Noninterest income of $560,000 for the three months ended June 30, 2010 represents a decrease of $106,000 when compared to the same period last year. The results for last year include higher levels of mortgage brokerage referral fees and higher earnings on the cash surrender value of life insurance. Noninterest expenses of $7.3 million are $111,000 or 1% less than those recorded for the second quarter of 2009.

Total assets decreased $49.9 million from $866.4 million at December 31, 2009 to $816.4 million at June 30, 2010. Total loans decreased $41.2 million from $645.2 million at December 31, 2009 to $603.9 million at June 30, 2010.

Total deposits decreased $46.1 million from $761.3 million at December 31, 2009 to $715.2 million at June 30, 2010. Much of the decrease in deposits can be attributed to Bancorp’s strategy to reduce rate sensitive deposits resulting in a lower cost of funds and an improvement in spreads.

Strategic balance sheet management and a reduction in higher risk loans resulted in an increase in Bancorp’s Capital Ratios at June 30, 2010 compared to December 31, 2009:


June 30, 2010

December 31, 2009
Total Risk Based Capital 8.70% 8.58%
Tier 1 Risk Based Capital 7.36% 7.22%
Tier 1 Leverage 4.74% 4.72%

As of June 30, 2010 Bancorp and the Bank are considered “adequately capitalized” under applicable regulatory guidelines. There are no conditions or events since then that management believes have changed the Bank’s classification. As previously disclosed, Bancorp, the Bank and PNBK Holdings LLC, an unaffiliated entity, entered into a Securities Purchase Agreement dated as of December 16, 2009, as amended by that certain First Amendment to Securities Purchase Agreement dated as of May 3, 2010 (the “SPA”) pursuant to which Bancorp has agreed to issue and sell and PNBK Holdings has agreed to purchase 33,333,333 shares of Bancorp common stock (as adjusted) for $50,000,000, subject to certain conditions and contingencies. This transaction is expected to close in the third quarter of 2010. The capital raised from the SPA should restore the Bank to the well capitalized regulatory classification.