vest brokerage sales. The number of full-time equivalent employees has decreased from 211 at December 31, 1999 to 202 at September 30, 2000. Several smaller items comprise the increase in other operating expense and have individually experienced small general increases. INCOME TAXES Income tax expense totaled $509,000 for the third quarter of 2000, as compared to $526,000 for the third quarter of 1999. Year-to-date income tax expense has increased to $3,567,000 from $1,217,000 in 1999, primarily due to an increase in income before taxes in 2000. The effective tax rate was 34.4% for the nine months ended September 30, 2000 compared to 30.1% in 1999. The primary cause for the increase was the impact of the settlement proceeds from the trust litigation. EARNINGS PER SHARE CALCULATION The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except share data):
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Numerator: Net income $ 1,230 $ 727 $ 6,806 $ 2,833 Denominator: Basic earnings per share- weighted average shares 3,486,565 3,761,031 3,529,818 3,788,247 Effect of dilutive securities- stock options 34,450 12,950 34,450 12,950 ---------- ---------- ---------- ---------- Diluted earnings per share- adjusted weighted average shares 3,521,015 3,773,981 3,564,268 3,801,197 Basic earnings per share Net income $ 0.35 $ 0.19 $ 1.93 $ 0.75 Diluted earnings per share Net income $ 0.35 $ 0.19 $ 1.91 $ 0.75
11 ANALYSIS OF FINANCIAL CONDITION Total assets at September 30, 2000 increased to $499,178,000 from $482,820,000 at December 31, 1999 (an increase of $16.4 million or 3.4%). Total deposits have increased by $12,106,000 from December 31, 1999 to September 30, 2000 (or 3.0%). In comparing categories of deposits for the first nine months of 2000 to the December 31, 1999, two categories had increasing balances: time deposits (increase of $12.8 million or 6.0%), and interest-bearing demand deposits (increase of $4.7 million or 5.1%). Additionally, two categories had decreasing balances: savings deposits (decrease of $3.9 million or 7.5%), and demand deposits (decrease of $1.5 million or 3.2%). Borrowings, consisting of customer repurchase agreements, notes payable, treasury, tax, and loan ("TT&L") deposits, federal funds purchased, and Federal Home Loan Bank advances, decreased from $33,499,000 at December 31, 1999 to $31,987,000 at September 30, 2000 (decrease of $1.5 million or 4.5%). This decrease is attributable to lower balances in customer repurchase agreements and TT&L deposits, as well as scheduled repayments of Federal Home Loan Bank advances and notes payable. Investments totaled $116,239,000 at September 30, 2000, compared to $113,966,000 at December 31, 1999 (an increase of $2.3 million or 2.0%). Loan demand continued to be strong in the first nine months of 2000, as loan balances, net of unearned interest, increased to $340,907,000 at September 30, 2000, compared to $316,993,000 at December 31, 1999 (an increase of $23.9 million or 7.5%). Excluding loans held for sale, there was a net increase in loans of $27.5 million, or 8.9%. Non-performing loans totaled $1,322,000 or 0.39% of net loans at September 30, 2000, as compared to $1,385,000 or 0.44% of net loans at December 31, 1999. For the nine months ended September 30, 2000, the subsidiary bank charged off $397,000 of loans and had recoveries of $301,000, compared to charge-offs of $494,000 and recoveries of $224,000 during the nine months ended September 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 September 30, 2000, the allowance was $2,624,000 which is 198.5% of non-performing loans and 0.77% of total loans, compared with $1,950,000 which was140.8% of non- performing loans and 0.62% of total loans at December 31, 1999. At September 30, 2000, impaired loans totaled $724,000 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. Loans 90 days or more past due and still accruing interest at September 30, 2000 were $102,000, compared to $111,000 at December 31, 1999. 12 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 September 30, 2000, total risk-based capital was 12.66%, compared to 12.31% at December 31, 1999. The Tier 1 capital ratio increased from 8.21% at December 31, 1999, to 8.59% at September 30, 2000. Total stockholders' equity to total assets at September 30, 2000 increased to 9.09% 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 activities, partially offset by those provided by operating and financing activities, resulted in a net decrease in cash and cash equivalents of $11,856,000 from December 31, 1999 to September 30, 2000. This usage was due to a net increase in loans, offset by a net increase in deposits and the trust litigation settlement proceeds. For more detailed cash flow information, see PNB's Consolidated Statements of Cash Flows. CURRENT EVENTS Work is nearing completion on the subsidiary bank's newest facility in Huntley, Illinois. The facility is adjacent to the new Dell Webb community which is being constructed just outside of Huntley. It is anticipated the office will be opened in early November 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. 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. 13 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 or 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 condition or results of operations of the Corporation In September, 2000, the FASB issued Statement 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (FAS 140). FAS 140 supercedes and replaces Statement 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". Accordingly, FAS 140 is now the authoritative accounting literature for transfers and servicing of financial assets and extinguishment of liabilities. FAS 140 also includes several additional disclosure requirements in the area of securitized financial assets and collateral arrangements. The provisions of FAS 140 related to transfers of financial assets are to be applied to all transfers of financial assets occurring after March 31, 2001. The collateral recognition and disclosure provisions in FAS 140 are effective for fiscal years ending after December 15, 2000. The Corporation anticipates that the adoption of FAS 140 will not have a material impact on the financial condition or results of operations 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 1999 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. 14 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY The following table sets forth (in thousands) 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%.
------------------------------------------------------------------------- NINE MONTHS ENDED, SEPT. 30, 2000 Nine Months Ended, Sept. 30, 1999 ------------------------------------------------------------------------- AVERAGE YIELD/ Average Yield/ BALANCE INTEREST COST Balance Interest Cost -------- -------- ----- -------- -------- ----- AVERAGE INTEREST-EARNING ASSETS Interest-bearing deposits $ 2,090 $ 89 5.69% $ 6,515 $ 228 4.67% Taxable investment securities 78,898 3,598 6.09% 93,769 3,941 5.61% Tax-exempt investment securities 36,613 2,105 7.68% 36,855 2,091 7.58% Federal funds sold 2,236 98 5.85% 6,609 231 4.67% Net loans 325,506 21,339 8.76% 282,174 18,122 8.58% -------- -------- -------- -------- Total interest-earning assets 445,343 27,229 8.17% $425,922 24,613 7.72% -------- -------- -------- -------- Average non-interest earning assets 38,781 36,888 -------- -------- Total average assets $484,124 $462,905 ======== ======== AVERAGE INTEREST-BEARING LIABILITIES Interest-bearing demand deposits $ 93,521 1,728 2.47% $ 92,651 1,639 2.36% Savings deposits 51,680 786 2.03% $ 56,029 870 2.07% Time deposits 214,697 8,814 5.48% 201,800 8,003 5.30% Interest-bearing demand notes issued to the U.S. Treasury 1,261 54 5.72% 1,054 34 4.31% Federal funds purchased and securities repurchase agreements 15,283 638 5.58% 15,191 492 4.33% Advances from Federal Home Loan Bank 13,095 557 5.68% 8,926 381 5.70% Borrowings 2,092 126 8.05% 1,177 62 7.04% -------- -------- -------- -------- Total interest-bearing liabilities 391,629 12,703 4.33% 376,828 11,481 4.07% -------- -------- -------- -------- Net yield on average interest-earning assets $ 14,526 4.36% $ 13,132 4.11% ======== ======== Average non-interest-bearing liabilities 49,362 43,930 Average stockholders' equity 43,133 42,147 -------- -------- Total average liabilities and stockholders' equity $484,124 $462,905 ======== ========
15 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. 9-MOS DEC-31-2000 SEP-30-2000 15,369 372,869 0 0 100,620 15,619 15,385 340,907 2,624 499,178 416,914 31,987 4,891 0 0 0 20,699 24,687 499,178 21,382 4,987 98 26,467 11,328 12,703 13,764 770 38 11,953 10,373 10,373 0 0 6,806 1.93 1.91 4.36 1,220 102 0 22 1,950 397 301 2,624 2,624 0 0
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