PNBC Princeton National Bancorp Inc (CE)

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

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Filed by a party other than the Registrant		o

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o		Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

PRINCETON NATIONAL BANCORP, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 28, 2009

Dear Stockholder:

     The Annual Meeting of Stockholders of Princeton National Bancorp, Inc., a Delaware corporation, will be held at The Galleria Convention Center, 1659 North Main Street, Princeton, Illinois, on Tuesday, April 28, 2009 at 10:00 a.m., for the purpose of considering and voting upon:

	(1)		the election of four directors for a term of three years;
	(2)		advisory vote on executive compensation; and
	(3)		such other business as may properly come before the meeting or any adjournment thereof.

     Stockholders of record at the close of business on February 27, 2009 will be entitled to notice of, and to vote at, the meeting.

     The Company’s Annual Report to Stockholders for the year ended December 31, 2008 is enclosed.

IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE VOTE, SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF THE PROXY IS MAILED IN THE UNITED STATES.

Lou Ann Birkey
Vice President – Investor Relations
and Corporate Secretary

March 16, 2009

TABLE OF CONTENTS

PROXY STATEMENT
March 16, 2009

     This Proxy Statement and the accompanying proxy are being furnished in connection with the solicitation of proxies by the Board of Directors of Princeton National Bancorp, Inc. (the “Company”) (NASDAQ: PNBC) from holders of the Company’s outstanding shares of common stock, par value $5.00 per share (the “Common Stock”), for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on April 28, 2009 at 10:00 a.m. at The Galleria Convention Center, 1659 North Main Street, Princeton, Illinois, or at any adjournment thereof, for the purposes set forth in the accompanying Notice of Meeting and in this Proxy Statement. The Company will bear the costs of soliciting proxies from its stockholders. In addition to soliciting proxies by mail, directors, officers and employees of the Company, without receiving additional compensation therefor, may solicit proxies by telephone or in person. This Proxy Statement and proxy are first being mailed to the Company’s stockholders on or about March 16, 2009.

Voting at the Annual Meeting

     The close of business on February 27, 2009 has been fixed as the record date for the determination of stockholders of the Company entitled to notice of, and to vote at, the Annual Meeting. As of the close of business on that date, 3,298,041 shares of Common Stock were outstanding and are entitled to vote at the Annual Meeting.

     Each proxy that is properly voted, signed and received prior to the Annual Meeting will, unless such proxy has been revoked, be voted in accordance with the instructions on such proxy. If no instructions are indicated, proxies will be voted “FOR” the approval of the proposals described in this Proxy Statement and “FOR” the election of all nominees named in the Proxy Statement. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their judgment. Any stockholder has the right to revoke a proxy at any time prior to its exercise at the Annual Meeting. A proxy may be revoked by properly executing and submitting to the Company a later-dated proxy or by mailing written notice of revocation to Princeton National Bancorp, Inc., 606 South Main Street, Princeton, Illinois 61356, Attention: Lou Ann Birkey, Vice President – Investor Relations and Corporate Secretary. A stockholder may also revoke a proxy by appearing at the Annual Meeting and voting in person. Proxies are valid only for the meeting specified therein or any adjournment of such meeting.

     A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of Common Stock, represented in person or by proxy, shall constitute a quorum for the transaction of business at the Annual Meeting. Votes cast by proxy or in person at the Annual Meeting will be tabulated by the judges of election appointed for the meeting. The judges will determine whether a quorum is present and, for purposes of determining the presence of a quorum, will treat abstentions as shares that are present and entitled to vote. Under certain circumstances, a broker or other nominee may have discretionary authority to vote shares of Common Stock, if instructions have not been received from the beneficial owner or other person entitled to vote. If a broker or other nominee indicates on the proxy that it does not have instructions or discretionary authority to vote certain shares of Common Stock on a particular matter (a “broker non-vote”), those shares will be considered as

present for purposes of determining whether a quorum is present, but will not have the effect of votes for or against any proposal.

     Under Proposal 1, the four nominees for director who receive the greatest number of votes cast in person or by proxy at the Annual Meeting shall be elected directors of the Company.

     Under Proposal 2, the affirmative vote of a majority of the shares cast is needed to approve the advisory proposal on the compensation of the Company’s named Executive Officers.

     Shares of Common Stock of the Company will be voted as specified. If no specification is made, shares will be voted FOR the nominees for director named below, for Proposal 2, and IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES as to any other matters which may properly come before the meeting.

PROPOSAL 1
ELECTION OF DIRECTORS

     The Company’s Board of Directors is currently comprised of twelve directors who are divided into three classes. One class is elected each year for a three-year term. At the Annual Meeting, Directors Bieber, Bruce, Ernat, and Sorcic will be nominated to serve in Class II until the Annual Meeting of Stockholders to be held in 2012 and until their successors have been duly elected and qualified.

     All of the nominees are currently serving as directors of the Company. Each of the nominees has agreed to serve as a director, if elected, and the Company has no reason to believe that any nominee will be unable to serve. In the event of the refusal or inability of any nominee for director of the Company to serve as a director, the persons named in the accompanying form of proxy shall vote such proxies for such other person or persons as may be nominated as directors by the Board of Directors of the Company, unless the number of directors shall have been reduced by the Board.

     All of the nominees and directors continuing in office also served on the Board of Directors of the Company’s wholly-owned subsidiary, Citizens First National Bank (“Citizens Bank”) during 2008, except for Directors Covert, Ernat, Lee and Janko.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE FOUR NOMINEES LISTED ON THE NEXT PAGE:

Name and Age at		Position, Principal Occupation, Business Experience and
December 31, 2008		Directorship
		Class II Directors – Nominees for Three-Year Terms Expiring in 2012
Gary C. Bruce, 56		Director since 2001. Owner of Bruce Jewelers. Also a member of the Company’s Audit Committee.
John R. Ernat, 60		Director since 1994. Partner in I. Ernat & Sons, a farming operation.
Gretta E. Bieber, 56		Appointed to the Board January 26, 2009. Attorney with Alshuler, Simantz & Hem LLC. Director of Citizens First National Bank since 2005.
Tony J. Sorcic, 55		Director since 1986. President and Chief Executive Officer of the Company since January 1997. Also a member of the Executive Committee. President and Chief Executive Officer of Citizens First National Bank since 1995.
		Class III Directors – Terms Expire in 2010
Daryl Becker, 71		Director since 2002. Owner of Beck Oil Company. Also a member of the Company’s Audit Committee.
Sharon L. Covert, 65		Director since 2001. Secretary/Treasurer of Covert Farms, Inc., a farming operation.
Mark Janko, 53		Director since 2002. Owner and President of Janko Realty and Development, a real estate development company.
Willard Lee, 79		Director since 2005. Retired President of Somonauk FSB Bancorp, Inc. and Farmers State Bank.
Stephen W. Samet, 64		Director since 1986. President and General Manager of WZOE, Inc., a commercial radio broadcasting company. Also a member of the Company’s Audit and Executive Committees.
		Class I Directors –Terms Expire in 2011
Donald E. Grubb, 68		Director since 1991. President of Grubb Farms, Inc., a farming operation. Also a member of the Company’s Executive Committee.
Ervin I. Pietsch, 67		Director since 1994. Retired Vice President, Ideal Industries, Inc., a manufacturer of electrical test equipment.
Craig O. Wesner, 67		Director since 1997. Retired General Manager of Ag View FS, Inc., a farm supply cooperative. Also a member of the Company’s Executive Committee.

PROPOSAL 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION

     On February 17, 2009, the President signed into law the American Recovery and Reinvestment Act of 2009. Among other things, the broad sweeping legislation requires that “TARP recipients during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding shall permit a separate [nonbinding] shareholder vote to approve the compensation of executives, as disclosed pursuant to the compensation disclosure rules of the Commission.” The nonbinding vote is required annually at each annual or other meeting of shareholders during the period that any obligation arising from financial assistance provided under the TARP remains outstanding.

     On January 23, 2009, the Company completed the sale of $25.1 million of preferred stock and a warrant to purchase up to 155,025 shares of the Company’s common stock to the U.S. Treasury under the TARP Program. As a result, the Company is submitting this nonbinding proposal for consideration by shareholders in compliance with Section 7001 of the American Recovery and Reinvestment Act of 2009.

     This proposal, commonly known as a “ Say-on-Pay ” proposal, gives you as a shareholder the opportunity to endorse or not endorse our executive pay program and policies through the following resolution:

“Resolved, that the shareholders approve the executive compensation of the Company, as described in the “Compensation Discussion and Analysis” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement. ”

     Because your vote is advisory, it will not be binding upon the Board. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE EXECUTIVE COMPENSATION OF THE COMPANY, AS DESCRIBED IN THE “COMPENSATION DISCUSSION AND ANALYSIS”, AND THE TABULAR DISCLOSURE REGARDING NAMED EXECUTIVE OFFICER COMPENSATION (TOGETHER WITH THE ACCOMPANYING NARRATIVE DISCLOSURE) IN THIS PROXY STATEMENT.

SECURITY OWNERSHIP OF DIRECTORS, NOMINEES FOR DIRECTOR,
MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS AND ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP

     The number and percentage of shares of Common Stock beneficially owned as of February 27, 2009 are listed below for each executive officer and director of the Company. Except as set forth below, the nature of each director’s beneficial ownership is sole voting and investment power.

		Amount and Nature				Percent of
		of Beneficial Ownership				Common Stock
Daryl Becker			16,664	1			*
Gary C. Bruce			16,501	2			*
Gretta E. Bieber			4,612	3			*
Sharon L. Covert			15,797	4			*
John R. Ernat			23,808	5			*
Donald E. Grubb			29,704	6			*
Mark Janko			17,751	7			*
Willard Lee			9,594	8			*
Ervin I. Pietsch			36,240	9			1.10	%
Stephen W. Samet			27,616	10			*
Tony J. Sorcic			111,537	11			3.38	%
Craig O. Wesner			28,749	12			*

All directors and executive officers (16 persons) of the Company and/or Citizens Bank, as a group, beneficially own 398,605 shares of Common Stock, or 12.09% of the outstanding Common Stock.

Board of Directors’ Meetings and Committees

     The Board of Directors held five meetings during 2008. The Board of Directors has an Executive Committee, an Audit Committee, a Compensation Committee and an ad hoc Nominating Committee. Each director of the Company attended at least 75% of the meetings of the Board of Directors and the Committees on which he or she served. The Board of Directors has determined that Becker, Bieber, Bruce, Covert, Ernat, Grubb, Janko, Lee, Pietsch, Samet and Wesner are independent as independence is defined in the NASDAQ’s listing standards, as those standards have been modified or supplemented.

Executive Committee

     The Executive Committee is authorized, to the extent permitted by law, to act on behalf of the Board of Directors of the Company in the interim between meetings of the Board. Directors Donald E. Grubb, Tony J. Sorcic, Stephen W. Samet and Craig O. Wesner are members of the Executive Committee. The Committee did not meet in 2008.

Audit Committee

     The Audit Committee has the responsibility for reviewing the scope of internal and external audit procedures, reviewing the results of internal and external audits conducted with respect to the Company and Citizens Bank and periodically reporting such results to the Board of Directors. Directors Daryl Becker, Gary C. Bruce and Stephen W. Samet are members of the Audit Committee. The Committee met six times during 2008.

Nominating Committee

     The Board of Directors has an ad hoc Nominating Committee. The Nominating Committee identifies individuals to become board members and selects, or recommends for the Board’s selection, director nominees to be presented for stockholder approval at the annual meeting of stockholders or to fill any vacancies. Directors Gary Bruce, Stephen W. Samet and Craig O. Wesner were members of the ad hoc Nominating Committee. The Nominating Committee met one time during 2008.

     The Board of Directors has adopted a written charter for the Nominating Committee, a copy of which is available on our website at http://www.pnbc-inc.com . When formed, it is anticipated that each of the members of the Nominating Committee will be independent as independence is defined in NASDAQ’s listing standards, as those standards have been modified or supplemented.

     The Nominating Committee’s policy is to consider director candidates recommended by stockholders. Such recommendations must be made pursuant to timely notice in writing to:

Princeton National Bancorp, Inc.
606 South Main Street
Princeton, Illinois 61356
Attention: Chairman

     The Nominating Committee has not established specific, minimum qualifications for recommended nominees or specific qualities or skills for one or more of the directors to possess. The Nominating Committee will use a subjective process for identifying and evaluating nominees for director, based on the information available to, and the subjective judgments of, the members of the Nominating Committee, and the Company’s then current needs. Although the Committee does not believe there would be any difference in the manner in which it evaluates nominees based on whether the nominee is recommended by a stockholder,

historically, nominees have been existing directors or business associates of our directors or officers.

Compensation Committee

     The Company has a joint Compensation Committee of the Board of Directors with Citizens Bank. The Executive Officers of the Company are also Executive Officers of Citizens Bank and, as a result, they receive compensation only from Citizens Bank for services to the Company and Citizens Bank. During 2008, the Directors’ Personnel Policy and Salary Committee (the “Committee”) established the compensation procedures and policies for the Company and Citizens Bank. The Committee is empowered to review and approve the annual compensation and compensation procedures for the Company’s Executive Officers, which consist of the President & Chief Executive Officer, Executive Vice President and Senior Vice President & Chief Financial Officer/Treasurer. The Committee relies on recommendations of the President & Chief Executive Officer with respect to the Company’s senior officers other than himself. The Company does not customarily utilize compensation consultants. The Committee met three times in 2008.

     The Board of Directors has adopted a written charter for the Committee, a copy of which is also available on the Company’s website at http://www.pnbc-inc.com.

Citizens Bank Board of Directors

     The Board of Directors of Citizens Bank held thirteen meetings during 2008. The Board of Directors of Citizens Bank has Auditing & Accounting; Fiduciary Services Auditing & Accounting; Loan; Fiduciary Services; Marketing & Sales Management; CRA & Compliance; Personnel Policy & Salary; Executive; and Funds Management Committees. The Committees collectively held a total of fifty meetings during 2008. Each director of Citizens Bank attended at least 75% of the meetings of the Board of Directors and the Committees on which he or she served.

Code of Ethics

     The Company has adopted a Code of Ethics that applies to all of the employees, officers and directors, including the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Ethics contains written standards that the Company believes are reasonably designed to deter wrongdoing and to promote:

	•		Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
	•		Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission and in other public communications the Company makes;
	•		Compliance with applicable governmental laws, rules and regulations;
	•		The prompt internal reporting of violations of the Code to an appropriate person or persons named in the Code; and
	•		Accountability for adherence to the Code.

     This Code of Ethics is included each year as Exhibit 14 to our Annual Report on Form 10-K and is available on our website at http://www.pnbc-inc.com. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of the Code of Ethics that applies to the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, and that relates to any element of the Code definition enumerated in Securities and Exchange Commission, Regulation S-K, Item 406(b) by posting such information on our website at http://www.pnbc-inc.com within five business days following the date of the amendment or waiver.

Stockholder Communications with the Board

     The Board of Directors has a process for stockholders to send communications to the Board of Directors or its Audit Committee, including complaints regarding accounting, internal accounting controls or auditing matters. Communications may be sent to the Board of Directors, its Audit Committee or specific directors by regular mail to the attention of the Board of Directors, its Audit Committee or specific directors at the principal executive office at 606 South Main Street, Princeton, Illinois 61356. All of these communications will be reviewed by our Corporate Secretary (1) to filter out communications that our Corporate Secretary deems are not appropriate for our directors, such as “spam” and communications offering to buy or sell products or services, and (2) to sort and relay the remainder to the appropriate directors. We encourage all of our directors to attend the Annual Meeting of Stockholders, if possible. All of our directors attended last year’s Annual Meeting of Stockholders.

Compensation of Directors

     Each director of the Company who is not also an employee of the Company or an employee or director of Citizens Bank received a $250 fee for each Board meeting attended and a $3,000 retainer. Each director of the Company who is also a director of Citizens Bank and who is not an employee of the Company or Citizens Bank received a $100 fee for each Board meeting of the Company attended in 2008. Each director of the Company, other than Directors Covert, Ernat, Janko and Lee, was also a director of Citizens Bank during 2008. In addition, in 2008, each non-employee director of the Company was awarded a grant of 2,000 stock options under the Princeton National Bancorp, Inc. Stock Option Plans. The options vest over three years at a rate of one-third per year, have an exercise price of $22.57 (the average of the low and high price on grant date) and expire on December 31, 2018.

     During 2008, each director of Citizens Bank who is not also an employee was paid a retainer ($17,500 per annum) plus a fee for each Board and Committee meeting attended. Each director of Citizens Bank who is not also an employee, other than the Chairman of the Board, received a $100 fee for each Citizens Bank Board meeting and a $100 fee for each Committee meeting attended in 2008. The Chairman of the Board of Citizens Bank received a $200 fee for each Board meeting attended and a $150 fee for each Committee meeting attended in 2008. The Chairman of the Audit Committee received a $150 fee for each Audit Committee meeting attended in 2008.

PNBC/CFNB Director Compensation

		Fees Earned or
		Paid in				Option
		Cash				Awards				Total
Name		($)				($) 1				($)
(a)		(b)				(c)				(d)
Daryl Becker		$	21,450			$	4,000			$	25,450
Gary C. Bruce		$	20,000			$	4,000			$	24,000
Sharon L. Covert		$	4,750			$	4,000			$	8,750
John R. Ernat		$	4,750			$	4,000			$	8,750
Donald E. Grubb		$	20,900			$	4,000			$	24,900
Mark Janko		$	4,750			$	4,000			$	8,750
Willard Lee		$	4,750			$	4,000			$	8,750
Gretta E. Bieber		$	19,300			$	4,000			$	23,300
Ervin I. Pietsch		$	19,700			$	4,000			$	23,700
Stephen W. Samet		$	21,400			$	4,000			$	25,400
Craig O. Wesner		$	26,250			$	4,000			$	30,250

Compensation Discussion and Analysis

Objectives of Compensation Program

     The primary objective of the compensation program is to attract and retain qualified, energetic staff members who are enthusiastic about the Company’s mission and culture. A further objective is to provide incentives and reward staff members for their contribution to the Company. Also, the compensation program is designed to align management’s compensation with the long-term interests of stockholders.

Base Salary

     Each Executive Officer’s current and prior compensation is considered in setting future compensation. In addition, the Compensation Committee considers the job performance of the Executive Officers and the average salaries, as published by the Illinois Bankers Association, the American Bankers Association and Crowe Horwath, of all of those persons holding comparable positions at comparably-sized bank holding companies and banks, as the case may be, in determining each Executive Officer’s base salary. The base salaries of the Executive Officers are targeted at the average base salary levels of the IBA 75 ^th quartile, ABA 75 ^th percentile and Crowe Horwath 3 ^rd quartile of the comparative compensation group.

     Stock price performance has not been a factor in determining annual compensation, because the price of the Company’s stock is subject to a variety of factors outside of our control. There is not an exact formula for allocating between cash and non-cash compensation. Compensation is generally paid as earned.

     Annual Executive Officer compensation consists of a base salary component and an incentive component. It is the Committee’s intention to set total executive cash compensation at an attractive, competitive level to retain a strong, motivated leadership team. The incentive plan is included as part of compensation to align the financial incentives with the interests of the stockholders.

Incentives

     The compensation program is designed to reward staff members for their contribution to the Company. The Executive Officers participate in the incentive compensation plan. Variable compensation is awarded to the Executive Officers based on the performance of the Company and Citizens Bank to maximize achievement of the key corporate strategies/objectives and annual business plan of Citizens Bank. In measuring the Executive Officers’ contributions, the Committee considers numerous factors including the Company’s growth, financial performance and the achievement of key measurement factors established and approved by the Committee. Those measurement factors for 2008 included net income, efficiency ratio, asset growth and individual management-by-objective measures (MBOs). These measurement factors were chosen because of their direct correlation with the interests of stockholders.

     The achievements accomplished determine the percentage payout. In determining the level of payout for the measurement factors, the current year’s budget is used, as well as a target goal and a target plus goal. Depending on the level of goals achieved, the minimum award level is 0% and the maximum level is 35%. A scale is attached to each level indicating the percentage of the payout based on the achieved results. The award for each measurement factor is multiplied by the percentage of weighting in each Officer’s individual MBOs.

Equity Compensation

     Each Executive Officer receives stock option grants under the Company’s stock option

plans. All Directors and employees of Citizens Bank are eligible for stock option grants. Beginning in 2006, the accounting treatment for stock options changed as a result of the Statement of Financial Accounting Standards No. 123R. The Company assessed the desirability of granting shares of restricted stock and concluded stock options are still a desirable form of long-term equity compensation. The original Stock Option Plan was approved by the stockholders of the Company in 1998, the 2003 Stock Option Plan was approved by the stockholders in 2003, and the 2007 Stock Compensation Plan was approved by stockholders in 2007. In the opinion of the Committee and the Board of Directors, the Company’s stock option plans promote the alignment of management and stockholder interests and result in Executive Officers of the Company being sufficient stockholders to encourage long-term performance and Company growth. The number of stock option grants made to each Executive Officer is awarded on a discretionary basis, rather than formula basis, by the Committee.

     With respect to options granted in 1999 through 2005, each option period is for ten (10) years and granted options are fully-vested. The 2008 grants were awarded as of December 31, 2008. With respect to options granted in 2006, 2007 and 2008, each option period is for ten (10) years and granted options become vested over a three-year period.

Retirement Plans

     Citizens Bank maintains a 401(k) & Profit Sharing Plan. Citizens Bank will match 100% of salary reduction contributions up to 3% of compensation, plus 50% of salary reduction contributions in excess of 3%, but not to exceed 5%. Citizens Bank may also contribute a discretionary contribution to the Profit Sharing Plan on an annual basis. The calculation used to determine whether a contribution will be made is based on net income results of Citizens Bank.

Employment Agreements

     Mr. Sorcic has an employment agreement with the Company, effective December 15, 2008, which provides for his full-time employment in his present capacity at a base compensation of $319,748 per year, or such increased amount as the Board of Directors of Citizens Bank may determine, plus fringe and health and welfare benefits. His term of employment is continuously extended so as to have a remaining term of two years, unless terminated sooner as a result of good cause or for good reason (see discussion below). The agreement also provides that Mr. Sorcic shall be eligible to participate in any incentive plans that the Company establishes for its executives. Effective January 1, 2009, Mr. Sorcic’s employment was amended to provide for discretionary allocations by the Company to Mr. Sorcic’s account in the 2005 Deferred Compensation Plans. Descriptions of these allocations are disclosed in the section titled Deferred Compensation Plans.

     Mr. Miller has an employment agreement with the Company, effective December 15, 2008, which provides for his full-time employment in his present capacity at a base compensation of $179,192 per year, or such increased amount as the Board of Directors of Citizens Bank may determine, plus fringe and health and welfare benefits. His term of employment is continuously extended so as to have a remaining term of eighteen months, unless terminated sooner as a result of good cause or for good reason (see discussion below). The agreement also provides that Mr. Miller shall be eligible to participate in any incentive plans that the Company establishes for its executives.

     Descriptions of any potential post-termination payments are disclosed in the section titled Other Potential Post-Employment Payments.

EXECUTIVE COMPENSATION

Summary

     The following table summarizes compensation for services to the Company and Citizens Bank for the years ended December 31, 2008, 2007 and 2006 paid to, or earned by, the President & Chief Executive Officer and Senior Vice President & Chief Financial Officer/Treasurer and the top three other Executive Officers of the Company and/or Citizens Bank whose salary and bonus exceeded $100,000 for the year ended December 31, 2008:

Summary Compensation Table

																		Non-
																		Equity
														Option				Incentive				All Other
						Salary				Bonus				Awards				Plan				Compensation
Name and Principal Position		Year				($) 1				($) 2				($) 3				Compensation				($) 4				Total ($)
(a)		(b)				(c)				(d)				(e)				(f)				(g)				(h)
Tony J. Sorcic			2008			$	319,455			$	109,731			$	40,000				—			$	18,076			$	487,262
President and Chief Executive Officer			2007			$	304,233			$	74,559			$	12,000				—			$	17,020			$	407,812
			2006			$	289,503			$	47,961			$	0				—			$	17,298			$	354,762
James B. Miller			2008			$	173,239			$	62,710			$	8,000				—			$	14,678			$	258,627
Executive Vice President			2007			$	160,900			$	35,130			$	1,800				—			$	12,638			$	210,458
			2006			$	155,246			$	23,441			$	0				—			$	13,254			$	191,941
Todd D. Fanning			2008			$	137,825			$	49,613			$	4,000				—			$	11,703			$	203,141
Senior Vice President &			2007			$	132,595			$	34,784			$	1,200				—			$	10,154			$	178,733
CFO/Treasurer			2006			$	111,929			$	20,634			$	0				—			$	9,856			$	142,419
Patrick B. Murray			2008			$	142,494			$	41,340			$	4,000				—			$	11,822			$	199,656
Senior Vice President — Citizens			2007			$	144,212			$	32,461			$	1,200				—			$	11,083			$	188,956
Financial Advisors			2006			$	134,355			$	26,774			$	0				—			$	10,806			$	171,935
Jacqualyn L. Karlosky			2008			$	99,388			$	26,986			$	4,000				—			$	10,021			$	140,395
Senior Vice President — Consumer			2007			$	93,901			$	21,735			$	1,200				—			$	8,133			$	124,969
Banking			2006			$	87,681			$	20,933			$	0				—			$	7,937			$	116,551

Grants of Plan Based Award

     The following tables present information about stock options granted to executive officers (of the Company and/or Citizens Bank) in 2008 and information about options held by such officers as of December 31, 2008:

						All Other Option
						Awards:
						Number of Securities
						Underlying Options of				Exercise or Base				Grant Date Fair
						Stock				Price of Option				Value of Stock
						or Units				Awards				and
Name		Grant Date				(#) 1				($/Sh)				Option Awards
(a)		(b)				(c)				(d)				(e)
Tony J. Sorcic			12/31/08				20,000			$	22.57			$	7,200
President and Chief Executive Officer
James B. Miller			12/31/08				5,000			$	22.57			$	1,800
Executive Vice President
Todd D. Fanning			12/31/08				2,000			$	22.57			$	720
Senior Vice President & CFO/Treasurer
Patrick B. Murray			12/31/08				2,000			$	22.57			$	720
Senior Vice President - Citizens Financial Advisors
Jacqualyn L. Karlosky			12/31/08				2,000			$	22.57			$	720
Senior Vice President - Consumer Banking

Outstanding Equity Awards at Fiscal Year-End

Option Awards
		Number
		of				Number of
		Securities				Securities
		Underlying				Underlying
		Unexercised				Unexercised				Option
		Options				Options				Exercise				Option
		Exercisable				Un-exercisable				Price				Expiration
Name		(#)				(#)				($)				Date
(a)		(b)				(c)				(e)				(f)
Tony J. Sorcic			20,000	1						$	28.56				12/31/13
President and Chief Executive Officer			20,000	1						$	28.83				12/31/14
			20,000	1						$	33.25				12/31/15
							20,000	2		$	32.55				12/31/16
							20,000	3		$	24.84				12/31/17
							20,000	4		$	22.57				12/31/18
James B. Miller			734	1						$	11.94				12/26/10
Executive Vice President			2,000	1						$	16.21				12/31/11
			4,000	1						$	21.15				12/31/12
			4,000	1						$	28.56				12/31/13
			4,000	1						$	28.83				12/31/14
			3,000	1						$	33.25				12/31/15
							3,000	2		$	32.55				12/31/16
							3,000	3		$	24.84				12/31/17
							5,000	4		$	22.57				12/31/18
Todd D. Fanning			533	1						$	28.56				12/31/13
Senior Vice President & CFO/Treasurer			1,200	1						$	28.83				12/31/14
			2,000	1						$	33.25				12/31/15
							2,000	2		$	32.55				12/31/16
							2,000	3		$	24.84				12/31/17
							2,000	4		$	22.57				12/31/18
Patrick B. Murray			1,000	1						$	28.83				12/31/14
Senior Vice President – Citizens Financial Advisors			2,000	1						$	33.25				12/31/15
							2,000	2		$	32.55				12/31/16
							2,000	3		$	24.84				12/31/17
							2,000	4		$	22.57				12/31/18
Jacqualyn L. Karlosky			2,000	1						$	28.56				12/31/13
Senior Vice President – Consumer Banking			2,000	1						$	28.83				12/31/14
			2,000	1						$	33.25				12/31/15
							2,000	2		$	32.55				12/31/16
							2,000	3		$	24.84				12/31/17
							2,000	4		$	22.57				12/31/18

Option Exercised and Stock Vested

		Option Awards
		Number of
		Shares
		Acquired				Value Realized
		on Exercise				on Exercise
Name		(#)				($)
(a)		(b)				(c)
Tony J. Sorcic			—				—
President & Chief Executive Officer
James B. Miller
Executive Vice President			—				—
Todd D. Fanning			—				—
Senior Vice President & CFO/Treasurer
Patrick B. Murray
Senior Vice President – Citizens Financial			—				—
Advisors
Jacqualyn L. Karlosky			—				—
Senior Vice President – Consumer Banking

Deferred Compensation Plans

     Mr. Sorcic participates in the Princeton National Bancorp, Inc. Deferred Compensation Plan and the Princeton National Bancorp, Inc. 2005 Deferred Compensation Plan. Except as

indicated below, the terms of these plans are substantially identical.

     Under the plans, prior to the beginning of each calendar year, Mr. Sorcic may elect to defer the receipt of all or part of his compensation otherwise payable to him for the forthcoming calendar year. The plans provide that amounts Mr. Sorcic defers are credited with earnings at the prime rate minus one and one-half percent, adjusted annually, as reported in the Wall Street Journal. Effective January 1, 2009, the crediting rate under the 2005 plan will be the greater of the prime rate minus one and one-half percent or 4%.

     Effective January 1, 2009, the Company and Mr. Sorcic have agreed to amendments to Mr. Sorcic’s employment agreement providing for an annual allocation to Mr. Sorcic’s account in the plan. Commencing on January 1, 2009 and on each of the following four successive anniversaries of that date, provided that Mr. Sorcic remains employed with the Company as of such date, the Company shall credit $25,000 to Mr. Sorcic’s discretionary contributions account in the plan. Mr. Sorcic shall become vested in such contributions at the rate of 20% per year beginning January 1, 2010, provided he is employed by the Company on that date until he is 100% vested in such contributions on January 1, 2014.

     The vested contributions described above and any earnings thereon shall be paid to Mr. Sorcic in 5 substantially equal installments, with the first installment being paid on the date Mr. Sorcic attains age 61 (i.e., June 3, 2014) and the remaining four installments being paid on each June 3 ^rd of the following four years. The contributions described above shall otherwise be made and administered in accordance with the terms and conditions of the plan.

     Amounts under the plans are generally payable to Mr. Sorcic upon the earliest of (i) the date his employment terminates; (ii) his death; (iii) his total and permanent disability; or (iv) the date of a change in control of the Company or Citizens First National Bank. Under the 2005 plan, if Mr. Sorcic is considered a specified employee under applicable provisions of the federal tax laws, a distribution following Mr. Sorcic’s termination of employment may not occur until 6 months following the date of that termination. As of December 31, 2008, Mr. Sorcic would be considered a specified employee. In addition, Mr. Sorcic may elect to be paid all or a portion of his plan benefits upon an unforeseeable financial emergency, but only to the extent that the payment is necessary to relieve that emergency.

     Amounts payable under the plans are paid either in a lump sum or ten substantially equal payments. Mr. Sorcic may change the form of benefit or waive the payment of plan accounts upon a change in control and elect to receive payments on the next payment date under the plans, provided that he makes the election in the calendar year preceding and at least 90 days prior to the change in control. However, under the 2005 plan, a change in the form of benefit or a waiver of payment upon a change in control would generally require a five-year delay in the first scheduled payment under the plans.

     Under the plans, the events that are deemed to constitute a change in control are substantially similar to the events that constitute a change in control under the employment agreement between the Company and Mr. Sorcic, except that under the 2005 plan, a change in ownership of 30% of the Company’s voting stock is required before a change in control will be deemed to occur. See descriptions of potential post-termination payments which are disclosed in the section titled Other Potential Post-Employment Payments.

Non-qualified Deferred Compensation

Executive

Registrant

Aggregate

Aggregate

Aggregate

Contributions

Contributions

Earnings

Withdrawals/

Balance

in Last FY

in Last FY

in Last FY

Distributions

at Last FYE

Name

($)

($)

($)

($)

($)

(a)

(b)

(c)

(d)

(e)

(f)

Tony J. Sorcic President & Chief

$

25,000

1

—

$

8,921

—

$

172,355

Executive Officer

Other Potential Post-Employment Payments

     Our Executive Officers have built the Company into the successful enterprise it is today, and we believe it is important to protect them in the event of a change in control, a termination of the Executive’s employment without cause or good reason, the Executive’s death or the Executive’s disability. Further, it is our belief the interests of stockholders will be best served if the interests of our Senior Management are aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of Executive Officers to pursue potential change in control transactions that may be in the best interests of stockholders. The cash component of any post-termination payment is paid in a single, lump sum and is based upon a multiple of base salary.

     The following paragraphs describe the post-termination benefits payable to Mr. Sorcic and Mr. Miller. During the period that the U.S. Treasury holds preferred stock of the Company pursuant to the TARP Capital Purchase Program, the Company may be prohibited or restricted from making the payments to Mr. Sorcic and Mr. Miller as described in this section.

     A post-termination benefit is payable to Mr. Sorcic if, during the term of his employment agreement, the Company or Citizens Bank terminates his employment without cause, Mr. Sorcic terminates his employment for good reason, or the Company or Citizens Bank terminates Mr. Sorcic’s employment within the twenty-four month period following the change in control. Under any of these circumstances, Mr. Sorcic would be entitled to receive a lump sum payment payable within 30 days following the date on which his employment terminates equal to the greater of his monthly salary times twenty-four or the salary payable for the balance of the term of his employment agreement. For the longer of twenty-four months or the period remaining in his employment agreement, Mr. Sorcic also would be entitled to receive all benefits accrued under any incentive and retirement plan of the Company and he and his dependents would continue to be covered by all welfare plans of the Company. In addition, all outstanding stock options would become fully and immediately exercisable. At December 31, 2008, had Mr. Sorcic’s employment with the Company or the Bank terminated under one of the circumstances described above, Mr. Sorcic would have been entitled to receive $660,036 (reflects two years) in base salary and $18,380 representing the present value of continued welfare benefit plan participation described above.

     If Mr. Sorcic dies during the term of his employment agreement, Mr. Sorcic’s the Company would pay Mr. Sorcic’s beneficiary a lump-sum payment equal to 12 months of Mr. Sorcic’s base salary prior to March 15 ^th of the year following the in which Mr. Sorcic’s death occurs and Mr. Sorcic’s spouse and other dependents would continue participation in the Company’s welfare benefit plans on the same terms as they would have been provided if Mr. Sorcic were an active employee and, for the period of twenty-four months following the first anniversary of Mr. Sorcic’s death, Mr. Sorcic’s spouse and other dependents would continue participation in the Company’s welfare benefit plans on the same terms as would have been provided if Mr. Sorcic were a retiree of the Company or the Bank.

     If Mr. Sorcic’s employment terminates due to his disability, the Company will continue to

pay his base salary from the date of disability until Mr. Sorcic is eligible to receive benefit payments under the Bank’s disability plan. During the period base salary payments continue, Mr. Sorcic will remain eligible to participate in the Company’s welfare benefit plans. Base salary continuation payments are reduced by disability benefits paid to Mr. Sorcic and cease upon the cessation of disability, except salary will be paid for an additional twelve months if neither the Company nor the Bank offer Mr. Sorcic re-employment in the same position he held prior to his disability.

     A post-termination benefit is payable to Mr. Miller if, during the term of his employment agreement, the Company or Citizens Bank terminates his employment without cause, Mr. Miller terminates his employment for good reason, or the Company or Citizens Bank terminates Mr. Miller’s employment within the twenty-four month period following the change in control. Under any of these circumstances, Mr. Miller would be entitled to receive a lump sum payment payable within 30 days following the date on which his employment terminates equal to the greater of his monthly salary times eighteen or the salary payable for the balance of the term of his employment agreement. For the longer of eighteen months or the period remaining in his employment agreement, Mr. Miller also would be entitled to receive all benefits accrued under any incentive and retirement plan of the Company and he and his dependents would continue to be covered by all welfare plans of the Company. In addition, all outstanding stock options would become fully and immediately exercisable. At December 31, 2008, had Mr. Miller’s employment with the Company or the Bank terminated under one of the circumstances described above, Mr. Miller would have been entitled to receive $358,384 (reflects eighteen months) in base salary and $6,604 representing the present value of continued welfare benefit plan participation described above.

     If Mr. Miller dies during the term of his employment agreement, for a period of 12 months from the date of death, Mr. Miller’s spouse and other dependents would continue participation in the Company’s welfare benefit plans on the same terms as they would have been provided if Mr. Miller were an active employee and for the period of twenty-four months following the first anniversary of Mr. Miller’s death, Mr. Miller’s spouse and other dependents would continue participation in the Company’s welfare benefit plans on the same terms as would have been provided if Mr. Miller were a retiree of the Company or the Bank.

     If Mr. Miller’s employment terminates due to his disability, the Company will continue to pay his base salary from the date of disability until Mr. Miller is eligible to receive benefit payments under the Bank’s disability plan. During the period base salary payments continue, Mr. Miller will remain eligible to participate in the Company’s welfare benefit plans. Base salary continuation payments are reduced by disability benefits paid to Mr. Miller and cease upon the cessation of disability, except salary will be paid for an additional twelve months if neither the Company nor the Bank offer Mr. Miller re-employment in the same position he held prior to his disability.

     A change in control is deemed to occur (i) upon the acquisition by any individual, entity or group of beneficial ownership of more than 25% of the Company’s voting stock; (ii) the commencement of a tender offer or an exchange offer for more than 20% of the Company’s outstanding voting stock; (iii) upon a merger or consolidation of the Company after which the Company’s stockholders immediately prior to the merger hold less than 25% of the voting stock of the surviving corporation; (iv) upon a transfer of 25% or more of the Company’s voting stock or substantially all of the property of Company, other than to an entity of which Company owns at least 50% of the voting stock; (v) upon a merger or consolidation of the Bank after which the Bank’s stockholders immediately prior to the merger hold less than 25% of the voting stock of the surviving corporation; or (vi) upon a transfer of 25% or more of the Bank’s voting stock or substantially all of the property of the Bank, other than to an entity of which the Bank owns at least 50% of the voting stock.

     For purposes of determining Mr. Sorcic’s and Mr. Miller’s rights to severance benefits upon their voluntary termination of employment, good reason is deemed to exist if Mr. Sorcic or Mr. Miller terminates his employment because, without his express written consent, (i) Bancorp breaches any of the terms of his employment agreement, (ii) he is assigned duties materially inconsistent with the duties and responsibilities stated in the by-laws of the Company and the Bank for his positions, (iii) the duties and responsibilities for the office held by Mr. Sorcic or Mr. Miller as stated in the by-laws of the Company and the Bank, respectively, are amended to be materially inconsistent with the duties and responsibilities that would typically be expected of that office; or (iv) the Company or the Bank changes by 50 miles or more the principal location in which Mr. Sorcic or Mr. Miller is required to perform services. Upon the occurrence of any event referenced in (i) through (iv) above, Mr. Sorcic and Mr. Miller shall, within 90 days of such occurrence, provide the Company notice of the existence of the condition. Upon receiving notice, the Company shall have no more than 30 days to remedy the condition. Executive shall have two years from the date of the initial existence of one of the above events to terminate his employment under this section.

Compensation Committee Report

     The Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

     The Committee certifies that it has reviewed with the Company’s senior risk officers the Company’s incentive compensation arrangements that it has with its Senior Executive Officers

(as such term is defined in the Emergency Economic Stabilization Act of 2008) and that the Committee has made reasonable efforts to ensure that such arrangements do not encourage the Company’s Senior Executive Officers to take unnecessary and excessive risks that threaten the value of the Company.

THE COMPENSATION COMMITTEE

Stephen W. Samet, Chairman		Daryl Becker		Craig
O. Wesner

Compensation Committee Interlocks and Insider Participation

     No member of the Compensation Committee is a current or former employee of the Company or any of its subsidiaries. No member of the Compensation Committee had any relationship with the Company which would have required disclosure in this Proxy Statement under the caption “Certain Transactions.” No Executive Officer of the Company served on the compensation committee or as a director of any other entity whose Executive Officer(s) served on the Company’s Compensation Committee or Board.

COMMON STOCK PRICE PERFORMANCE GRAPH

     The following Common Stock price performance graph compares the monthly change in the Company’s cumulative total stockholder returns on its Common Stock, assuming the Common Stock was purchased on December 31, 2003 and sold on December 31, 2008, with the cumulative total return of stocks included in the Russell 3000, SNL Midwest Bank Stock Index and the NASDAQ Bank Index for the same period. The amounts shown assume the reinvestment of dividends.

PRINCETON NATIONAL BANCORP, INC.

			Period Ending
	Index			12/31/03					12/31/04					12/31/05					12/31/06					12/31/07					12/31/08
	Princeton National Bancorp, Inc.				100.00					104.33					124.41					125.70					97.18					92.63
	Russell 3000				100.00					111.95					118.80					137.47					144.54					90.61
	SNL Midwest Bank				100.00					112.84					108.73					125.68					97.96					64.44
	NASDAQ Bank				100.00					110.99					106.18					117.87					91.85					69.88

     The Company’s Common Stock began trading on the NASDAQ Stock Market under the symbol PNBC on May 8, 1992. On December 31, 2008 and February 27, 2009, the Record Date, the closing prices for the Common Stock as quoted on NASDAQ Online was $22.14 and $13.03, respectively.

AUDIT COMMITTEE REPORT

     The Company’s Audit Committee is currently comprised of three directors (Directors Becker, Bruce and Samet). Each of the members of the Audit Committee is independent under the definition contained in Rule 4200(a) (15) of NASDAQ’s listing standards. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our Website at http://www.pnbc-inc.com.

     In connection with the audited consolidated financial statements contained in the Company’s 2008 Annual Report on Form 10-K for the fiscal year ended December 31, 2008, the Audit Committee reviewed and discussed the audited financial statements with Management and BKD, LLP. The Audit Committee discussed with BKD, LLP the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Volume 1 AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received written disclosures from BKD, LLP required by the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and has discussed with them their independence.

     Based on the review and discussions, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

Daryl Becker		Gary C. Bruce		Stephen W. Samet

     AUDIT AND NON-AUDIT FEES

     The following table presents fees for professional audit services rendered by BKD, LLP for the audit of the Company’s consolidated financial statements for 2008 and 2007, and fees billed for other services rendered by BKD, LLP:

		2008				2007
Audit Fees (1)		$	195,150			$	190,050
Audit-related fees (2)		$	16,000			$	10,500
Audit and audit-related fees		$	211,150			$	200,550
Tax fees			—				—
All other fees			—				—
Total fees		$	211,150			$	200,550

     In accordance with Section 10A(i) of the Exchange Act, before BKD, LLP is engaged to render audit or non-audit services, the engagement is approved by the Audit Committee. None of the audit-related or other services described in the table above were approved by the Audit Committee, pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.

     The Audit Committee of the Board of Directors of the Company considers that the provision of the services referenced above to the Company is compatible with maintaining independence of BKD, LLP. Representatives of BKD, LLP are expected to attend the Annual Meeting and will be available to respond to appropriate questions or to make a statement if they desire to do so.

AUDIT COMMITTEE FINANCIAL EXPERT

     While the Board of Directors endorses the effectiveness of the Company’s Audit Committee, its membership does not include a director who qualifies for designation as an “audit committee financial expert” – a concept under federal regulation that contemplates such designation only when an audit committee member satisfies all five qualification requirements, such as experience (or “experience actively supervising” others engaged in) preparing, auditing, analyzing or evaluating financial statements presenting a level of accounting complexity comparable to what is encountered in connection with our Company’s financial statements.

CERTAIN TRANSACTIONS

     Several of the Company’s directors and their affiliates, including corporations and firms of which they are officers or in which they or members of their families have an ownership interest, are customers of Citizens Bank. These persons, corporations and firms have had transactions in the ordinary course of business with Citizens Bank, including borrowings of material amounts, all of which, in the opinion of management, were on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated persons and did not involve more than the normal risk of collectibility or present other unfavorable features. It is the policy of Citizens Bank not to extend credit to Executive Officers thereof. For any potential related party transaction that would require disclosure pursuant to Item 404(a) of Regulation S-K, the details of the potential transaction are to be submitted in written form to the Audit Committee for review and approval prior to commitment.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Based solely upon its review of Forms 3, 4 and 5 and any amendment thereto furnished to the Company pursuant to Rule 16a-3(e) of the Securities Exchange Act of 1934, as amended, and written representations from the Directors and Executive Officers that no other reports were required, the Company is not aware of any Director, Officer or beneficial holder of 10% of its Common Stock that failed to file any such reports on a timely basis during 2008, except Director Mr. Samet filed one report with respect to one transaction one day late.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     As of February 27, 2009, the only persons or groups who are known to the Company to be the beneficial owners of more than 5% of the Common Stock were:

		Amount and Nature of
Name and Address of Beneficial Owner		Beneficial Ownership				Percent of Class
Tontine Partners, LP
55 Railroad Avenue 3 rd Floor
Greenwich, CT 06830-6378			233,911	(1)			7.09	%

ANNUAL MEETING TO BE HELD IN 2010

     Any stockholder who intends to present a proposal (a “Proponent”) at next year’s Annual Meeting of Stockholders to be held in 2010 must submit the proposal in writing to the Company on or before November 16, 2009, in order for the proposal to be eligible for inclusion in the Company’s proxy statement and form of proxy for that meeting, pursuant to Rule 14A-8.

     In addition, pursuant to Rule 14a-4 of Regulation 14A under the Securities Exchange Act of 1934 and the Company’s Bylaws, a stockholder must follow certain procedures to nominate persons for Director or to introduce an item of business outside of Rule 14A-8 at an Annual Meeting of Stockholders. The nomination or proposed item must be delivered to, or mailed to, and received no later than the close of business on the 120 ^th day, nor earlier than the close of business on the 150 ^th day, prior to the anniversary of the mailing date of the proxy statement for the preceding year’s annual meeting.

The Chairman of the meeting may refuse to allow the transaction of any business not presented beforehand or to acknowledge the nomination of any person not made in compliance with the following procedures:

Proposed Item of Business

     If the notice is regarding a proposed item of business, such stockholder’s notice to the Corporate Secretary of the Company must contain the following information:

     As to any business the stockholder proposes to bring before the annual meeting,

	•		a brief description of the business desired to be brought;
	•		the reasons for conducting such business at the annual meeting;
	•		any material interest of the stockholder in such business and the beneficial owner, if any, on whose behalf the proposal is made;
	•		the name and address of both the stockholder and the beneficial owner; and
	•		the class and number of shares of the Company’s capital stock that are owned beneficially and of record by the stockholder and the beneficial owner.

Nomination of Director

     If the notice is regarding the nomination of a person for Director, such stockholder’s notice to the Corporate Secretary of the Company must contain the following information:

     As to each person whom the stockholder proposes to nominate for election as a Director,

	•		name, age, business address and residential address;
	•		principal occupation or employment;
	•		class and number of shares of Company stock beneficially-owned on the date of the notice; and
	•		any other information relating to the nominee that would be required to be disclosed on Schedule 13D under the Securities and Exchange Act of 1934.

     As to the stockholder giving the notice,

	•		name and address of stockholder, and name, business and residential address of any other beneficial stockholders known by the stockholder to support the nominee; and
	•		class and number of shares of Company stock owned by the stockholder on the date of the notice, and the number of shares beneficially-owned by other record or beneficial stockholders known by the stockholder to be supporting the nominee.

OTHER MATTERS

     Management of the Company does not intend to present any other matters for action at the annual meeting and has not been informed that other persons intend to present any other matters for action at the meeting. However, if any other matters should properly come before

the meeting, the persons named in the accompanying proxy intend to vote thereon, pursuant to the proxy, in accordance with the recommendation of the management of the Company.

PROXY AVAILABILITY

      Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on April 28, 2009:

     The proxy statement and annual report to shareholders are available at our website at www.pnbc-inc.com .

By Order of the Board of Directors,

Lou Ann Birkey
Vice President – Investor Relations
& Corporate Secretary

March 16, 2009

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
April 28, 2009
- Please vote, sign, and return immediately -

     The undersigned hereby appoints Messrs. Lawrence DeVore, James Smith, and John Isaacson, or any of them, as the attorneys and proxies of the undersigned, with full power of substitution, to represent and vote all shares of common stock of Princeton National Bancorp, Inc. (the “Company”), standing in the name of the undersigned at the close of business on February 27, 2009, at the Annual Meeting of Stockholders of the Company to be held at The Galleria Convention Center, 1659 North Main Street, Princeton, Illinois, at 10:00 a.m., on Tuesday, April 28, 2009 or at any adjournment or postponement thereof, with all the powers that the undersigned would possess if personally present, on all matters coming before said meeting, as follows:

(1)

Election of directors

		o I/We vote FOR all nominees listed below (other than any nominee whose name has been lined out). o  I/We WITHHOLD AUTHORITY to vote for all nominees listed below.		Class II Directors Gretta E. Bieber Gary C. Bruce John R. Ernat Tony J. Sorcic

     YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY OF THE ABOVE-NAMED NOMINEES BY LINING OUT THAT NOMINEE’S NAME.

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF THE FOUR NOMINEES

(2)

To approve the following advisory (non-binding) proposal :

		o I/We vote FOR Proposal II. o I/We ABSTAIN on the vote for Proposal II. o I/We vote AGAINST Proposal II.		“Resolved, that the shareholders approve the executive compensation of the Company, as described in the “Compensation Discussion and Analysis” and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) in this Proxy Statement.”

      THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE EXECUTIVE COMPENSATION OF THE COMPANY.

(3)

In their discretion, upon such other matters as may properly come before the Annual Meeting.

     This proxy when properly executed will be voted in the manner directed herein. If no instructions are indicated, this proxy will be voted “FOR” the election of all nominees named in the Proxy Statement and “FOR” the approval of the proposals described in the Proxy Statement.

     Please vote, date and sign this proxy and return it in the enclosed envelope. When signing as an executor, administrator, trustee, guardian, custodian, corporate officer or in any capacity other than individually, give your full title as such. If stock is held jointly, each joint owner should sign this proxy.

		(Date)
		(Shareholder’s Signature)
		(Capacity, if other than individually)
		(Shareholder’s Signature)
		(Capacity, if other than individually)

The signer hereby revokes all proxies, if any, previously given by the signer to vote at the
meeting or any adjournment of the meeting.

Princeton National Bancorp (CE) (USOTC:PNBC)
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