Princeton National Bancorp, I (PNBC)

[Enterprising Investor]

PNBC Releases Second Quarter Results (7/29/11)

PRINCETON, IL--(Marketwire - Jul 29, 2011) - Princeton National Bancorp, Inc. (the "Corporation") (NASDAQ: PNBC), parent corporation of Citizens First National Bank ("Subsidiary Bank"), announced a net loss available to common stockholders for the second quarter of 2011 of $2,932,000 million or $(0.88) per basic and diluted common share ("EPS"), compared to net income of $99,000 or $0.03 EPS in the second quarter of 2010. The net loss is primarily attributable to a higher loan loss provision required due to continued real estate collateral devaluation and increasing costs to carry other real estate owned properties, partially offset by gains on sales of available-for-sale securities.

Princeton National Bancorp, Inc.'s net interest margin rose to 4.12% in the second quarter of 2011 compared to 3.96% in the second quarter of 2010. The increase in the net interest margin continues to be driven by a reduction in the cost of funds, which decreased by 46 basis points quarter over quarter (a reduction of $1.4 million in interest expense). Net interest income before the provision for loan losses was $8,756,000 for the second quarter of 2011, compared to $9,185,000 for the second quarter of 2010.

"We continue to work through the migration process of underperforming loans and the still eroding property values of our collateral, primarily in our eastern markets," noted Thomas Ogaard, President & CEO. "Our focus on resolving credit issues remains our top priority as evidenced by the results of the quarter," added Ogaard.

Non-performing loans amounted to 14.74% of total loans at June 30, 2011 compared to 15.16% at March 31, 2011 and 13.83% at December 31, 2010. Net charge-offs increased during the second quarter of 2011 to $18.8 million, compared to net charge-offs of $1.4 million for the second quarter of 2010. The Corporation recorded a loan loss provision of $8.1 million in the second quarter of 2011 which reflects management's focus on problem credit resolution, despite ongoing high levels of stress in the commercial real estate industry. Given the current state of the economy, management has assessed the impact of the recession on each category of loans and adjusted historical loss factors for more recent economic trends. Also, several economic uncertainties were taken into consideration in developing the appropriate level of reserve.

Non-interest income for the second quarter of 2011 was $4.0 million compared to $2.0 million in the second quarter of 2010. This increase was primarily due to the realization of gains on sales of available-for-sale securities of $1,598,000 in the second quarter of 2011, compared to $80,000 in the second quarter of 2010. Also negatively impacting results in the second quarter of 2010 was the recognition of a $589,000 impairment charge on mortgage servicing rights. Service charges on deposits experienced an increase of $44,000 or 4.6% due to an increase in overdraft fee income. Annualized non-interest income as a percentage of total average assets increased to 1.49% for the second quarter of 2011, from 0.70% for the same period in 2010.

Non-interest expense for the second quarter of 2011 totaled $10.2 million, up from $8.8 million during the same quarter in 2010. The primary difference between the two quarters was an increase in expenses related to other real estate owned of $1,046,000 and an increase in loan collection expenses of $187,000. Annualized non-interest expense as a percentage of total average assets increased to 3.78% for the second quarter of 2011, compared to 3.04% for the same period in 2010.

Stockholders' equity as of June 30, 2011 decreased slightly to $55.0 million from $56.9 million at December 31, 2010.

The price of PNBC stock closed at $5.00 on June 30, 2011, compared to $3.64 on December 31, 2010.

Princeton National Bancorp, Inc., through its wholly owned subsidiary Citizens First National Bank, operates community banking offices with strategic locations in 8 counties in northern Illinois. Total assets at June 30, 2011 decreased to $1.070 billion from $1.096 billion at December 31, 2010. Total loan balances decreased by $46.4 million during the six month period to $657.7 million due to seasonal pay downs in the agricultural portfolio and general decline in the overall demand for new low-risk credit. The decrease in assets reflects the Corporation's 2011 capital management objectives.

The Corporation offers stockholders the opportunity to participate in the Princeton National Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan, which allows for optional cash contributions to purchase stock. To obtain information about the stock purchase plan, please contact us at 815-872-6131.

Princeton National Bancorp, Inc.'s Web Address: www.pnbc-inc.com.

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