Attached files
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2010
Commission File Number 0-20050
PRINCETON NATIONAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Delaware |
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36-32110283 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
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606 South Main Street |
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Princeton, Illinois |
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61356-2080 |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (815) 875-4444
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Name of each |
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Common Stock |
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The Nasdaq |
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Stock Market |
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Preferred Share |
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Purchase Rights |
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is a well-known season issuer, as defined in Rule 405 of the Securities Act. |
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Indicate by check mark if the registrant is not required to file reports pursuant to Sections 13 or 15(d) of the Act. |
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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. |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files). |
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): |
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Large accelerated filer |
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Accelerated filer |
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(do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). |
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At March 23, 2011, 3,325,941 shares of Common Stock, $5.00 Par Value, were outstanding, and the aggregate market value of the common stock (based upon the closing representative bid price of the common stock on June 30, 2010 of $6.15, the last business day of the Registrant’s most recently completed second quarter, as reported by NASDAQ) held by nonaffiliates was approximately $20,454,537. |
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Determination of stock ownership by nonaffiliates was made solely for the purpose of responding to this requirement and the registrant is not bound by this determination for any other purpose. |
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Portions of the following documents are incorporated by reference: |
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2011 Notice and Proxy Statement for the Annual Meeting of Stockholders May 10, 2011 (the “Proxy Statement”) - Part III and portions of the Corporation’s 2010 Annual Report (the “Annual Report”) - Part II |
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Page 1 of 84 pages
PART I
Item 1. Business
Princeton National Bancorp, Inc. (“PNBC”, the “Corporation”, or the “Company”) is a single-bank holding company which operates in one business segment conducting a full-service banking and trust business through its subsidiary bank, Citizens First National Bank (“Citizens Bank”, “the Bank”, or the “subsidiary bank”). PNBC was incorporated as a Delaware corporation in 1981 in contemplation of the acquisition of all of the outstanding common stock of Citizens Bank and other future acquisitions. At December 31, 2010, the Corporation had consolidated total assets of $1,096,471,000 and stockholders’ equity of $56,861,000.
PNBC operates the Bank as a community bank with offices located for convenience and with professional, highly-motivated, progressive employees who know the Bank’s customers and provide individualized, quality service. As part of its community banking approach, officers of the Bank actively participate in community organizations. In addition, within certain credit and rate of return parameters, the subsidiary bank strives to meet the lending needs of the communities in which offices are located and invests in local municipal securities.
Corporate policy, strategy and goals are established by the Board of Directors of PNBC. Pursuant to PNBC’s holding company philosophy, operational and administrative policies for the Bank are also established at the holding company level. Within this framework, the Bank focuses on providing personalized services and quality products to its customers to meet the needs of the communities in which its offices are located. In 2010, the majority of the directors of PNBC also served as the directors of Citizens Bank, which further assists PNBC to directly implement its policies at Citizens Bank.
Acquisition and Expansion Strategy
Though distinct economic challenges exist in the current environment that have created the need to manage growth, PNBC continues to seek to identify available opportunities to diversify both its market area and asset base and increase profitability through acquisitions and expansion. PNBC’s goal, as reflected by its acquisition policy, is to resume expansion through the acquisition of established financial service organizations (primarily commercial banks to the extent suitable candidates may be identified) and by expanding into potential high-growth areas. In integrating acquisitions, PNBC focuses on, among other actions, implementing the policies established at Citizens Bank, improving asset quality, the net interest margin, and encouraging community involvement. In 2007, PNBC acquired the Plainfield office of HomeStar Bank and in 2005, PNBC acquired Somonauk FSB Bancorp, Inc. and its subsidiary, Farmers State Bank, with branches in Somonauk, Millbrook, Newark and Sandwich (subsequently merged into Citizens Bank).
PNBC will also consider establishing branch facilities as a means of expanding its presence into new market areas. PNBC opened new branch facilities in the Peru/LaSalle/Oglesby area in 1994, in Minooka in 1994, Hampshire in 1995, Henry in 1999, Huntley in 2001, Plano in 2005 and Aurora in 2006. Several of these locations are located in rapidly growing communities that will provide significant loan and deposit growth opportunities, as well as increased revenue potential.
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Citizens First National Bank
Citizens Bank was organized in 1865 as a national banking association under the National Bank Act. Currently in its one hundred and forty-sixth year, Citizens Bank has twenty-one offices in seventeen different communities in north central Illinois: Aurora, DePue, Genoa, Hampshire, Henry, Huntley, Millbrook, Minooka, Newark, Oglesby, Peru, Plainfield, Plano, Princeton, Sandwich, Somonauk, and Spring Valley.
Citizens Bank serves individuals, businesses and governmental bodies in Bureau, DeKalb, Grundy, Kane, Kendall, LaSalle, Marshall, McHenry, Will and contiguous counties. Citizens Bank operates a full-service community commercial bank and trust business that offers a broad range of financial services to customers. Citizens Bank’s services consist primarily of commercial, real estate and agricultural lending, consumer deposit and financial services, and trust, brokerage, insurance, and farm management services.
Commercial, Real Estate, and Agricultural Lending
Citizens Bank’s commercial loan department provides secured and to a much lesser extent unsecured loans, including real estate loans, to companies and individuals for business purposes and to governmental units within the Bank’s market area. As of December 31, 2010, Citizens Bank had commercial loans of $138.3 million (19.6% of the Bank’s total loan portfolio) and commercial real estate loans of $205.3 million (29.2% of the Bank’s total loan portfolio). Citizens Bank has a concentration of commercial loans to the agricultural industry as more fully disclosed below.
Agricultural and agricultural real estate loans are primarily related to ventures within 30 miles of branch locations. As of December 31, 2010, Citizens Bank had agricultural loans of $78.1 million and agricultural real estate loans of $46.4 million, which represent approximately 11.1% and 6.6%, respectively, of the Bank’s total loan portfolio.
Agricultural loans, many of which are secured by crops, machinery, and real estate, are provided to finance capital improvements and farm operations as well as acquisitions of livestock and machinery. The agricultural loan department, which has the equivalent of five lending officers, works closely with all agricultural customers (including companies and individual farmers) and assists in the preparation of budgets and cash flow projections for the ensuing crop year. These budgets and cash flow projections are monitored closely by the bank during the year. In addition, Citizens Bank works closely with governmental agencies, including the Farm Service Agency, to assist agricultural customers in obtaining credit enhancement products, such as loan guaranties.
In accordance with its loan policy, Citizens Bank maintains a diversified loan portfolio. Citizens Bank had syndicated loans with other lending institutions totaling $26.7 million at December 31, 2010 (3.8% of the Bank’s total loan portfolio). Citizens Bank does buy and sell loan participations with other community banks. In connection with its credit relationships, Citizens Bank encourages commercial and agricultural borrowers to maintain deposit accounts at the Bank.
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Personal Financial Services
The principal consumer services offered by Citizens Bank are demand, savings and time deposit accounts, home mortgage loans, installment loans, and brokerage services.
One of the strengths of Citizens Bank is the stability of its retail deposit base. This stability is due primarily to the Bank’s service oriented competitive strategy and the economically diverse populations of the counties encompassing the twenty-one banking offices. These locations provide convenience for customers and visibility for Citizens Bank. A variety of marketing strategies are used to attract and retain stable depositors, the most important of which is the officer call program. Nearly all officers of the Bank call on customers and potential customers of the Bank to maintain and develop relationships.
Citizens Bank is active in consumer and mortgage lending with approximately $90.9 million in home mortgage loans (12.9% of the Bank’s total loan portfolio) and $56.7 million in consumer installment loans (8.1% of the Bank’s total loan portfolio) as of December 31, 2010. To better serve its retail customers, Citizens Bank is active in the secondary residential mortgage market. As a matter of policy, Citizens Bank does not hold in portfolio, long term, fixed rate, single-family home mortgage loans, however, the servicing of such loans is maintained. As of December 31, 2010, Citizens Bank had $395 million of loans that have been sold, but servicing has been maintained. Management believes customers receive a higher level of quality service with this arrangement. Citizens Bank does not originate sub-prime loans.
Citizens Bank maintains twenty-five automated teller machines. The Bank is a member of ACCEL/Exchange and NYCE as well as other major nationwide networks such as, CIRRUS and PLUS. To enhance customer service and convenience, Citizens Bank offers ATM & debit cards, which can be used anywhere VISA is accepted, and is viewed as a tremendous benefit to our customers. Citizens Bank also offers a host of Internet Banking services including Online Banking, Mobile Banking and Bill Pay as an additional and convenient alternative delivery mechanism for its product and service line.
Citizens Bank continues to maintain an intensive sales training program, which includes team coaching, setting goals, measuring results, and reward recognition. In 2010, Citizens Bank continued to focus on making quality product referrals and sales.
Citizens Financial Advisors (“CFA”)
The Fiduciary and Investment Services departments experienced growth in 2010 through efforts to improve staff through education, technology, and licensing enhancement. Fiduciary Services substantially achieved these objectives by the addition of new Investment and Business Development Officers. The new Investment Officer has enhanced the department’s equity, bond and mutual fund portfolio management abilities, leading to a dramatic improvement in the regular oversight and timeliness of the portfolio’s trading and has improved customer communication. Enhanced portfolio management processes have improved the ability of the new Business Development Officer to offer quality service to prospective new customers.
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Investment Services is focused on the growing need for Financial Planning services as well as the use of Separately Managed Advisory Accounts. Two new Certified Financial Planners have been added to the Client Advisor roster, one each in the Northern and Eastern Regions. In addition, the organic development of a sales assistant into a licensed Client Advisor was accomplished in the Princeton area.
As of the end of 2010 the Fiduciary Services department was the manager or administrator of 907 trust accounts totaling approximately $175,519 compared to 965 trust accounts totaling approximately $171,429 at December 31, 2009.
Competition
PNBC is committed to community banking and to providing quality products and services at competitive loan rates and deposit pricing in order to remain competitive in its North Central Illinois market. Citizens Bank competes with both small, locally owned banks, as well as regional financial institutions which have numerous offices. The Bank competes with these organizations, as well as with savings and loan associations, credit unions, mortgage companies, insurance companies and other local financial institutions for deposits, loans and other business. The principal methods of competition include loan and deposit pricing, the types and quality of services provided, as well as advertising and marketing programs.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under federal and state law. Any change in applicable law or regulations may have a material effect on the business of PNBC and the Bank.
PNBC is registered as a bank holding company with the Board of Governors of the Federal Reserve System (the “FRB”), and is subject to supervision by the FRB under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). PNBC is required to file with the FRB periodic reports and such additional information as the FRB may require pursuant to the BHC Act. The FRB examines PNBC.
The BHC Act requires prior FRB approval for, among other things, the acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all the assets of any bank or bank holding company, or for a merger or consolidation of a bank holding company with another bank holding company. With certain exceptions, the BHC Act prohibits a bank holding company from acquiring direct or indirect ownership or control of voting shares of any company which is not a bank or bank holding company and from engaging directly or indirectly in any activity other than banking or managing or controlling banks or performing services for its authorized subsidiaries. A bank holding company may, however, engage in or acquire an interest in a company that engages in activities which the FRB has determined by regulation or order to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.
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In November 1999, the Gramm-Leach-Bliley Act (“GLB Act”) was signed into law. Under the GLB Act, bank holding companies that meet certain standards and elect to become “financial holding companies” are permitted to engage in a wider range of activities than those permitted for bank holding companies, including securities and insurance activities. Specifically, a bank holding company that elects to become a financial holding company may engage in any activity that the FRB, in consultation with the Secretary of the Treasury, determines is (i) financial in nature or incidental thereto, or (ii) complementary to any such financial-in-nature activity, provided that such complementary activity does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. A bank holding company may elect to become a financial holding company only if each of its depository institution subsidiaries is well-capitalized, well-managed, and has a Community Reinvestment Act rating of “satisfactory” or better at their most recent examination.
The GLB Act specifies many activities that are financial in nature, including lending, exchanging, transferring, investing for others, or safeguarding money or securities; underwriting and selling insurance; providing financial, investment, or economic advisory services; underwriting, dealing in, or making a market in securities; and those activities currently permitted for bank holding companies that are so closely related to banking or managing or controlling banks, as to be a proper incident thereto. PNBC has not elected to be treated as a financial holding company.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) became law on July 21, 2010. The Dodd-Frank Act constitutes one of the most significant efforts in recent history to comprehensively overhaul the financial services industry and will affect large and small financial institutions alike. While some of the provisions of the Dodd-Frank Act take effect immediately, many of the provisions have delayed effective dates and their implementation will require the issuance of numerous new regulations.
The Dodd-Frank Act deals with a wide range of regulatory issues including, but not limited to: mandating new capital requirements that would require certain bank holding companies to be subject to the same capital requirements as their depository institutions; eliminating (with certain exceptions) trust preferred securities; codifying the Federal Reserve’s Source of Strength doctrine; creating a Bureau of Consumer Financial Protection which will have the power to exercise broad regulatory, supervisory and enforcement authority concerning both existing and new consumer financial protection laws; permanently increasing federal deposit insurance protection to $250,000 per depositor; extending the unlimited coverage for qualifying non-interest bearing transactional accounts until December 31, 2012; increasing the ratio of reserves to deposits minimum to 1.35 percent; assessing premiums for deposit insurance coverage on average consolidated total assets less average tangible equity, rather than on a deposit base; authorizing the assessment of examination fees; establishing new standards and restrictions on the origination of mortgages; permitting financial institutions to pay interest on business checking accounts; limiting interchange fees payable on debit card transactions; and implementing requirements on boards, corporate governance and executive compensation for public companies.
The complete impact of the Dodd-Frank Act is unknown since many of the substantive requirements will be contained in the many rules and regulations to be implemented. However, the Dodd-Frank Act will have significant and immediate effects on banks and bank holding companies in many areas.
The GLB Act changed federal laws to facilitate affiliation between banks and entities engaged in securities and insurance activities. The law also established a system of functional regulation under which banking activities, securities activities, and insurance activities conducted by financial holding companies and their subsidiaries and affiliates will be separately regulated by banking, securities, and insurance regulators, respectively.
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PNBC is a legal entity separate and distinct from the Bank. The major source of PNBC’s revenue is dividends received from the Bank. The right of PNBC to participate as a stockholder in any distribution of assets of the Bank upon its liquidation or reorganization or otherwise is subject to the prior claims of creditors of the Bank. The Bank is subject to claims by creditors for long-term and short-term debt obligations, including obligations for federal funds purchased and securities sold under repurchase agreements, as well as deposit liabilities. The Bank is subject to regulation and examinations by the Office of the Comptroller of the Currency (the “OCC”).
The Bank may declare dividends out of undivided profits, except that until the surplus fund of the Bank is equal to its common capital, no dividend can be declared until one-tenth of the Bank’s net income for the applicable period has been carried to the surplus fund. The Bank, however, cannot declare or pay a dividend, if after making the dividend, the Bank would be undercapitalized. In addition, prior approval of the OCC is required if dividends declared by the Bank in any calendar year will exceed its net income for that year combined with its retained net income for the preceding two years. Under national banking regulations and capital guidelines, as of December 31, 2010, the Bank was authorized to distribute $0 as dividends without prior approval from the OCC, based on net income for 2010 and retained net income for 2008 and 2009. As of January 1, 2011, retained net income for the prior two years was $0 and during 2011 the Bank will need prior approval from the OCC to pay dividends. Future payments of dividends by the Bank will be dependent on individual regulatory capital requirements and levels of profitability. The ability of the Bank to pay dividends may be further restricted as a result of regulatory policies and guidelines relating to dividend payments and capital adequacy.
In February, 2011, as required by PNBC’s primary regulator, the Federal Reserve Bank, a resolution of PNBC’s Board of Directors was passed requiring that PNBC obtain written approval from the Federal Reserve Bank prior to any of the following:
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the declaration or payment of corporate dividends; |
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any increase in debt; |
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any distribution of interest, principal, or other sum associated with subordinated debentures or trust preferred securities; and, |
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the redemption of holding company stock. |
Federal laws limit certain transactions between the Bank and its affiliates, including PNBC. Such transactions include loans or extensions of credit by the Bank to PNBC, the purchase of assets or securities of PNBC, the acceptance of PNBC’s securities as collateral for loans, and the issuance of a guaranty, acceptance or letter of credit on behalf of PNBC. Transactions of this kind are limited to 10% of the Bank’s capital and surplus for transactions with one affiliate, and 20% of the Bank’s capital and surplus for transactions with all affiliates. Such transactions are also subject to certain collateral requirements. These transactions, as well as other transactions between the Bank and PNBC, must also be on terms substantially the same as, or at least as favorable as, those prevailing at the time for comparable transactions with nonaffiliated companies or, in the absence of comparable transactions, on terms, or under circumstances, including credit standards, that would be offered to, or would apply to, nonaffiliated companies.
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FRB policy requires PNBC to act as a source of financial strength to the Bank and commit resources to support the Bank. The FRB takes the position that in implementing this policy, it may require PNBC to provide such support when PNBC otherwise would not consider itself able to do so.
The various federal bank regulators, including the FRB and the OCC, have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards establish minimum capital standards in relation to assets and off-balance sheet exposures, as adjusted for credit risks. Capital is classified into two tiers. For bank holding companies, Tier 1 or “core” capital consists of common shareholders’ equity, perpetual preferred stock (subject to certain limitations) and minority interests in the equity accounts of consolidated subsidiaries, and is reduced by goodwill and certain other intangible assets (“Tier 1 Capital”). Tier 2 capital consists of (subject to certain conditions and limitations) the allowance for possible credit losses, perpetual preferred stock, “hybrid capital instruments,” perpetual debt and mandatory convertible debt securities, and term subordinated debt and intermediate-term preferred stock (“Tier 2 Capital”). Total capital is the sum of Tier 1 Capital and Tier 2 Capital (the latter being limited to 100% of Tier 1 Capital). Components of Tier 1 and Tier 2 Capital for national banks are similar, but not identical, to those for holding companies.
Under the risk-adjusted capital standards, a minimum ratio of qualifying total capital to risk-weighted assets of 8% and of Tier l Capital to risk-weighted assets of 4% is required. The FRB and OCC also have adopted a minimum leverage ratio of Tier 1 Capital to total assets of 3% for banks rated “1” under the Uniform Financial Institutions Rating System or bank holding companies rated “1” under the rating system of bank holding companies. All other banks and bank holding companies must maintain a leverage ratio of 4%. In addition, all banks and bank holding companies are expected to have capital commensurate with the level and nature of all risks to which they are exposed.
At December 31, 2010, PNBC had a total capital to risk-weighted assets ratio of 9.68%, a Tier 1 capital to risk-based assets ratio of 8.40%, and a leverage ratio of 5.76%. PNBC is classified as adequately capitalized for the first ratio and well-capitalized for the last two ratios. At December 31, 2010, the Bank had a total capital to risk-weighted assets ratio of 10.29%, a Tier 1 capital to risk-weighted assets ratio of 9.01%, and a leverage ratio of 6.18%. The Bank is classified as well-capitalized for all three ratios.
The Bank’s deposits are insured by the Deposit Insurance Fund, which is administered by the Federal Deposit Insurance Corporation (the “FDIC”). As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the Deposit Insurance Fund pursuant to a risk-based assessment system. Pursuant to the Dodd-Frank Act, the basic limit on federal deposit insurance coverage was raised from $100,000 to $250,000 per depositor. In addition, in November 2010, pursuant to the Dodd-Frank Act, the FDIC issued a final rule to provide temporary unlimited deposit insurance coverage for non-interest bearing accounts from December 31, 2010 through December 31, 2012, at no additional surcharge.
Under the FDIC’s risk-based assessment regulations there are four risk categories, and each insured institution is assigned to a risk category based on capital levels and supervisory ratings. Well-capitalized institutions with CAMELS composite ratings of 1 or 2 are placed in Risk Category I while other institutions are placed in Risk Categories II, III or IV depending on their capital levels and CAMELS composite ratings. The assessment rates may be changed by the FDIC as necessary to maintain the insurance fund at the reserve ratio designated by the FDIC. The FDIC may set the reserve ratio annually at between 1.15% and 1.50% of insured deposits. Deposit insurance assessments are collected for a quarter at the end of the next quarter. Assessments are based on deposit balances at the end of the quarter, except institutions with $1 billion or more in assets and institutions that become insured on or after January 1, 2007 will have their assessment base determined using average daily balances of insured deposits.
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Due to a decrease in the reserve ratio of the Deposit Insurance Fund, in October 2008, the FDIC established a restoration plan to restore the reserve ratio to at least 1.15% within five years (the FDIC has extended this time to eight years). The reserve ratio has now been increased to 1.35% by the Dodd-Frank Act. The FDIC has been directed to offset the effects of increased assessments on depository institutions with less than $10 billion in assets. To achieve these levels, the FDIC is authorized by the Dodd-Frank Act to make special assessments and charge examination fees.
On December 16, 2008, the FDIC adopted and issued a final rule increasing the rates banks pay for deposit insurance uniformly by 7 basis points (annualized) effective January 1, 2009. Under the final rule, risk-based rates for the first quarter 2009 varied between 12 and 50 basis points depending on an institution’s risk category. On February 27, 2009, the FDIC adopted a final rule amending the way that the assessment system differentiates for risk and setting new assessment rates beginning with the second quarter of 2009. As of April 1, 2009, for the highest rated institutions, those in Risk Category I, the initial base assessment rate was between 12 and 16 basis points and for the lowest rated institutions, those in Risk Category IV, the initial base assessment rate was 45 basis points. The final rule modified the means to determine a Risk Category I institution’s initial base assessment rate. It also provided for the following adjustments to an institution’s assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for institutions in risk categories other than Risk Category I, an increase for brokered deposits above a threshold amount. After applying these adjustments, for the highest rated institutions, those in Risk Category I, the total base assessment rate is between 7 and 24 basis points and for the lowest rated institutions, those in Risk Category IV, the total base assessment rate is between 40 and 77.5 basis points.
On May 22, 2009, the FDIC imposed a special assessment of five basis points on each FDIC-insured depository institution’s assets, minus its Tier 1 capital, as of June 30, 2009. The special assessment was collected on September 30, 2009, and the Bank paid an additional assessment of $588,000.
On November 12, 2009, the FDIC adopted a final rule that required insured institutions to prepay on December 31, 2009, estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011, and 2012. For purposes of calculating the prepayment amount, the institution’s third quarter 2009 assessment base was increased quarterly at a five percent annual growth rate through the end of 2012. On September 29, 2009, the FDIC also increased annual assessment rates uniformly by three basis points beginning January 1, 2011. On December 31, 2009, the Bank prepaid estimated assessments of $6.3 million.
As required by the Dodd-Frank Act, on February 7, 2011, the FDIC adopted a final rule that redefines its deposit insurance premium assessment base to be an insured depository institution’s average consolidated total assets minus average tangible equity. In addition, the FDIC has revised its deposit insurance rate schedules as a consequence of the changes to the assessment base. The proposed rate schedule and other revisions become effective on April 1, 2011.
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On November 21, 2008, the FDIC adopted final regulations implementing the Temporary Liquidity Guarantee Program (“TLGP”) pursuant to which depository institutions could elect to participate. Pursuant to the TLGP, the FDIC will (i) guarantee, through the earlier of maturity or June 30, 2012, certain newly issued senior unsecured debt issued by participating institutions on or after October 14, 2008 and before October 31, 2009 (the “Debt Guarantee”), and (ii) provide full FDIC deposit insurance coverage for non-interest bearing deposit transaction accounts regardless of dollar amount for an additional fee assessment by the FDIC (the “Transaction Account Guarantee”). The Bank opted out of the Transaction Account Guarantee portion of the TLGP. PNBC and the Bank did not opt out of the Debt Guarantee program, but did not issue any debt under the Debt Guarantee program. The Transaction Account Guarantee was to expire on December 31, 2009; however, it was extended to December 31, 2010 for those participating institutions that did not opt out.
The Dodd-Frank Act extended unlimited federal deposit insurance until January 1, 2013 to non-interest bearing transaction deposit accounts at all insured depository institutions. This coverage is applicable to all qualifying accounts at any FDIC-insured institution. There is no additional surcharge related to this coverage.
All FDIC-insured depository institutions must pay a quarterly assessment to provide funds for the payment of interest on bonds issued by the Financing Corporation, a federal corporation chartered under the authority of the Federal Housing Finance Board. The bonds (commonly referred to as FICO bonds) were issued to capitalize the Federal Savings and Loan Insurance Corporation.
Federal law permits adequately capitalized and adequately managed bank holding companies to acquire banks across state lines, without regard to whether the transaction is prohibited by state law. Any state law relating to the minimum age of target banks (not to exceed five years) or limits on the amount of deposits that may be controlled by a single bank or bank holding company applies. The FRB is not permitted to approve any acquisition if, after the acquisition, the bank holding company would control more than 10% of the deposits of insured depository institutions nationwide or 30% or more of the deposits in the state where the target bank is located. The FRB could approve an acquisition, notwithstanding the 30% limit, if the state waives the limit either by state regulation or order of the appropriate state official.
Banks are permitted to merge with one another across state lines and thereby create a main bank with branches in separate states. After establishing branches in a state through an interstate merger transaction, a bank can establish and acquire additional branches at any location in the state where any bank involved in the merger could have established or acquired branches under applicable federal or state law. Some states prohibited de novo branching or had reciprocity requirements; however, the Dodd-Frank Act removed such restrictions on interstate branching. As a result of the Dodd-Frank Act, interstate branching authority has been expanded and a state or national bank may open a de novo branch in another state if the law of the state where the branch is to be located would permit a state bank chartered by that state to open the branch. PNBC does not have current plans to acquire banking organizations located outside the state of Illinois.
National banks may establish operating subsidiaries to engage in activities in which the bank could engage directly.
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National banks are also authorized by the GLB Act to engage, through “financial subsidiaries,” in activities that are permissible for financial holding companies and activities that the Secretary of the Treasury, in consultation with the FRB, determines are financial in nature or incidental to any such financial activity, except (i) insurance underwriting, (ii) real estate development or real estate investment activities (unless otherwise permitted by law), (iii) insurance company portfolio investments, and (iv) merchant banking. A national bank’s authority to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investment in financial subsidiaries).
The GLB Act affected many other changes to federal law applicable to PNBC and the Bank. One of these changes was a requirement that financial institutions take steps to protect customers’ “nonpublic personal information.”
Pursuant to EESA, the U.S. Department of the Treasury (the “Treasury”) has the authority to among other things, purchase up to $700 billion of mortgages, mortgage-backed securities and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets. Pursuant to its authority under EESA, the Treasury created the Troubled Asset Relief Program (“TARP”) Capital Purchase Program (“CPP”) under which the Treasury was authorized to invest in non-voting, senior preferred stock of U.S. banks and savings associations or their holding companies.
PNBC elected to participate in the CPP and on January 23, 2009, PNBC completed the sale of $25.1 million of preferred stock to the Treasury. PNBC issued and sold (1) 25,083 shares of Fixed Rate Cumulative Perpetual Preferred Stock Series B, with a liquidation preference of $1,000 per share (the “Series B Preferred Shares”), and (2) a ten-year warrant (the “Warrant”) to purchase up to 155,025 shares of the PNBC’s common stock (“Common Stock”) at an exercise price of $24.27 per share, or an aggregate purchase price of $3.8 million in cash. Cumulative dividends on the Series B Preferred Shares will accrue at a rate of 5% per annum for the first five years, and at a rate of 9% per annum thereafter.
The securities purchase agreement, dated January 23, 2009 (the “Purchase Agreement”), between PNBC and the Treasury, pursuant to which the Series B Preferred Shares and the Warrant were sold, limits the payment of dividends on the Common Stock to the current quarterly cash dividend of $0.28 per share, limits PNBC’s ability to repurchase its Common Stock, and subjects PNBC to certain of the executive compensation limitations included in the EESA.
The restrictions on stock repurchases are in effect until the earlier to occur of January 23, 2012 (the third anniversary of the issuance of the Series B Preferred Shares to the Treasury) or the date on which the Company has redeemed all of the Series B Preferred Shares issued or the date on which the Treasury has transferred all of the Series B Preferred Shares to third parties not affiliated with the Treasury The terms of the Series B Preferred Shares, as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”), provide that the Series B Preferred Shares, may be redeemed by PNBC, in whole or in part, upon approval of the Treasury and PNBC’s primary banking regulators.
As a condition to the closing of the transaction, each of PNBC’s senior executive officers (as defined in the Purchase Agreement) executed a waiver voluntarily waiving any claim against the Treasury or PNBC for any changes to their compensation or benefits, as required to comply with the regulations issued by the Treasury under the TARP CPP. The senior executive officers also acknowledged that the regulations may require modification of the compensation, bonus, incentive and other benefit plans, arrangements and policies and agreements (including so-called “golden parachute” agreements) as they relate to the period the Treasury holds any securities of PNBC acquired through the CPP.
11
ARRA was enacted on February 17, 2009. Among other things, ARRA sets forth additional limits on executive compensation at all financial institutions receiving federal funds under any program, including the TARP CPP, both retroactively and prospectively. The executive compensation restrictions in ARRA include, among others: limits on compensation incentives, prohibitions on “Golden Parachute Payments” to certain employees, the establishment by publicly registered TARP CPP recipients of a board compensation committee comprised entirely of independent directors for the purpose of reviewing employee compensation plans, and the requirement of a non-binding vote on executive pay packages at each annual shareholder meeting until the government funds are repaid.
On January 24, 2011, PNBC notified the U.S. Treasury that it will defer regularly scheduled dividend payments on PNBC’s $25.1 million in Series B Preferred Shares and PNBC provided notice to Bank of America, N.A., as successor Trustee by merger, of PNBC’s $25 million in junior subordinated debt securities due 2035 (PNBC Capital Trust I) that PNBC is exercising its right to defer interest payments for a period of twenty (20) consecutive quarterly interest payment periods beginning with the next interest payment period of March 15, 2011, unless PNBC subsequently gives notice that it has elected to shorten such deferral period. By taking these actions, PNBC expects to save approximately $1.7 million in annual cash payments, based on current rates.
In June 2010, the Federal Reserve issued final guidance to ensure that incentive compensation arrangements at financial institutions take into account risk and are consistent with safe and sound practices. The guidance does not set forth any formulas or pay caps, but sets forth certain principles which companies would be required to follow with respect to employees and groups of certain employees that may expose the institution to material amounts of risk.
On March 15, 2010 the Bank entered into a written agreement (the “Agreement”) with the OCC. The Agreement sets forth the Bank’s commitments to: (i) review and take action as necessary regarding its allowance for loan and lease losses; (ii) improve the Bank’s asset quality through the development of workout plans for criticized assets and the assessment of credit risk; and (iii) revise the Bank’s credit risk rating management information system. The Bank has taken steps to address the issues raised in the Agreement and intends to fully comply with the requirements set forth in the Agreement.
Pursuant to the Agreement, the Bank’s Board of Director’s has reviewed on a monthly basis the adequacy of the Bank’s allowance for loan losses and established a program for the maintenance of an adequate allowance. The Bank also took immediate action to protect its interest in criticized assets and to adopt individual written workout plans with respect to such assets. A copy of the workout plans is provided to the OCC on a quarterly basis for any criticized asset equal to or exceeding $100,000. Under the agreement, the board ensures that the Bank’s internal ratings of loan relationships are timely, accurate, and consistent with the regulatory credit classification criteria established by the OCC.
The Bank’s risk management loan review staff reports independently to the Directors’ Loan Committee. The Directors’ Loan Committee reports further to the Bank’s Board of Directors. Management furnishes its reports and additional documentation to these committees on a regular basis. The internal loan review staff has been expanded, as has the scope of their loan reviews. The Directors’ Loan Committee has directed risk management to refine its loan review grading methodology to ensure that loans with a probability of payment default or well-defined weaknesses are graded substandard regardless of mitigating controls which might reduce the credit risk. The Directors’ Loan Committee monitors this process through bi-monthly meetings and reviews loan review reports to ensure compliance with the terms of the Agreement.
12
In the fourth quarter of 2010, the Bank filled a newly created role of Chief Credit Officer and established a credit administration division to oversee the development, maintenance, and monitoring of loan policies & procedures. Other responsibilities of the credit administration division include credit analysis, credit risk management, loan servicing and administration, collections, and the special assets group, as well as loan portfolio analysis and the allowance for loan losses. The functions of the special assets group include loss mitigation and workout of non-performing loans, liquidation of non-performing assets, and other responsibilities to accelerate and maximize loan recoveries. As part of establishing the new credit administration division, the Bank’s Chief Credit Officer identified and engaged experienced personnel to fill key roles within credit administration in continuing to address the Bank’s commitments relative to the Agreement.
Employees
Because PNBC’s principal activity is its ownership of Citizens Bank, it has a limited number of employees, generally the President and Chief Executive Officer, the Chief Financial Officer, the Corporate Secretary, and certain other officers who are necessary to fulfill the corporate requirements of PNBC. Each of these employees is dually-employed by Citizens Bank which is responsible for payroll.
As of December 31, 2010, Citizens Bank employed 275 full-time and 88 part-time employees. The Bank offers a variety of employee benefits. Citizens Bank employees are not represented by a union or a collective bargaining agreement, and employee relations are considered to be excellent.
Citizens Bank believes one of its strengths is its ability to attract and retain experienced and well-trained personnel who are knowledgeable of the market areas in which it operates. Management believes that PNBC generally has an easier time attracting and retaining quality employees than other banks in North Central Illinois. This is due primarily to its size and management style, which affords greater opportunities to employees for direct participation and development of managerial and banking skills.
In order to implement PNBC’s community banking philosophy and to promote itself as a community oriented organization, the Bank has a formal officer call program. Nearly every officer of the Bank calls on existing or potential customers and is expected to become actively involved in leadership positions in community organizations. As of December 31, 2010, officers and employees of the Bank participated in approximately 686 community organizations, providing over 16,150 hours of community service.
Available Information
Our Internet address is www.pnbc-inc.com. There we make available, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our SEC reports can be accessed through the investor relations section of our Web site. The information found on our Web site is not part of this or any other report we file with or furnish to the SEC.
13
You may also read and copy materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site (www.sec.gov) that contains reports, proxy statements and other information that we electronically file with the SEC.
Item 1A. Risk Factors
As a smaller reporting company under the SEC’s scaled reporting requirements, the Company is not required to include the information required by Item 1A of Forms 10-Q and 10-K, respectively. Accordingly, this information is omitted from this 10-K filing,
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
PNBC’s headquarters and Citizens Bank’s principal offices are located at 606 South Main Street, Princeton, Illinois. Also located at this address is an annex building completed in 1990. The two buildings at this location are owned by Citizens Bank and contain approximately 36,000 square feet of space, all of which is occupied by PNBC and Citizens Bank. Citizens Bank also has two drive-up facilities in Princeton and branch offices in Aurora, DePue, Genoa, Hampshire, Henry, Huntley, Millbrook, Minooka, Newark, Oglesby, Peru, Plainfield, Plano, Sandwich, Somonauk and Spring Valley. Citizens Bank is the owner of each of these facilities. None of the facilities owned by the Bank are subject to a mortgage. Additionally, the mortgage banking department of the Bank is located in Spring Valley in a separate location from the branch office. This location is not owned by the Bank and is rented by lease agreement. For additional information regarding these properties, see Footnote 6 of Item 8 of this report.
Item 3. Legal Proceedings
The Bank is subject to legal proceedings and claims that arise in the ordinary course of business. Although management of the Corporation cannot predict the ultimate outcome of such matters, it believes that the ultimate resolution of these matters will not have a material adverse effect on the Corporation, the Bank, or the Corporation’s financial position, liquidity, and results of operations.
14
Item 4. Reserved
Supplemental Item - Executive Officers
The following table sets forth information regarding the executive officers:
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Name |
|
Age |
|
Position |
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|
|
Thomas D. Ogaard |
|
54 |
|
President & Chief Executive Officer |
|
Todd D. Fanning |
|
48 |
|
Executive Vice President & COO / CFO |
|
Kenneth W. Grams |
|
46 |
|
Executive Vice President & Chief Credit Officer |
|
Jacqualyn L. Karlosky |
|
50 |
|
Senior Vice President – Consumer Banking |
Thomas D. Ogaard has been President and Chief Executive Officer of PNBC since February 2, 2010, and was appointed to the Board of Directors of PNBC and Citizens Bank on September 25, 2009. He joined Citizens Bank on August 31, 2009. Mr. Ogaard started his career in banking in 1978 and most recently was employed by State Bank of Park Rapids, Minnesota as Executive Vice President and Chief Loan Officer.
Todd D. Fanning joined Citizens Bank in 1990 as Assistant Vice President & Controller and has been the Chief Financial Officer of PNBC since 1997. He was appointed to the Board of Directors of PNBC and Citizens Bank on February 2, 2010. Mr. Fanning currently is the Executive Vice-President & Chief Operating Officer/Chief Financial Officer of Citizens Bank.
Jacqualyn L. Karlosky joined Citizens Bank in 1994 as Assistant Vice President & Branch Manager. Ms. Karlosky became Senior Vice President – Consumer Banking in 2002 and remains in that capacity.
Kenneth W. Grams joined Citizens Bank in 2010 as Executive Vice President & Chief Credit Officer and remains in that capacity. Prior to joining Citizens Bank, Mr. Grams served as Senior Vice President and Chief Administration Officer for Loan Star National Bank, McAllen, Texas from 2009 to 2010 and as Senior Vice President of Credit Administration for Viewpoint Bank, Plano, Texas from 2004 to 2009.
15
PART II
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Item 5. |
Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities |
(a) Since May 15, 1992, PNBC’s Common Stock has been listed on the NASDAQ Stock Market, under the symbol PNBC.
The table below indicates the high and low sales prices, and the dividends declared per share for PNBC Common Stock during the periods indicated.
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Cash |
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Prices |
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High |
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Low |
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|||
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2010 |
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|
|
|
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|
|
|
|
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|
Fourth Quarter |
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$ |
5.50 |
|
$ |
2.73 |
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$ |
.00 |
|
|
Third Quarter |
|
|
6.50 |
|
|
4.65 |
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|
.00 |
|
|
Second Quarter |
|
|
10.00 |
|
|
5.50 |
|
|
.00 |
|
|
First Quarter |
|
|
11.50 |
|
|
8.01 |
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|
.00 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
2009 |
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|
|
|
|
|
|
|
|
|
|
Fourth Quarter |
|
$ |
15.99 |
|
$ |
9.70 |
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$ |
.14 |
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Third Quarter |
|
|
18.94 |
|
|
13.39 |
|
|
.14 |
|
|
Second Quarter |
|
|
15.75 |
|
|
13.49 |
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|
.14 |
|
|
First Quarter |
|
|
23.06 |
|
|
12.30 |
|
|
.28 |
|
On December 31, 2010, PNBC had 758 registered holders of record of its Common Stock.
The holders of the Common Stock are entitled to receive such dividends as are declared by the Board of Directors of PNBC, which considers payment of dividends quarterly. The ability of PNBC to pay dividends is dependent upon receipt of dividends from the Bank. In determining cash dividends, the Board of Directors considers the earnings, capital requirements, debt servicing requirements, financial ratio guidelines established by the Board, the financial condition of PNBC and other relevant factors. The Bank’s ability to pay dividends to PNBC is subject to regulatory restrictions. See “Supervision and Regulation.”
PNBC paid regular cash dividends on the Common Stock since it commenced operations in 1982 through 2009. The Company suspended its dividend in the first quarter of 2010. There can be no assurance when dividends will be resumed by PNBC. The timing and amount of dividends will depend upon the earnings, capital requirements, and financial condition of PNBC and the Bank as well as the general economic conditions and other relevant factors affecting PNBC and the Bank. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
16
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(c) |
The following table provides information about purchases of the Company’s common stock by the Company during the quarter ended December 31, 2010: |
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Period |
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(a) Total number of |
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(b) Average price paid |
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(c) Total number |
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(d) Maximum number |
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10/1/10 – 10/31/10 |
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0 |
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$ |
0.00 |
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|
|
0 |
|
|
0 |
|
|
11/1/10 – 11/30/10 |
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|
0 |
|
|
$ |
0.00 |
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0 |
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|
0 |
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|
12/1/10 – 12/31/10 |
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0 |
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$ |
0.00 |
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0 |
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0 |
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Total |
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|
0 |
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$ |
0.00 |
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|
|
0 |
|
|
0 |
|
(1) The Company does not currently have a stock repurchase plan in place.
The performance graph required by item 201(e) of Regulation S-K is incorporated by reference from Page 55 of the Company’s Annual Report.
Item 6. Selected Financial Data
Information regarding the Company’s selected financial data is included on page 53 of the Company’s Annual Report, which information is incorporated by reference herein.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Information regarding the Company’s management’s discussion and analysis of financial condition and results of operations is included on pages 38-51 in the Company’s Annual Report, which information is incorporated by reference herein.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The information required by Item 305 of Regulation S-K is contained in the Company’s Annual Report on pages 49-51, under the headings “Asset Liability Management” and “Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements”, which information is incorporated herein by reference.
Item 8. Consolidated Financial Statements and Supplementary Data
Information regarding the Company’s consolidated financial statements and supplementary data is included on pages 10-37 and page 52 in the Company’s Annual Report, which information is incorporated by reference herein.
17
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
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(a) |
Disclosure controls and procedures. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Our disclosure controls and procedures are the controls and other procedures that we designed to ensure that we record, process, summarize and report in a timely manner the information we must disclose in reports that we file with or submit to the SEC. Thomas D. Ogaard, President and Chief Executive Officer, and Todd D. Fanning, Executive Vice President and Chief Operating Officer / Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Ogaard and Fanning concluded that, as of the date of their evaluation, our disclosure controls were effective. |
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(b) |
Internal controls. The report required by Item 308 of Regulation S-K is attached hereto as Exhibit 99.1 and is incorporated herein by reference. Included in Exhibit 99.1 is a discussion of changes in our internal controls over financial reporting during the quarter ended December 31, 2010 that materially affected or are reasonably likely to materially affect those controls. |
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Certain information regarding executive officers of the Company is included as a Supplementary Item at the end of Part I of this Form 10-K.
Information regarding executive officers and directors of the Company and the Company’s Audit Committee is included in the Corporation’s Definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 10, 2011 (the “Proxy Statement”) under the captions “Proposal 1-Election of Directors” and “Board of Directors’ Meetings and Committees”, which information is incorporated by reference herein.
Information regarding compliance with Section 16(a) of the Exchange Act is included in the Proxy Statement under the caption “Section 16(a) Beneficial Ownership Compliance Reporting”, which information is incorporated by reference herein.
Information regarding the Corporation’s Code of Ethics is included in the Proxy Statement under the caption “Code of Ethics”, which information is incorporated by reference herein.
18
Information regarding an Audit Committee Financial Expert is included in the Proxy Statement under the caption “Audit Committee Financial Expert”, which information is incorporated by reference herein.
Item 11. Executive Compensation
Information regarding executive compensation is included in the Proxy Statement under the captions “Board of Directors’ Meetings and Committees”, “Compensation of Directors”, and “Executive Compensation Discussion”, which information is incorporated by reference herein.
The information called for by items 407(e)(4) and (5) is not required for smaller reporting companies.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
Information regarding security ownership is included in the Proxy Statement under the captions “Security Ownership of Directors, Nominees for Director, Most Highly Compensated Executive Officers and All Directors and Executive Officers as a Group” and “Security Ownership of Certain Beneficial Owners,” which information is incorporated by reference herein.
Equity Compensation Plan Information
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Plan Category |
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Number of securities to |
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Weighted-average |
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Number of securities |
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Equity compensation plans approved by security holders |
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555,277 |
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$ |
23.60 |
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63,082 |
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Equity compensation plans not approved by security holders |
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N/A |
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N/A |
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5,548 |
(1) |
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Total |
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555,277 |
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$ |
23.60 |
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68,440 |
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(1) Represents shares issuable under the Company’s Amended and Restated Employee Stock Purchase Plan (the “ESPP”). The ESPP is a broad-based plan which was originally adopted by the Company in October, 1994 and has been amended and restated to increase the number of shares issuable under the ESPP to the current maximum of 140,000 shares. Under the ESPP, eligible employees and directors may purchase PNBC common stock without incurring any brokerage commissions or service charges using lump sum contributions and/or payroll deductions, in the case of employees.
19
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding relationships and transactions is included in the Proxy Statement under the captions “Certain Transactions” and “Board of Directors’ Meetings and Committees,” which information is incorporated by reference herein.
Item 14. Principal Accountant Fees and Services
Information regarding principal accountant fees and services is included in the Proxy Statement under the caption “Audit Committee Report”, which information is incorporated by reference herein.
Item 15. Exhibits and Financial Statement Schedules
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(a)(1) |
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The following is a list of the Financial Statements included in Part II, Item 8 of this report: |
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Report of Independent Registered Public Accounting Firm |
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Consolidated Balance Sheets as of December 31, 2010 and 2009. |
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Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008. |
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Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2010, 2009, and 2008. |
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Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009, and 2008. |
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Notes to Consolidated Financial Statements. |
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(a)(2) |
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Financial Statement Schedules |
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No consolidated financial statement schedules are required to be included in this Report on Form 10-K. |
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(a)(3) |
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Exhibits |
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The exhibits filed herewith are listed on the Exhibit Index filed as part of this report on Form 10-K. Each management contract or compensatory plan or arrangement of the Company listed on the Exhibit Index is separately identified by an asterisk. |
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20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registration has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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PRINCETON NATIONAL BANCORP, INC. |
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By. |
/s/ Thomas D. Ogaard |
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Thomas D. Ogaard, President and Chief Executive Officer |
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Date: |
March 30, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ Thomas D. Ogaard |
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President & Chief Executive Officer & Director |
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(Principal Executive Officer) |
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Thomas D. Ogaard |
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/s/ Todd D. Fanning |
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Executive Vice-President & Chief Operating Officer / Chief |
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||
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Financial Officer & Director |
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Todd D. Fanning |
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(Principal Accounting and Financial Officer) |
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/s/ |
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Chairman of the Board |
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Craig O. Wesner |
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/s/ |
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Director |
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Gretta E. Bieber |
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/s/ Gary C. Bruce |
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Director |
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Gary C. Bruce |
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/s/ Sharon L. Covert |
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Director |
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Sharon L. Covert |
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/s/ |
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Director |
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John R. Ernat |
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/s/ Mark Janko |
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Director |
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Mark Janko |
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/s/ |
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Director |
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Willard Lee |
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/s/ Stephen W. Samet |
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Director |
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Stephen W. Samet |
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21
INDEX TO EXHIBITS
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Exhibit |
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Exhibit |
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3.1 |
Amended and Restated Certificate of Incorporation of Princeton National Bancorp, Inc. (“PNBC”) (incorporated by reference from Exhibit 4.1 to the PNBC Registration Statement on Form S-3 (Registration No. 333-157451)). |
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3.2 |
By-Laws of PNBC (incorporated by reference from Exhibit 3.2 of the 2007 PNBC Annual Report on Form 10-K). |
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4.1 |
Certificate of Designation of Series A Junior Participating Preferred Stock (incorporated by reference from Registration Statement on Form 8-A filed by PNBC on August 1, 2003 (File No. 000-20050)). |
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4.2 |
Certificate of Designations of Series B Preferred Stock (incorporated by reference from Exhibit 3.1 to Form 8-K filed on January 27, 2009). |
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4.3 |
Trust Preferred Securities Indenture (incorporated by reference from Exhibit 4.1 from PNBC Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). |
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4.4 |
Warrant to purchase up to 155,025 shares of Common Stock issued January 23, 2009 (incorporated by reference from Exhibit 4.1 to the Form 8-K filed on January 29, 2009). |
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10.1* |
Employment Agreement, dated as of January 25, 2010, between PNBC and Thomas D. Ogaard (incorporated by reference from the Form 8-K filed by PNBC on January 29, 2010). |
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10.2* |
Citizens First National Bank Profit Sharing Plan, as amended and restated January 1, 1989 (incorporated by reference from Exhibit 10.4 to the S-1 Registration Statement (33-46362)). |
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10.3* |
Citizens First National Bank Defined Contribution Plan and Trust, as amended and restated January 1, 1989 (incorporated by reference from Exhibit 10.5 to the S-1 Registration Statement). |
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10.4* |
Princeton National Bancorp, Inc. Stock Option Plan (incorporated by reference from Schedule 14A filed by PNBC on March 6, 1998). |
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10.5* |
Princeton National Bancorp, Inc. Management Incentive Compensation Plan (incorporated by reference from Exhibit 10.7 of the 2001 PNBC Annual Report on Form 10-K). |
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10.6* |
Princeton National Bancorp, Inc. 2003 Stock Option Plan (incorporated by reference from Schedule 14A filed by PNBC on March 19, 2003). |
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10.7* |
Form of Stock Option Agreement (incorporated by reference from Exhibit 10.9 of the 2004 PNBC Annual Report on Form 10-K). |
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10.8* |
Amendment to Stock Option Agreement (incorporated by reference from Exhibit 10.10 of the 2005 PNBC Annual Report on Form 10-K). |
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10.9 |
Trust Preferred Securities Purchase Agreement (incorporated by reference from Exhibit 10.1 to PNBC Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). |
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10.10 |
Trust Preferred Securities Declaration of Trust (incorporated by reference from Exhibit 10.2 to PNBC Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). |
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10.11 |
Trust Preferred Securities Guarantee Agreement (incorporated by reference from Exhibit 10.3 to PNBC Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). |
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10.12* |
2007 Stock Compensation Plan (incorporated by reference from Schedule 14A filed by PNBC on March 14, 2007). |
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10.13 |
Letter Agreement with U.S. Treasury dated January 23, 2009 including Securities Purchase Agreement (incorporated by reference from Form 8-K filed on January 29, 2009). |
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10.14 |
Form of Waiver of Senior Executive Officers (incorporated by reference from Exhibit 10.2 to Form 8-K filed on January 29, 2009). |
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10.15 |
Form of Omnibus Amendment Agreement (incorporated by reference from Exhibit 10.3 to Form 8-K filed on January 29, 2009). |
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13 |
Portions of 2010 Annual Report to Shareholders. |
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14 |
Code of Ethics (incorporated by reference from Exhibit 14 of the 2003 PNBC Annual Report on Form 10-K). |
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21 |
Subsidiaries of PNBC. |
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23.1 |
Consent of BKD, LLP. |
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31.1 |
Certification of Thomas D. Ogaard required by Rule 13a-14(a). |
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31.2 |
Certification of Todd D. Fanning required by Rule 13a-14(a). |
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32.1 |
Certification of Thomas D. Ogaard required by Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
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32.2 |
Certification of Todd D. Fanning required by Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350. |
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99.1 |
Report of Management on Internal Control over Financial Reporting. |
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99.2 |
31 C.F.R. Section 30.15 Certification of Thomas D. Ogaard. |
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99.3 |
31 C.F.R. Section 30.15 Certification of Todd D. Fanning. |
* Management contract or compensatory plan.
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