-----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, TDcj2DyPZH2vTwlZjtAvdpfKSw0IvTgx9F61G3cvgoY0/4RAN5WDrzOan5oZJh/6 0O9xZoeYTDz8vWJW7bcmEA== 0000950124-98-002977.txt : 19980518 0000950124-98-002977.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950124-98-002977 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRINCETON NATIONAL BANCORP INC CENTRAL INDEX KEY: 0000707855 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [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: 98623821 BUSINESS ADDRESS: STREET 1: 606 S MAIN ST CITY: PRINCETON STATE: IL ZIP: 61356 BUSINESS PHONE: 8158754444 10-Q 1 10-Q 1 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 March 31, 1998 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 April 21, 1998, the registrant had outstanding 4,010,238 shares of its $5 par value common stock. 2 PART I: FINANCIAL INFORMATION The 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 Consolidate Financial Statements Schedule 6: Management's discussion and Analysis of Financial Condition and Results of Operatons PART II: OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits : 27 - Financial Data Schedule for the period ended March 31, 1998. (b) No reports on Form 8-K were filed during the quarter ended March 31, 1998. 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: May 13, 1998 By /s/ Tony J. Sorcic --------------------------------- Tony J. Sorcic President & Chief Executive Officer Date: May 13, 1998 By /s/ Todd D. Fanning --------------------------------- Todd D. Fanning Chief Financial Officer 3 Schedule 1 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, December 31, 1998 1997 ---------- ------------ (Unaudited) ASSETS Cash and due from banks $ 16,940 $ 21,268 Short-term funds 10,396 11,900 Loans held for sale 2,180 1,576 Investment securities: Available-for-sale, at fair value 110,464 107,042 Held-to-maturity (fair value of $12,982 and $12,661 at March 31, 1998 and December 31, 1997, respectively) 12,823 12,498 --------- --------- Total investment securities 123,287 119,540 --------- --------- Loans: Gross loans 268,956 274,725 Less: Unearned interest (93) (120) Allowance for possible loan losses (1,746) (1,830) --------- --------- Net loans 267,117 272,775 --------- --------- Premises and equipment 8,741 8,752 Interest receivable 5,028 5,808 Goodwill and intangible assets, net of accumulated amortization 5,193 5,272 Other assets 2,919 2,769 --------- --------- TOTAL ASSETS $ 441,801 $ 449,660 ========= ========= LIABILITIES Deposits: Demand $ 36,633 $ 42,333 Interest-bearing demand 85,517 87,364 Savings 54,094 52,193 Time 198,091 204,050 --------- --------- Total deposits 374,335 385,940 Short-term borrowings 16,264 13,237 Long-term borrowings 3,600 3,750 Other liabilities 4,319 4,065 --------- --------- TOTAL LIABILITIES 398,518 406,992 --------- --------- STOCKHOLDERS' EQUITY Common stock: $5 par value, 7,000,000 shares authorized and 4,139,917 issued at March 31, 1998 and December 31, 1997 20,700 13,800 Surplus 6,235 6,235 Retained earnings 17,380 23,469 Accumulated other comprehensive income, net of tax 487 560 Less: Cost of 129,679 treasury shares at March 31, 1998 and 123,604 treasury shares at December 31, 1997 (1,519) (1,396) --------- --------- TOTAL STOCKHOLDERS' EQUITY 43,283 42,668 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 441,801 $ 449,660 ========= =========
See accompanying note to consolidated financial statements 4 Schedule 2 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) For the Three Months (In thousands, except share data) Ended March 31 1998 1997 --------- --------- INTEREST INCOME: Interest and fees on loans $ 6,124 $ 5,707 Interest and dividends on investment securities 1,755 1,634 Interest on short-term funds 86 50 ----------- ----------- Total interest income 7,965 7,391 INTEREST EXPENSE: Interest on deposits 3,780 3,398 Interest on short-term borrowings 173 94 Interest on long-term borrowings 80 90 ----------- ----------- Total interest expense 4,033 3,582 ----------- ----------- NET INTEREST INCOME 3,932 3,809 Provision for possible loan losses 55 105 ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES 3,877 3,704 NON-INTEREST INCOME: Trust & farm management fees 329 309 Service charges on deposit accounts 325 320 Other service charges 118 102 Gain (loss) on sales of securities 10 (3) Loan servicing fees and other charges 75 30 Other operating income 96 83 ----------- ----------- Total non-interest income 953 841 NON-INTEREST EXPENSE: Salaries and employee benefits 1,804 1,666 Occupancy 251 249 Equipment expense 196 225 FDIC/OCC assessments 46 9 Goodwill and intangible assets amortization 117 118 Data processing 172 167 Other operating expense 758 658 ----------- ----------- Total non-interest expense 3,344 3,092 ----------- ----------- INCOME BEFORE INCOME TAXES 1,486 1,453 Income tax expense 381 376 ----------- ----------- Net income $ 1,105 $ 1,077 =========== =========== Basic and diluted earnings per share: 0.28 0.26 Weighted average shares outstanding 4,013,246 4,085,960 Dividends per share 0.08 0.07
See accompanying note to consolidated financial statements 5 Schedule 2 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) For the Three Months (In thousands, except share data) Ended March 31 1998 1997 ---------- --------- Net Income $ 1,105 $ 1,077 Other comprehensive income, net of tax Unrealized gains on securities: Unrealized holding loss arising during the period (73) (355) Less: Reclassification adjustment for gains (losses) included in net income 10 (3) ------- ------- Other comprehensive income (83) (352) ------- ------- Comprehensive income $ 1,022 725 ======= =======
See accompanying note to consolidated financial statements 6 Schedule 3 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
For the Three Months Ended March 31 1998 1997 --------- --------- (In thousands) Balance, January 1 $ 42,668 $ 40,197 Net income 1,105 1,077 Cash dividends (294) (272) Other comprehensive income, net of tax (73) (355) Purchases of treasury stock (132) 0 Sales of treasury stock 9 11 -------- -------- Balance, March 31 $ 43,283 $ 40,658 ======== ========
See accompanying note to consolidated financial statements 7 Schedule 4 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31 (In thousands) 1998 1997 --------- ---------- OPERATING ACTIVITIES: Net income $ 1,105 $ 1,077 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 153 226 Provision for possible loan losses 55 105 Amortization of goodwill and other intangible assets 117 114 Amortization of premiums (discounts) on investment securities, net of accretion 41 40 (Gain) loss on sales of securities, net (10) 3 Loans originated for sale (5,474) (668) Proceeds from sales of loans originated for sale 4,870 922 (Decrease) increase in accrued interest payable (90) 33 Decrease in accrued interest receivable 780 881 Increase in other assets (233) (50) Increase in other liabilities 381 358 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,695 3,041 -------- -------- INVESTING ACTIVITIES: Proceeds from sales of investment securities available-for-sale 3,008 241 Proceeds from maturities of investment securities available-for-sale 8,904 12,724 Purchase of investment securities available-for-sale (15,476) (9,279) Proceeds from maturities of investment securities held-to-maturity 506 490 Purchase of investment securities held-to-maturity (830) (270) Proceeds from sales of other real estate owned 45 55 Net (decrease) increase in loans 5,603 (1,432) Purchases of premises and equipment (142) (138) -------- -------- NET CASH PROVIDED BY INVESTING ACTIVITIES 1,618 2,391 -------- -------- FINANCING ACTIVITIES: Net decrease in deposits (11,605) (1,145) Net increase (decrease) in short-term borrowings 3,027 (5,965) Payments for long-term borrowings (150) (150) Dividends paid (294) (272) Purchase of treasury stock (132) 0 Sale of treasury stock 9 11 -------- -------- NET CASH USED FOR FINANCING ACTIVITIES (9,145) (7,521) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,832) (2,089) CASH AND CASH EQUIVALENTS AT JANUARY 1 33,168 21,133 -------- -------- CASH AND CASH EQUIVALENTS AT MARCH 31 $ 27,336 $ 19,044 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 3,870 $ 3,358 Income taxes $ 86 $ 150 Supplemental disclosures of non-cash flow activities: Amounts transferred to other real estate owned $ 0 $ 108
See accompanying note to consolidated financial statements 8 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 financial statements and notes included in the Registrant's 1997 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. 9 Schedule 6 PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARCH 31, 1998 (UNAUDITED) The following discussion provides information about Princeton National Bancorp, Inc.'s (PNB) financial condition and results of operations for the quarter ending March 31, 1998. 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. PNB cautions that such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. STOCK DIVIDEND On April 14, 1998, the Board of Directors of PNB declared a three-for-two stock split in the form of a 50% stock dividend to be distributed May 15, 1998 to shareholders of record on April 24, 1998. Each shareholder of record will receive one new share of common stock for each two shares owned as of the record date. Cash will be paid in lieu of fractional shares. Accordingly, all per share data stated in this Form 10-Q has been adjusted to reflect this dividend. RESULTS OF OPERATIONS Net income for the first quarter of 1998 was $1,105,000, or basic earnings per share of $0.28 as compared to net income of $1,077,000 in the first quarter of 1997, or basic earnings per share of $0.26. This represents an increase of $0.02 per share. Annualized return on average assets and return on average equity were 1.02% and 10.47%, respectively, for the first quarter of 1998, compared with 1.05% and 10.82% for the first quarter of 1997. Net interest income before any provision for loan losses was $3,932,000 for the first quarter of 1998, compared to $3,809,000 for the first quarter of 1997 (an increase of $123,000 or 3.2%). This increase is a result of an increase in average interest-earning assets from $378.4 million at March 31, 1997, to $409.5 million at March 31, 1998. However, as of March 31, 1998, total loans represented 61.4% of total assets compared with 63.3% as of March 31, 1997. Accordingly, the net yield on interest-earning assets (on a fully taxable equivalent basis) decreased from 4.27% for the first three months of 1997 to 4.08% for the first three months of 1998. Non-interest income increased by $112,000 (or 13.3%) during the first quarter of 1998 as compared to the first quarter of 1997, from $841,000 to $953,000. All categories had marginal increases over the same time frame a year ago, notably loan servicing fees increasing $45,000, trust and farm management fees increasing $20,000, and other service charge categories 10 increasing $16,000. Additionally, PNB realized net gains of $10,000 from securities transactions in the first three months of 1998, while realizing net losses of $3,000 in the first three months of 1997 (an improvement to non-interest income of $13,000). Non-interest expenses for the first quarter of 1998 were $3,344,000, an increase of $252,000 (or 8.2%) from the first quarter of 1997. This is due mainly to an increase in salaries and employee benefits of $138,000 (8.3%). Additionally, FDIC/OCC premiums increased by $37,000 during the first quarter of 1998, a result of PNB receiving an adjustment during the first quarter of 1997. Also worth noting is an increase in other operating expenses from $658,000 for the first quarter of 1997, to $758,000 for the first quarter of 1998. This is a result of several small increases over many categories of PNB's operating expenses. Offsetting these increases was a $29,000 reduction in equipment expense, primarily reduced depreciation expense. EARNINGS PER SHARE Basic income per share is computed by dividing net income by the weighted average number of shares outstanding which were 4,013,246 and 4,085,960 for the quarters ending March 31, 1998 and 1997, respectively. There were no common stock equivalents during either of these quarters. ANALYSIS OF FINANCIAL CONDITION Total assets at March 31, 1998 decreased to $441,801,000 from $449,660,000 at December 31, 1997 ($7.8 million or 1.7%). This decrease is attributable mainly to seasonal deposit growth at the end of the year followed by a drop in the first three months of the year. This year the largest decreases occurred in the demand deposit category (falling from $42.3 million at December 31, 1997 to $36.6 million at March 31, 1998, a decrease of 13.5%) and in time deposits (falling from $204.1 million at December 31, 1997 to $198.1 million at March 31, 1998, a decrease of 2.9%). Offsetting decreases in total deposits was an increase in customer repurchase agreements, from $9.8 million at December 31, 1997 to $11.4 million at March 31, 1998 (an increase of 16.3%). Payoffs have exceeded loan demand during the first three months of 1998. Loan balances, net of unearned interest, decreased to $271,043,000 at March 31, 1998, compared to $276,181,000 at December 31, 1997 (a decrease of $5.1 million or 1.9%). This resulted in the aforementioned drop in yield on interest-earning assets. Non-performing loans totaled $1,186,000 or 0.44% of net loans at March 31, 1998, as compared to $860,000 or 0.31% of net loans at December 31, 1997. Total investment securities increased from $119.5 million at December 31, 1997 to $123.3 million at March 31, 1998. During the first three months of 1998, PNB charged off $238,000 of loans and had recoveries of $99,000. This compares to charge-offs of $221,000 and recoveries of $153,000 during the first three months of 1997. The allowance for possible 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. 11 During the first three months of 1998, PNB recorded a loan loss expense of $55,000, compared to $105,000 during the first three months of 1997. As loan volume grows during the remainder of 1998 as anticipated, management expects to continue to increase the balance in the allowance for possible loan losses. At March 31, 1998, the balance in the allowance was $1,746,000 which is 0.64% of total loans, compared with $1,830,000 or 0.66% of total loans at December 31, 1997. At March 31, 1998, the recorded balance in loans for which impairment has been recognized in accordance with FASB Statement No. 114 totaled $616,000, all of which related to impaired loans which do not require a related allowance for possible loan losses as the carrying value of the loans exceeds the discounted present value of expected future cash flows. Interest recognized on impaired loans (during the portion of this quarter that they were impaired) is not considered material. 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 March 31, 1998, total risk-based capital was 14.37%, compared to 13.88% at December 31, 1997. Similarly, the Tier 1 capital ratio also increased from 8.36% at December 31, 1996, to 8.68% at March 31, 1998. Total stockholders' equity to total assets at March 31, 1998 increased to 9.80% from 9.49% at December 31, 1997. This is primarily due to the reduction in total assets. The Corporation's plan (announced in July, 1997) to repurchase its own stock continued during the first quarter of 1998 as PNB repurchased 7,500 shares (split-adjusted). PNB has now repurchased a total of 82,500 shares of its own stock since the announcement of this plan, which represents 2% of the total issued. 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 both the repayment of loans and the securitization of assets, are also considered in determining whether liquidity is satisfactory. Cash flows used by financing activities offset those provided by investing and operating activities, resulting in a net decrease in cash and cash equivalents of $5,832,000 from December 31, 1997 to March 31, 1998. This usage was due to a net decrease in deposits and an increase in investments (purchases greater than sales and maturities), offset by a net decrease in loans. For more detailed cash flow information, see PNB's Consolidated Statement of Cash Flows. IMPACT OF NEW ACCOUNTING STANDARDS In June 1997, FASB Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" (FAS 131), was 12 issued. FAS 131 establishes standards for the way public business enterprises are to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports issued to shareholders. FAS 131 is effective for financial periods beginning after December 15, 1997, and is not expected to have a material impact on PNB. 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 position 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 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule EX-27 2 EX-27
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. 1,000 3-MOS DEC-31-1997 MAR-31-1998 16,940 337,702 5,000 0 110,464 12,823 12,982 271,043 1,746 441,801 374,335 16,264 4,319 3,600 0 0 13,800 29,483 441,801 6,124 1,755 86 7,965 3,780 4,033 3,932 55 10 3,344 1,486 1,486 0 0 1,105 .28 .28 4.08 1,186 101 0 149 1,746 238 99 1,746 1,746 0 0
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