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2008 Interview with: Princeton National Bancorp, Inc. (PNBC-NASDAQ), President and CEO, Tony J. Sorcic - featuring: their Citizens First National Bank, a $1.128 billion community bank with strategic locations in 8 counties in northern Illinois.. |
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| Princeton National Bancorp, Inc. (PNBC-NASDAQ) | |
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Agriculture Is Having The Best Year Ever
And Several Ethanol Plants Are In Operation Or Under Development In PNBC’s
Market Area
Princeton National Bancorp, Inc. is the parent
holding company of Citizens First National Bank, a $1.128 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. Mr. Sorcic: “Our vision for Princeton National Bancorp is to continue managed growth through expansion and acquisition in north-central Illinois. We are moving closer to the suburban expansion that is occurring in and around the Chicago area. We have grown from one location in Princeton to twenty-one locations and that is since the holding company was formed in 1982.”
CEOCFO: What is the economy like in the area that you are servicing today? Mr. Sorcic: “The economy is diverse. Western markets are very heavily engaged in agriculture and if you have been following commodity prices agriculture is having one of the best years in the history of the world! The economy in these markets is very strong. Also, several ethanol plants are beginning production in north-central Illinois, which also has added to this economic strength. As we move further east it becomes more heavily residential and commercial development and we have seen those markets, which were up until the last year, have slowed down fairly significantly. However, the economy is still healthy overall and it doesn’t reflect what you see in the national media.”
CEOCFO: Is there a typical customer for you? Mr. Sorcic: “It would depend on which market. We modify our approach based on the market needs and we do that fairly well. It takes a little ingenuity, creativity and good people. We hire the best bankers in each market and develop products in and around their customer base. In one market, Huntley, we are adjacent to a Del Webb development, which is mostly senior-focused. We have different products there than we do in Minooka, which is primarily young families, fast-growing schools, and communities that attract builders. In our traditional markets, our customers are savers/investors, large Ag production and public entities. With the right people and the right creativity, we develop products based on market needs.”
CEOCFO: Your website shows that “the inside ideas of our employees are key to our success;” please give us an example of how that comes into play. Mr. Sorcic: “A good example would be community service. With our staff, this is part of their job requirement. When we interview to fill openings we make it clear we want them actively involved and to be part of the solution not part of the problem in each community. We provide them the freedom during work time to participate and take steps to improve their community and in the end, the bank benefits. Other examples of ingenuity are the products and relationships with customers. This is another strength of the Bank. We have customers who have been customers for generations. It is the ingenuity of the staff to think of better ways to serve the customer, such as a new internet-banking product where we installed the best security in the country. In fact, we had that security in place before many very large banks had it. That is part of understanding the concern of the customer and then having a staff with the ingenuity to go out and find the security tools to satisfy that customer concern.”
CEOCFO: Are many of your customers taking advantage of your variety of services or is that an area of growth for you? Mr. Sorcic: “It has been a focus of ours for many years. We have had a corporate sales manager for many years and part of the vision was to fully bank each customer. Therefore, rather than having just a checking account or a mortgage loan, we try to have multiple services per customer. We incent our staff to fully bank those customers. The customer has the need, but they don’t necessarily understand how our products might make their life easier or might save or make them more money. We train the staff to effectively explain this to the customer and then the customer better understands how we can help them further and they purchase additional services with us.”
CEOCFO: Do you see new branches in the future? Mr. Sorcic: “Definitely! We will continue to grow through branch expansion. There are certain communities we have highlighted for future expansion and if there is not a suitable acquisition then we would consider building a branch. Currently, we have not done an acquisition or developed a new location for about a year, which was a conscious decision on our part. With the economy slowing down and some banks having difficulties we do not believe this is a good time to expand. However, we were not having those problems as evidenced by our record performance.”
CEOCFO: The first six months of 2008 were a 37% % increase over the prior year; with so many banks having problems what accounts for your success? Mr. Sorcic: “We have focused on the various segments of our earnings. One is our net interest margin; we put a committee together internally that focused on how we could improve the margin over several months and the group has obviously achieved positive results. Second, we focused on diversifying our fee income sources, and this has helped us exceed 1% of assets for many months. The third focus was to better control operating expenses. This was in anticipation that times might be getting a bit tougher. Operating expenses (as a percent of assets) are the lowest since the 1980’s. Fee income has grown at double-digits rates each year for several years. Those three initiatives are very important. The fourth and equally important is have a loan policy and stick with it, don’t make compromises, don’t get into businesses that you don’t understand. You pay management to do things but you also pay management not to do things and we like to think that we have avoided many of the landmines you read about today.”
CEOCFO: Do you have customers with more concerns these days and do you have to spend time to help them more than in the past? Mr. Sorcic: “Certainly, and that is the strength of all community banks. We live in these communities, go to church here, we shop here, go to the high-school football games here, so you naturally develop relationships with customers. We reach out to our customers when they have problems and as long as they are cooperative, we will work with them. Another strength of our organization is our very low turnover (about 8% a year), which is approximately a third of the industry average. Therefore, we are able to retain staff, which then allows us more time to develop relationships with customers. You are naturally more willing to cooperate and help customers you know. The new challenge, which has occurred over the last several months as the national media has pounded on safety and soundness and FDIC coverage. We took a proactive approach; with radio and newspaper ads stressing the security, safety success and longevity of the bank. We have been around since 1865, so we have been through many of these challenging cycles. The campaign has reassured customers and we have picked up many new customers because of it. There is a flight to safety; they feel good about putting their life savings with us.”
CEOCFO: Is the investment community paying attention? Mr. Sorcic: “Certainly! We have seen our stock price up over 10% this year when almost every one of our peers is down between 8% and 80%. I believe the investors are very well attuned and very responsive to the message that we put out there.”
CEOCFO:
It’s your 94th consecutive dividend?
CEOCFO: What is ahead? Mr. Sorcic: “We will continue to do the best job we can to improve our performance. Currently, we are earning approximately 12% return on equity. Our goal, as the economy rebounds, is to improve that further. We are also focusing on new products that will make us more efficient internally and also to attract the younger segments of the population. We are well geared for that with technology and technology is a big equalizer. The younger generation does require a different level of service, a different type of service and we have been investing in satisfying those needs.”
CEOCFO: It goes back to what you said about treating each segment differently. Mr. Sorcic: “Definitely.”
CEOCFO: In closing, why should investors be interested in Princeton National Bancorp today?
Mr.
Sorcic: “If
they are looking for a stable successful community bank that understands its
markets and understands its business, we would be a great candidate. We are
located in eight counties in north-central Illinois, have a terrific track
record, and have grown from one branch to 21. PNBC has a very stable
employee base of which 80% are shareholders of the company. Therefore, when
you add all those strengths together it does make for an attractive
investment.” |
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“Our vision for Princeton National Bancorp is to continue managed growth through expansion and acquisition in north-central Illinois. We are moving closer to the suburban expansion that is occurring in and around the Chicago area. We have grown from one location in Princeton to twenty-one locations and that is since the holding company was formed in 1982.” - Tony J. Sorcic |
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