Princeton National Bancorp, Inc. Surpasses First Quarter 2009 Net Income

• Press Release
• Source: Princeton National Bancorp, Inc.
• On 4:08 pm EDT, Monday July 27, 2009

PRINCETON, IL--(Marketwire - 07/27/09) - Princeton National Bancorp, Inc. (NASDAQ:PNBC - News), the holding company of Citizens First National Bank, today reported results of operations and financial condition for the second quarter of 2009.

President & CEO Tony J. Sorcic stated, "The Company is very pleased with the second quarter operating results. Net income increased 64.2%, despite an increase in FDIC premiums and credit costs. Additionally, net interest income increased 2.8% and non-interest income increased 44.2% compared to first quarter results."

Mr. Sorcic concluded, "Princeton National Bancorp, Inc. has made significant progress. During a time when many companies are experiencing a shrinking of their balance sheet and negative income results, the Company continues to grow and generate positive earnings. In comparing June 30, 2009 to June 30, 2008, total deposits increased $151.9 million, total loans increased $19.5 million, year-to-date net interest income increased $1.753 million and non-interest income increased $415,000. While many banks experienced a compression in their net interest margin, the Company experienced a 4 basis point increase resulting in a net interest margin of 3.48%. Although non-interest expense increased $2.4 million, the majority of the increase is in the categories of federal deposit insurance assessments which rose $1.4 million and other real estate expenses which increased $387,000. The Board of Directors and Management are pleased with the results generated during the first six months of 2009."

In review of the June 30, 2009 consolidated statements of income, net income was $1,898,000 for the second quarter, or $.48 per common share, compared to $1,156,000 or $.28 per common share for the first quarter of 2009 and $2,020,000 or $.61 per common share for the second quarter of 2008. Net-interest income for the second quarter of 2009 (before provision) was $8,629,000 and non-interest income was $3,731,000, compared to $8,395,000 and $2,588,000, respectively, for the first quarter of 2009 and $7,817,000 and $2,751,000, respectively, for the second quarter of 2008. Return on average equity was 7.77% for the second quarter 2009, compared to 5.14% for the first quarter 2009 and 11.71% for the second quarter of 2008.

Total assets ended the quarter at $1.258 billion, up 3.5% from $1.215 billion at March 31, 2009 and 8.2% from $1.163 billion at December 31, 2008. Princeton National Bancorp, Inc. experienced a $9.0 million and $25.1 million decrease in total loans as of June 30, 2009 in comparison to March 31, 2009 and December 31, 2008, respectively (primarily due to a decrease in the residential real estate category as variable rate loans were refinanced into fixed rate loans and sold in the secondary market and a general slowdown in the economy, along with seasonal agricultural paydowns).

Non-performing loans totaled $22.0 million as of June 30, 2009 and represents a 33.8% decrease from March 31, 2009 and a 33.3% decrease from December 31, 2008. An $11.0 million commercial loan was transferred into OREO. This was a participation loan with a correspondent bank, who had started foreclosure proceedings. Based on the anticipated value of the collateral, the Subsidiary Bank decided to purchase the correspondent's interest and continue with the foreclosure. Transferring the property into OREO moves the Subsidiary Bank one step closer to a resolution. At the end of the second quarter, specific loss provisions for individual credits totaled $1.530 million, compared to $818,000 at December 31, 2008. The Subsidiary Bank staff will continue to work with borrowers to resolve problem loan situations and to work through the challenging remediation cycle for real estate and construction-related credits. Recognizing this, and reflective of current conditions, the level of loan loss provisioning has increased, bringing the level of reserves to .80% of total loans, an increase from .64% at December 31, 2008. The loan loss provision taken in the second quarter totaled $1,465,000 versus $1,170,000 in the first quarter and $450,000 in the second quarter of 2008. Citizens First National Bank evaluates the risk characteristics of the loan portfolio on a monthly basis and believes the loan loss reserve was adequate to cover possible losses as of June 30, 2009.

At the July Board of Directors' meeting, the Board of Directors declared a $.14 per common share dividend payable August 25, 2009 to those shareholders of record as of August 7, 2009.

On February 27, 2009, the FDIC announced it had adopted an interim rule to impose an emergency special assessment on June 30, 2009 which will be collected on September 30, 2009. It was anticipated the amount of the emergency special assessment on the Subsidiary Bank would be 16 basis points or $1.6 million. On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point emergency special assessment on an institution's assets minus Tier 1 capital. This emergency special assessment equates to a one-time cost of $600,000, significantly lower than originally anticipated. This amount has been accrued for by the Company and is reflected in non-interest expense. The FDIC also increased the risk-based assessment to 14 basis points, versus 7 basis points previously. Accordingly, the new assessment rates increased the quarterly federal deposit insurance expense by approximately $200,000 (for both the first and second quarters of 2009).

The Subsidiary Bank retains servicing of residential mortgages sold into the secondary market for which fees are earned. During the first quarter, the Company recorded a pre-tax charge of $556,419 to earnings due to the decrease in the value of existing mortgage servicing rights as mortgage interest rates had declined. There was no charge taken in the second quarter.

The Company's solid capital base and ability to generate core earnings continue to be an advantage as we work through the current credit cycle. The Subsidiary Bank has been providing financial solutions to meet the financial needs of its customers since 1865. Princeton National Bancorp, Inc. and Citizens First National Bank will be in a position to benefit as conditions improve.

The price of PNBC stock closed at $14.60 on June 30, 2009, compared to $14.00 on March 31, 2009 and $22.14 on December 31, 2008. The decrease in stock price from year-end 2008 is reflective of the banking industry as a whole. Financial stocks continue to be impacted by poor earnings reports by many institutions, due to the current credit cycle. Princeton National Bancorp, Inc. has reported positive quarterly earnings for fifty-seven consecutive quarters!

For detailed financial information, please refer to the attached June 30, 2009 financial statements for Princeton National Bancorp, Inc. You may also visit our website at www.pnbc-inc.com to obtain financial information, as well as press releases, stock prices and information on the Company.

The Company offers shareholders the opportunity to participate in the Princeton National Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan. The Company also offers electronic direct deposit of dividends. To obtain information about the stock purchase plan or electronic direct deposit, please contact us at 815-875-4445, extension 650.

Princeton National Bancorp, Inc. is the parent holding company of Citizens First National Bank, a $1.258 billion community bank with strategic locations in 8 counties in northern Illinois. The Company is well-positioned in the high growth counties of Will, Kendall, Kane, Grundy, DeKalb and LaSalle plus Bureau and Marshall. Communities include: Aurora, DePue, Genoa, Hampshire, Henry, Huntley, Millbrook, Minooka, Newark, Oglesby, Peru, Plainfield, Plano, Princeton, Sandwich, Somonauk and Spring Valley. The Subsidiary Bank, Citizens First National Bank, provides financial services to meet the needs of individuals, businesses and public entities.

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 the audited results.

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CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)         June 30,
                                                    2009     December 31,
                                                (unaudited)      2008
                                                -----------  -------------

ASSETS

Cash and due from banks                         $    12,741  $      20,163
Interest-bearing deposits with financial
 institutions                                        35,929             98
Federal funds sold                                        0              0
                                                -----------  -------------
    Total cash and cash equivalents                  48,670         20,261

Loans held for sale, at lower of cost or market       2,766          2,155

Investment securities available-for-sale, at
 fair value                                         317,514        236,883
Investment securities held-to-maturity, at
 amortized cost                                      15,186         14,232
                                                -----------  -------------
    Total investment securities                     332,700        251,115

Loans, net of unearned interest                     765,754        790,837
Allowance for loan losses                            (6,160)        (5,064)
                                                -----------  -------------
    Net loans                                       759,594        785,773

Premises and equipment, net                          28,935         29,297
Land held for sale, at lower of cost or market        2,354          2,354
Federal Reserve and Federal Home Loan Bank
 stock                                                4,230          4,211
Bank-owned life insurance                            22,072         21,588
Interest receivable                                   7,840          9,693
Goodwill, net of accumulated amortization            24,521         24,521
Intangible assets, net of accumulated
 amortization                                         3,776          4,207
Other real estate owned                              15,250          2,487
Other assets                                          5,346          5,468
                                                -----------  -------------

    TOTAL ASSETS                                $ 1,258,054  $   1,163,130
                                                ===========  =============

                                                -----------  -------------

LIABILITIES

Demand deposits                                 $   108,952  $     110,559
Interest-bearing demand deposits                    289,432        246,714
Savings deposits                                     67,144         61,089
Time deposits                                       590,129        543,770
                                                -----------  -------------
    Total deposits                                1,055,657        962,132

Customer repurchase agreements                       35,621         35,532
Advances from the Federal Home Loan Bank             32,496         32,493
Interest-bearing demand notes issued to the
 U.S. Treasury                                        1,516          2,441
Federal funds purchased                                   0          6,500
Trust Preferred securities                           25,000         25,000
Note payable                                              0         16,050
                                                -----------  -------------
    Total borrowings                                 94,633        118,016

Other liabilities                                     9,664         10,511
                                                -----------  -------------
    Total liabilities                             1,159,954      1,090,659
                                                -----------  -------------

STOCKHOLDERS' EQUITY

Preferred stock                                      24,944              0
Common stock                                         22,391         22,391
Common stock warrants                                   150              0
Additional paid-in capital                           18,395         18,420
Retained earnings                                    55,597         54,329
Accumulated other comprehensive income (loss),
 net of tax                                             624          1,402
Less:  Treasury stock                               (24,001)       (24,071)
                                                -----------  -------------
    Total stockholders' equity                       98,100         72,471
                                                -----------  -------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY        $ 1,258,054  $   1,163,130
                                                ===========  =============


CAPITAL STATISTICS  (UNAUDITED)

YTD average equity to average assets                   7.78%          6.25%
Tier 1 leverage capital ratio                          7.91%          6.22%
Tier 1 risk-based capital ratio                       10.75%          7.72%
Total risk-based capital ratio                        11.46%          8.30%
Common book value per share                     $     22.15  $       21.97
Closing market price per share                  $     14.60  $       22.14
End of period shares outstanding                  3,302,157      3,298,041
End of period treasury shares outstanding         1,176,138      1,180,254

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CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands,
 except share data)
                           THREE        THREE
                          MONTHS       MONTHS      SIX MONTHS   SIX MONTHS
                           ENDED        ENDED        ENDED        ENDED
                          June 30,     June 30,     June 30,     June 30,
                            2009         2008         2009         2008
                        (unaudited)  (unaudited)  (unaudited)  (unaudited)
                        -----------  -----------  -----------  -----------

INTEREST INCOME

Interest and fees on
 loans                  $    11,167  $    11,801  $    22,543  $    24,152
Interest and dividends
 on investment
 securities                   3,216        2,659        6,147        5,338
Interest on federal
 funds sold                       0            4            0           29
Interest on
 interest-bearing time
 deposits in other
 banks                           35            9           51           20
                        -----------  -----------  -----------  -----------
  Total Interest Income      14,418       14,473       28,741       29,539
                        -----------  -----------  -----------  -----------

INTEREST EXPENSE

Interest on deposits          5,103        5,805       10,250       12,479
Interest on borrowings          686          851        1,467        1,789
                        -----------  -----------  -----------  -----------
  Total Interest
   Expense                    5,789        6,656       11,717       14,268
                        -----------  -----------  -----------  -----------

Net interest income           8,629        7,817       17,024       15,271
Provision for loan
 losses                       1,465          450        2,635          818
                        -----------  -----------  -----------  -----------

Net interest income
 after provision              7,164        7,367       14,389       14,453
                        -----------  -----------  -----------  -----------

NON-INTEREST INCOME
Trust & farm management
 fees                           394          336          708          812
Service charges on
 deposit accounts               977        1,110        1,953        2,202
Other service charges           508          567          953        1,024
Gain on sales of
 securities
 available-for-sale             574            0          761          276
Brokerage fee income            249          208          447          427
Mortgage banking income         765          288          876          636
Bank-owned life
 insurance                      230          206          473          421
Other operating income           34           36          148          106
                        -----------  -----------  -----------  -----------
  Total Non-Interest
   Income                     3,731        2,751        6,319        5,904
                        -----------  -----------  -----------  -----------

NON-INTEREST EXPENSE
Salaries and employee
 benefits                     4,113        4,226        8,693        8,623
Occupancy                       602          611        1,311        1,290
Equipment expense               763          751        1,536        1,470
Federal insurance
 assessments                    826           84        1,523          168
Intangible assets
 amortization                   208          178          416          357
Data processing                 339          302          655          579
Advertising                     211          162          408          330
ORE Expenses, net               419           91          509          122
Other operating expense       1,234        1,104        2,424        2,130
                        -----------  -----------  -----------  -----------
  Total Non-Interest
   Expense                    8,715        7,509       17,475       15,069
                        -----------  -----------  -----------  -----------

Income before income
 taxes                        2,180        2,609        3,233        5,288
Income tax expense              282          589          178        1,177
                        -----------  -----------  -----------  -----------

Net income                    1,898        2,020        3,055        4,111

Preferred stock
 dividends                      317            0          554            0
Accretion of preferred
 stock discount                   6            0           11            0
                        -----------  -----------  -----------  -----------

Net income available to
 common stockholders    $     1,575  $     2,020  $     2,490  $     4,111
                        ===========  ===========  ===========  ===========

Net income per share:
  BASIC                 $      0.48  $      0.61  $      0.75  $      1.25
  DILUTED               $      0.48  $      0.61  $      0.75  $      1.24

Basic weighted average
 shares outstanding       3,300,161    3,295,998    3,299,119    3,300,030
Diluted weighted
 average shares
 outstanding              3,300,586    3,309,084    3,299,634    3,311,735


PERFORMANCE RATIOS
 (annualized)

Return on average
 assets                        0.61%        0.75%        0.51%        0.76%
Return on average
 equity                        7.77%       11.71%        6.51%       11.98%
Net interest margin
 (tax-equivalent)              3.43%        3.49%        3.48%        3.44%
Efficiency ratio
 (tax-equivalent)             66.72%       67.71%       70.86%       67.68%


ASSET QUALITY

Net loan charge-offs    $     1,169  $       189  $     1,540  $       670
Total non-performing
 loans                  $    22,021  $    14,567  $    22,021  $    14,567
Non-performing loans as
 a % of total loans            2.88%        1.95%        2.88%        1.95%

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