UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

Commission File Number 0-20050

PRINCETON NATIONAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	36-3210283
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

606 S. Main Street, Princeton, IL 61356

(Address of principal executive offices and Zip Code)

(815) 875-4444

(Registrant’s telephone number, including area code)

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 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.

Yes x      No o

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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o
Accelerated filer	x
Non-accelerated filer	o
Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No x

As of July 17, 2008, the registrant had outstanding 3,295,184 shares of its $5 par value common stock.

Part I: FINANCIAL INFORMATION

The unaudited consolidated financial statements of Princeton National Bancorp, Inc. and Subsidiary and management’s discussion and analysis of financial condition and results of operation are presented in the schedules as follows:

Schedule 1:	Consolidated Balance Sheets
Schedule 2:	Consolidated Statements of Income
Schedule 3:	Consolidated Statements of Stockholders’ Equity
Schedule 4:	Consolidated Statements of Cash Flows
Schedule 5:	Notes to Consolidated Financial Statements
Schedule 6:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Schedule 7:	Controls and Procedures

Part II: OTHER INFORMATION

Item 1A.Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Corporation. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

2

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information about purchases of the Corporation’s common stock by the Corporation during the quarter ended June 30, 2008:

Period	(a) Total number of shares purchased		(b) Average price paid per share	(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
4/1/08 – 4/30/08	0	$	0.00	0	30,000
5/1/08 – 5/31/08	5,000	$	28.50	5,000	25,000
6/1/08 – 6/30/08	5,000	$	28.25	5,000	20,000
Total	10,000	$	28.38	10,000	20,000

On April 24, 2007, the Board of Directors approved the repurchase of up to an aggregate of 50,000 shares of our common stock pursuant to a repurchase program announced the same day (“the Program”). The original expiration date of this Program was April 24, 2008, but was extended to October 24, 2008 by the Board of Directors at their meeting held on April 28, 2008. Unless terminated earlier by resolution of our Board of Directors, the Program will expire on the earlier of such expiration date or when we have repurchased all shares authorized for repurchase under the Program.

Item 4.Submission of Matters to a Vote of Security Holders

The Annual Meeting of Shareholders of Princeton National Bancorp, Inc. was held on April 29, 2008, for the purpose of electing three directors to serve for a term of three years. Proxies for the meeting were solicited by Management pursuant to Regulation 14A under the Securities Exchange Act of 1934, and there was no solicitation in opposition to Management’s solicitation.

All three of the nominees for director listed in the proxy statement were elected. The results of the vote were as follows:

	Shares Voted “For”	Shares “Withheld”	Abstain
Donald E. Grubb	2,702,412	8,933	0
Ervin I. Pietsch	2,697,141	14,204	0
Craig O. Wesner	2,700,492	10,853	0

In addition, the following directors’ terms of office continued after the meeting:

Daryl Becker	John R. Ernat	Thomas M. Longman
Gary C. Bruce	Mark Janko	Stephen W. Samet
Sharon L. Covert	Willard Lee	Tony J. Sorcic

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Item 6.Exhibits

31.1 Certification of Tony J. Sorcic required by Rule 13a-14(a).

31.2 Certification of Todd D. Fanning required by Rule 13a-14(a).

32.1 Certification of Tony J. Sorcic required by Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRINCETON NATIONAL BANCORP, INC.

By	/s/ Tony J. Sorcic	By	/s/ Todd D. Fanning
	Tony J. Sorcic President & Chief Executive Officer August 11, 2008		Todd D. Fanning Sr. VP & Chief Financial Officer August 11, 2008

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Schedule 1

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share data)

	June 30, 2008 (unaudited)			December 31, 2007
ASSETS
Cash and due from banks	$	26,297		$	25,801
Interest-bearing deposits with financial institutions		102			1,803
Total cash and cash equivalents		26,399			27,604
Loans held for sale, at lower of cost or market		3,324			928
Investment securities:
Available-for-sale, at fair value		220,617			218,095
Held-to-maturity, at amortized cost (fair value of $15,791 and $14,799)		15,608			14,578
Total investment securities		236,225			232,673
Loans:
Loans, net of unearned interest		746,234			722,647
Allowance for loan losses		(3,396	)		(3,248	)
Net loans		742,838			719,399
Premises and equipment, net of accumulated depreciation		30,374			30,801
Land held for sale, at lower of cost or market		1,344			1,344
Bank-owned life insurance		21,256			22,461
Accrued interest receivable		8,764			10,876
Goodwill		24,521			24,521
Intangible assets, net of accumulated amortization		4,648			5,090
Other real estate owned		851			833
Other assets		4,642			4,172
TOTAL ASSETS	$	1,105,186		$	1,080,702
LIABILITIES
Deposits:
Demand	$	103,597		$	102,452
Interest-bearing demand		252,954			241,749
Savings		63,524			58,401
Time		484,198			488,805
Total deposits		904,273			891,407
Borrowings:
Customer repurchase agreements		35,079			34,217
Federal funds purchased		21,300			26,500
Advances from the Federal Home Loan Bank		23,488			6,984
Interest-bearing demand notes issued to the U.S. Treasury		2,215			1,838
Trust preferred securities		25,000			25,000
Note payable		14,550			14,550
Total borrowings		121,632			109,089
Other liabilities		10,245			11,599
TOTAL LIABILITIES		1,036,150			1,012,095
STOCKHOLDERS' EQUITY
Common stock: $5 par value, 7,000,000 shares authorized; 4,478,295 shares issued		22,391			22,391
Surplus		18,358			18,275
Retained earnings		52,960			51,279
Accumulated other comprehensive income (loss), net of tax		(553	)		344
Less:  Cost of 1,183,111 and 1,169,848 treasury shares at June 30, 2008 and December 31, 2007, respectively		(24,120	)		(23,682	)
TOTAL STOCKHOLDERS' EQUITY		69,036			68,607
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,105,186		$	1,080,702

See accompanying notes to unaudited consolidated financial statements

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Schedule 2

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(dollars in thousands, except share data)

	For the Three Months Ended June 30				For the Six Months Ended June 30
	2008		2007		2008		2007
Interest income:
Interest and fees on loans	$	11,801	$	12,293	$	24,152	$	23,900
Interest on investment securities:
Taxable		1,681		1,734		3,297		3,619
Non-taxable		978		1,106		2,041		2,234
Interest on federal funds sold		4		75		29		221
Interest on interest-bearing time deposits in other banks		9		26		20		76
Total interest income		14,473		15,234		29,539		30,050
Interest expense:
Interest on deposits		5,805		7,622		12,479		15,101
Interest on borrowings		851		1,025		1,789		1,971
Total interest expense		6,656		8,647		14,268		17,072
Net interest income		7,817		6,587		15,271		12,978
Provision for loan losses		450		115		818		300
Net interest income after provision for loan losses		7,367		6,472		14,453		12,678
Non-interest income:
Trust & farm management fees		336		357		812		771
Service charges on deposit accounts		1,110		1,095		2,202		2,085
Other service charges		567		497		1,024		958
Gain on sales of securities available-for-sale		0		162		276		209
Brokerage fee income		208		214		427		417
Mortgage banking income		288		137		636		409
Bank-owned life insurance income		206		209		421		405
Other operating income		36		51		106		113
Total non-interest income		2,751		2,722		5,904		5,367
Non-interest expense:
Salaries and employee benefits		4,226		4,137		8,623		8,317
Occupancy		611		598		1,290		1,201
Equipment expense		751		837		1,470		1,615
Federal insurance assessments		84		86		168		170
Intangible assets amortization		178		164		357		351
Data processing		302		257		579		530
Advertising		162		178		330		351
Other operating expense		1,195		1,137		2,252		2,131
Total non-interest expense		7,509		7,394		15,069		14,666
Income before income taxes		2,609		1,800		5,288		3,379
Income tax expense		589		247		1,177		397
Net income	$	2,020	$	1,553	$	4,111	$	2,982
Earnings per share:
Basic		0.61		0.47		1.25		0.89
Diluted		0.61		0.46		1.24		0.89
Basic weighted average shares outstanding		3,295,998		3,333,897		3,300,030		3,340,462
Diluted weighted average shares outstanding		3,309,084		3,344,557		3,311,735		3,354,268

See accompanying notes to unaudited consolidated financial statements

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Schedule 3

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

(dollars in thousands except per share data)

For the Six Months Ended June 30, 2008	Common Stock		Surplus		Retained Earnings			Accumulated Other Comprehensive Income (Loss), net of tax effect			Treasury Stock		Total
Balance, January 1, 2008	$	22,391	$	18,275	$	51,279		$	344		($23,682	)	$	68,607
Net income						4,111								4,111
Purchase of 20,000 shares of treasury stock											(554	)		(554	)
Sale of 2,237 shares of treasury stock				21							39			60
Exercise of stock options and re-issuance of treasury stock (4,500 shares)				20							77			97
Cash dividends ($.56 per share)						(1,851	)							(1,851	)
Stock option compensation expense				42										42
Adjustment to apply EITF 06-4						(579	)							(579	)
Other comprehensive loss, net of $567 tax effect									(897	)				(897	)
Balance, June 30, 2008	$	22,391	$	18,358	$	52,960			($553	)	($24,120	)	$	69,036
For the Six Months Ended June 30, 2007
Balance, January 1, 2007	$	22,391	$	18,158	$	48,109			($960	)	($22,343	)	$	65,355
Net income						2,982								2,982
Purchase of 40,000 shares of treasury stock											(1,204	)		(1,204	)
Sale of 3,144 shares of treasury stock				36							54			90
Cash dividends ($.54 per share)						(1,807	)							(1,807	)
Stock option compensation expense				23										23
Other comprehensive loss, net of $569 tax effect									(899	)				(899	)
Balance, June 30, 2007	$	22,391	$	18,217	$	49,284			($1,859	)	($23,493	)	$	64,540

See accompanying notes to unaudited consolidated financial statements

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Schedule 4

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(dollars in thousands)

	For the Six Months Ended June 30
	2008			2007
Operating activities:
Net income	$	4,111		$	2,982
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,123			1,245
Provision for loan losses		818			300
Amortization of intangible assets and other purchase accounting adjustments, net		346			351
Amortization (accretion) of premiums and discounts on investment securities, net		(4	)		(131	)
Gain on sales of securities available-for-sale, net		(276	)		(209	)
Compensation expense for vested stock options		42			23
Gain on sales of other real estate owned, net		2			0
Loans originated for sale		(55,832	)		(28,681	)
Proceeds from sales of loans originated for sale		53,436			28,531
(Decrease) increase in accrued interest payable		(568	)		678
Decrease in accrued interest receivable		2,112			1,447
Decrease (increase) in other assets		736			(1,024	)
Decrease in other liabilities		(786	)		(498	)
Net cash provided by operating activities		5,260			5,014
Investing activities:
Proceeds from sales of investment securities available-for-sale		8,670			9,385
Proceeds from maturities of investment securities available-for-sale		28,679			30,587
Purchase of investment securities available-for-sale		(41,644	)		(6,104	)
Proceeds from maturities of investment securities held-to-maturity		1,130			865
Purchase of investment securities held-to-maturity		(1,594	)		(1,075	)
Proceeds from sales of other real estate owned		736			0
Net increase in loans		(24,902	)		(23,017	)
Purchases of premises and equipment		(696	)		(1,184	)
Payments related to acquisition, net of cash and cash equivalents acquired		0			(10,110	)
Net cash used in investing activities		(29,621	)		(653	)
Financing activities:
Net increase (decrease) in deposits		12,866			(30,752	)
Net increase in borrowings		12,538			4,238
Dividends paid		(1,851	)		(1,807	)
Purchases of treasury stock		(554	)		(1,204	)
Exercise of stock options and issuance of treasury stock		97			0
Sales of treasury stock		60			90
Net cash provided by (used in) financing activities		23,156			(29,435	)
Decrease in cash and cash equivalents		(1,205	)		(25,074	)
Cash and cash equivalents at beginning of period		27,604			39,185
Cash and cash equivalents at June 30	$	26,399		$	14,111
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	14,836		$	16,394
Income taxes	$	1,588		$	980
Supplemental disclosures of non-cash flow activities:
Loans transferred to other real estate owned	$	756		$	677
Land transferred to held for sale	$	0		$	1,344

See accompanying notes to unaudited consolidated financial statements

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Schedule 5

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

(Unaudited)

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods ended June 30, 2008 and 2007, and all such adjustments are of a normal recurring nature. The 2007 year-end consolidated balance sheet data was derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles.

The unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information required by accounting principles generally accepted in the United States of America for complete financial statements and related footnote disclosures. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered for a fair presentation of the results for the interim period have been included. For further information, refer to the consolidated financial statements and notes included in the Registrant's 2007 Annual Report on Form 10-K. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the year. Certain amounts in the 2007 consolidated financial statements have been reclassified to conform to the 2008 presentation.

(1)EARNINGS PER SHARE CALCULATION

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated (in thousands, except share data):

	Three Months Ended June 30,				Six Month Ended June 30,
	2008		2007		2008		2007
Numerator:
Net income	$	2,020	$	1,553	$	4,111	$	2,982
Denominator:
Basic earnings per share-weighted average shares		3,295,998		3,333,897		3,300,030		3,340,462
Effect of dilutive securities-stock options		13,086		10,660		11,705		13,806
Diluted earnings per share-adjusted weighted average shares		3,309,084		3,344,557		3,311,735		3,354,268
Net income per share:
Basic	$	0.61	$	0.47	$	1.25	$	0.89
Diluted	$	0.61	$	0.46	$	1.24	$	0.89

The earnings per share calculation for the three and six month periods ended June 30, 2008 and 2007 does not include 279,816 shares and 160,283 shares, respectively, which were anti-dilutive.

9

(2)ACQUISITION

On February 23, 2007, the Corporation completed the acquisition of the Plainfield office of HomeStar Bank in Manteno, Illinois, for $10.2 million in cash, including goodwill of $1.5 million, in order to expand its market presence in the area. The Corporation purchased the existing facility for $4.5 million plus $17.0 million in loans (at book value) and assumed $12.9 million in deposit liabilities. The Plainfield office operates as a branch of the subsidiary bank.

The transaction has been accounted for as a purchase, and the results of operations of the Plainfield office since the acquisition date have been included in the consolidated financial statements. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of this transaction (in thousands):

Cash and cash equivalents	$	93
Loans		17,043
Premises and equipment		4,500
Goodwill		1,492
Other assets		85
Total assets acquired		23,213
Deposits		12,865
Other liabilities		145
Total liabilities assumed		13,010
Net assets acquired	$	10,203

Transaction costs related to the completion of the transaction were considered immaterial. The total fair value of the assets and liabilities acquired exceeded the book value, resulting in goodwill of $1,492,000 which is not subject to amortization.

The following unaudited pro forma condensed combined financial information presents the results of operations of the Corporation, including the effects of the purchase accounting adjustments, had the acquisition taken place at the beginning of each period (in thousands):

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	Pro Forma For the six months ended June 30, 2007
Net interest income	$	13,018
Provision for loan losses		300
Non-interest income		5,402
Non-interest expense		14,681
Income before income taxes		3,439
Income tax expense		421
Net income	$	3,018
Earnings per share
Basic	$	0.90
Diluted	$	0.90
Basic weighted average shares outstanding		3,340,462
Diluted weighted average shares outstanding		3,354,268

The unaudited pro forma condensed combined financial statements do not reflect any anticipated cost savings and revenue enhancements. Additionally, the income statement for the first six months of 2007 includes merger-related expenses. Accordingly, the pro forma results of operations of the Corporation as of and after the merger may not be indicative of the results that actually would have occurred if the merger had been in effect during the period presented or of the results that may be attained in the future.

(3)GOODWILL AND INTANGIBLE ASSETS

The balance of goodwill, net of accumulated amortization, totaled $24,521,000 at June 30, 2008 and December 31, 2007. The balance of intangible assets, net of accumulated amortization, totaled $4,648,000 and $5,090,000 at June 30, 2008 and December 31, 2007, respectively.

The following table summarizes the Corporation’s intangible assets, which are subject to amortization, as of June 30, 2008 and December 31, 2007:

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(in thousands)

	June 30, 2008					December 31, 2007
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Core deposit intangible	$	9,004	$	(4,440	)	$	9,004	$	(4,006	)
Other intangible assets		234		(150	)		234		(142	)
Total	$	9,238	$	(4,590	)	$	9,238	$	(4,148	)

Amortization expense of all intangible assets totaled $357,000 for the six months ended June 30, 2008 and $351,000 for the six months ended June 30, 2007, respectively. The amortization expense of these intangible assets will be approximately $179,000 for the each of the remaining quarters in 2008.

The Corporation has originated mortgage servicing rights which are included in other assets on the consolidated balance sheets. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing income on a basis similar to the interest method using an accelerated amortization method and are subject to periodic impairment testing. As of June 30, 2008, no impairment had been recorded during the year. Changes in the carrying value of capitalized mortgage servicing rights are summarized as follows:

(in thousands)

Balance, January 1, 2008	$	2,498
Servicing rights capitalized		567
Amortization of servicing rights		(266	)
Impairment of servicing rights		0
Balance, June 30, 2008	$	2,799

The Corporation services loans for others with unpaid principal balances at June 30, 2008 and December 31, 2007 of approximately $292,987,000, and $268,391,000, respectively.

The following table shows the future estimated amortization expense for mortgage servicing rights based on existing balances as of June 30, 2008. The Corporation’s actual amortization expense in any given period may be significantly different from the estimated amounts displayed depending on the amount of additional mortgage servicing rights, changes in mortgage interest rates, estimated prepayment speeds, and market conditions.

Estimated Amortization Expense:

	Amount (inthousands)
For the six months ended December 31, 2008	$	157
For the year ended December 31, 2009		305
For the year ended December 31, 2010		286
For the year ended December 31, 2011		268
For the year ended December 31, 2012		251
For the year ended December 31, 2013		236
Thereafter		1,296

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(4)OTHER COMPREHENSIVE LOSS

Other comprehensive loss components and related taxes for the six months ended June 30, 2008 and 2007 were as follows:

(in thousands)

	2008			2007
Net unrealized losses on securities available-for-sale	$	(1,196	)	$	(1,259	)
Less:  classification adjustment for realized gains included in income		276			209
		(1,472	)		(1,468	)
Amortization of transition obligation of post retirement health care		8			0
Other comprehensive income, before tax effect		(1,464	)		(1,468	)
Tax benefit		567			569
Other comprehensive loss	$	(897	)	$	(899	)

The components of accumulated other comprehensive loss, included in stockholders’ equity at June 30, 2008 and 2007 are as follows:

	2008			2007
Net unrealized loss on securities available-for-sale	$	(351	)	$	(2,019	)
Net unrealized benefit obligations		(552	)		(1,016	)
		(903	)		(3,035	)
Tax effect		350			1,176
Net –of-tax amount	$	(553	)	$	(1,859	)

5)FEDERAL HOME LOAN BANK STOCK

Investment securities available-for-sale includes Federal Home Loan Bank stock totaling $2,373,000 at June 30, 2008 and December 31, 2007. During the third quarter of 2007, the Federal Home Loan Bank of Chicago received a Cease and Desist Order from their regulator, the Federal Housing Finance Board. The order prohibits capital stock repurchase and redemptions until a time to be determined by the Federal Housing Finance Board. The Federal Home Loan Bank will continue to provide funding through advances. The Federal Home Loan Bank recently announced it will no longer fund purchases through its MPF Program after October 31, 2008. With regard to dividends, the Federal Home Loan Bank will continue to assess their dividend capacity each quarter and make appropriate request for approval. There were no dividends paid by the Federal Home Loan Bank of Chicago during the first six months of 2008. Management performed an analysis and deemed the investment in Federal Home Loan Bank stock was not impaired as of June 30, 2008 or December 31, 2007.

13

(6) FDIC ONE-TIME ASSESSMENT CREDIT

Effective November 17, 2006, the FDIC implemented a one-time credit of $4.7 billion to eligible institutions. The purpose of the credit is to recognize contributions made by certain institutions to capitalize the Bank Insurance Fund and Savings Association Insurance Fund, which have now been merged into the Deposit Insurance Fund. The Bank is an eligible institution and received notice from the FDIC that its share of the credit was $647,000. This amount is not reflected in the accompanying financial statements as it represents contingent future credits against future insurance assessment payments. As such, the timing and ultimate recoverability of the one-time credit may change. In 2008 and 2007, FDIC premium credits received totaled $263,000 and $381,000, respectively, against the premium expense, leaving a remaining credit of $3,000, as of June 30, 2008, to offset future premium expense.

(7) CHANGE IN ACCOUNTING PRINCIPLE

The Financial Accounting Standards Board Emerging Issues Task Force (“EITF”) issued EITF No. 06-4 “Accounting for Deferred Compensation and Post Retirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements,” which requires the Company to recognize a liability and compensation expense for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to post retirement periods. The benefit to the employees is the payment of the premiums by the Company. The Company adopted EITF 06-4 as of January 1, 2008, through a cumulative effect adjustment as a liability and a decrease to retained earnings of $579,000. Beginning January 1, 2008, an expense is being recorded as the remaining benefit is earned with a corresponding addition to the post retirement benefit obligation. The amount of the expense for 2008 is estimated to be approximately $59,000. For the period from retirement to the estimated date of death for the participants, this liability is reversed into income.

(8) FAIR VALUE OF ASSETS AND LIABILITIES

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157 (FAS 157), “Fair Value Measurements”. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 has been applied prospectively as of the beginning of the period.

FAS 157 defines the fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In accordance with FAS 157, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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Level 1 Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheet.

Available-for-Sale Securities

The fair value of available-for-sale securities are determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Level 2 securities include U.S. Treasury securities, Obligations of U.S. government corporations and agencies, Obligations of states and political subdivisions, mortgage-backed securities, collateralized mortgage obligations and corporate bonds. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. The Company has no securities classified within Level 3.

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the FAS 157 hierarchy in which the fair value measurements fall as of June 30, 2008 (in thousands):

	Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$	220,617	$	0	$	220,617	$	0

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In February 2007, the FASB issued SFAS No. 159 (FAS 159), “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”.  FAS 159 allows companies to report selected financial assets and liabilities at fair value. The changes in fair value are recognized in earnings and the assets and liabilities measured under this methodology are required to be displayed separately in the balance sheet. The main intent of the Statement is to mitigate the difficulty in determining reported earnings caused by a “mixed-attribute model” (or reporting some assets at fair value and others using a different valuation attribute such as amortized cost). The project is separated into two phases.  This first phase addresses the creation of a fair value option for financial assets and liabilities.  A second phase will address creating a fair value option for selected non-financial items. FAS 159 is effective for all financial statements issued for fiscal years beginning after November 15, 2007.  The Corporation has not elected the fair value option for any financial assets or liabilities at March 31, 2008.

(9)IMPACT OF NEW ACCOUNTING STANDARDS

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (FAS 158), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements 87, 88, 106, and 132 (R),” which requires recognition of a net liability or asset to report the funded status of defined benefit pension and other postretirement plans on the balance sheet and recognition (as a component of other comprehensive income) of changes in the funded status in the year in which the changes occur. Additionally, FAS 158 requires measurement of a plan’s assets and obligations as of the balance sheet date and additional annual disclosures in the notes to the financial statements. The recognition and disclosure provisions of FAS 158 were adopted during 2006, while the requirement to measure a plan’s assets and obligations as of the balance sheet date is effective for fiscal years ending after December 15, 2008. The Corporation does not expect the adoption of the measurement provisions to have a material impact on its financial reporting and disclosures.

In December 2007, the FASB issued SFAS No. 141R (FAS 141R), “Business Combinations”, which revises FAS 141 and changes multiple aspects of the accounting for business combinations. Under the guidance in FAS 141R, the acquisition method must be used, which requires the acquirer to recognize most identifiable assets acquired, liabilities assumed, and non-controlling interests in the acquiree at their full fair value on the acquisition date. Goodwill is to be recognized as the excess of the consideration transferred plus the fair value of the non-controlling interest over the fair values of the identifiable net assets acquired. Subsequent changes in the fair value of contingent consideration classified as a liability are to be recognized in earnings, while contingent consideration classified as equity is not to be re-measured. Costs such as transaction costs are to be excluded from acquisition accounting, generally leading to recognizing expense and additionally, restructuring costs that do not meet certain criteria at acquisition date are to be subsequently recognized as post-acquisition costs. FAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact that this issuance will have on its financial position and results of operations; however, it anticipates that the standard will lead to more volatility in the results of operations during the periods subsequent to an acquisition.

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In March 2008, the FASB issued SFAS No. 161 (FAS 161), “Disclosures About Derivative Instruments and Hedging Activities – an amendment of FAS 133”. FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. FAS 161 is effective for fiscal years beginning after November 15, 2008. The Company does not expect the implementation of FAS 161 to have a material impact on its consolidated financial statements.

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Schedule 6

PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the three and six months ended June 30, 2008 and 2007

The following discussion provides information about Princeton National Bancorp, Inc.'s (“PNBC” or the “Corporation”) financial condition and results of operations for the three and six month periods ended June 30, 2008 and 2007. This discussion should be read in conjunction with the attached consolidated financial statements and notes thereto. Certain statements in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, but not limited to those statements that include the words “believes”, “expects”, “anticipates”, “estimates”, or similar expressions. PNBC cautions that such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such risks and uncertainties include potential change in interest rates, competitive factors in the financial services industry, general economic conditions, the effect of new legislation, and other risks detailed in documents filed by the Corporation with the Securities and Exchange Commission from time to time.

RESULTS OF OPERATIONS

The Company realized a significant improvement in earnings during the second quarter and the first six months of 2008. Net income for the second quarter of 2008 was $2,020,000, or basic and diluted earnings per share of $0.61, as compared to net income of $1,553,000 in the second quarter of 2007, or basic earnings per share of $0.47 (diluted earnings per share of $0.46). This represents an increase of $467,000 (or 30.0%), $0.14 basic earnings per share and $0.15 diluted earnings per share. The improvement in earnings is attributable to an increase in net interest income, discussed below, due to an improving net interest margin. Net income for the first six months of 2008 was $4,111,000 or basic earnings per share of $1.25 and diluted earnings per share of $1.24, compared to net income of $2,982,000, or basic and diluted earnings per share of $0.89 for the first six months of 2007. This represents an increase of $1,129,000, (37.9%) or $0.36 per basic share and $0.35 per diluted share. The higher net income figure is primarily attributed to an increase in the net yield on interest-earning assets from 3.13% for the first six months of 2007 to 3.44% for the first six months of 2008. The annualized return on average assets and return on average equity were 0.75% and 11.71%, respectively, for the second quarter of 2008, compared with 0.60% and 9.56% for the second quarter of 2007. For the six-month periods, the annualized return on average assets and return on average equity were 0.76% and 11.98%, respectively for 2008, compared with 0.58% and 9.18%, respectively for 2007.

Net interest income before provision for loan losses was $7,817,000 for the second quarter of 2008, compared to $6,587,000 for the second quarter of 2007 (an increase of $1,230,000 or 18.7%). This improvement is a result of an increase in average interest-earning assets of $48.8 million over the past twelve months. For the three months ended June 30, 2008, average interest-earning assets were $962.0 million compared to $913.1 million for the three months ended June 30, 2007. Additionally, the resulting net yield on interest-earning assets (on a fully taxable equivalent basis) increased to 3.49% in the second quarter of 2008 compared to 3.15% in the second quarter of 2007, contributing to the higher net income reported above. The 3.49% net yield in the second quarter of 2008 also represents an increase from the 3.39% in the first quarter of 2008 and continues the positive trend that began in the third quarter of 2007. Net interest income before any provision for loan losses was $15,271,000 for the first six months of 2008, an increase of $2.3 million, or 17.7%, from the $12,978,000 reported for the first six months of 2007. This is attributable to an increase in average interest-earning assets of $44.5 million over the past twelve months, along with the resulting net yield on interest-earning assets (on a fully taxable equivalent basis) increasing to 3.44% in the first half of 2008 from 3.13% in the first half of 2007, an improvement of 9.9%.

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The Corporation’s provision for loan loss expense recorded each quarter is determined by management’s evaluation of the risk characteristics of the loan portfolio. For the second quarter of 2008, PNBC had net charge-offs of $189,000, comparable to net charge-offs of $142,000 for the second quarter of 2007 and a decrease from net charge-offs of $481,000 in the first quarter of 2008. For the six-month comparable periods, PNBC had net charge-offs of $670,000 in 2008 and net charge-offs of $243,000 in 2007. PNBC recorded a loan loss provision of $450,000 in the second quarter of 2008 and $818,000 in the first half of 2008 compared to a provision of $115,000 in the second quarter of 2007 and $300,000 in the first half of 2007. The ratio of non-performing loans to total loans at June 30, 2008 has increased to 1.98% compared to 0.72% at June 30, 2007, but remains low by industry standards. The Corporation has no sub-prime loans in the portfolio, nor is there any sub-prime exposure in the investment portfolio.

Non-interest income totaled $2,751,000 for the second quarter of 2008, compared to $2,722,000 in the second quarter of 2007, an increase of $29,000 (or 1.1%). Annualized non-interest income as a percentage of average total assets decreased to 1.02% for the second quarter of 2008 from 1.06% for the same period in 2007. Year-to-date in 2008, non-interest income totaled $5,904,000 compared to $5,367,000 for the first half of 2007, an increase of $537,000 (or 10.0%). The primary reason for the positive change is the increase in mortgage banking income which has improved by $227,000 (or 55.5%) period over period. Additionally, the categories of service charges on deposits, gains on sales of securities available for sale, and other service charges saw increases of $117,000, $67,000 and $66,000, respectively. Annualized non-interest income as a percentage of average total assets increased from 1.05% for the first six months of 2007, to 1.10% for the same period in 2008.

Total non-interest expense for the second quarter of 2008 was $7,509,000, an increase of $115,000 (or 1.6%) from $7,394,000 in the second quarter of 2007. The largest increase was in salaries and employee benefits which went up $89,000, or 2.2%. Annualized non-interest expense as a percentage of total average assets decreased to 2.77% for the second quarter of 2008, compared to 2.88% for the same period in 2007, continuing a positive trend in the effort to control operating expenses as the Corporation grows and expands. The annualized percentage of 2.77% is the lowest the Corporation has reported since 1989. Year-to-date non-interest expense for the first half of 2008 was $15,069,000, an increase of $403,000 (or 2.7%) from the $14,666,000 for the first half of 2007. Again, the majority of the increase is in salaries and employee benefits which rose $306,000 (or 3.7%), due to an increase in the number of employees. Annualized non-interest expense as a percentage of total average assets also decreased to 2.80% for the first six months of 2008, compared to 2.88% for the same period in 2007.

INCOME TAXES

Income tax expense totaled $589,000 for the second quarter of 2008, as compared to $247,000 for the second quarter of 2007. The effective tax rate was 22.6% for the three month period ended June 30, 2008 and 13.7% for the three month period ended June 30, 2007. Income tax expense totaled $1,177,000 for the first six months of 2008, as compared to $397,000 for the first six months of 2007. The effective tax rate was 22.3% for the six month period ended June 30, 2008 and 11.7% for the six month period ended June 30, 2007. The higher effective tax rate in 2008 is due to a higher pre-tax income.

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ANALYSIS OF FINANCIAL CONDITION

Total assets at June 30, 2008 increased to $1,105,186,000 from $1,080,702,000 at December 31, 2007 (an increase of $24.5 million or 2.3%). Investment balances totaled $236,225,000 at June 30, 2008, compared to $232,673,000 at December 31, 2007 (an increase of $3.5 million or 1.5%). Total deposits increased to $904,273,000 at June 30, 2008 from $891,407,000 at December 31, 2007 (an increase of $12.9 million or 1.4%). Comparing categories of deposits at June 30, 2008 to December 31, 2007, interest-bearing demand deposits increased $11.2 million (or 4.6%), savings deposits increased $5.1 million (or 8.8%), and demand deposits increased $1.1 million (or 1.1%), while time deposits decreased $4.6 million (or 1.0%). Borrowings, consisting of customer repurchase agreements, notes payable, treasury, tax, and loan (“TT&L”) deposits, and Federal Home Loan Bank advances, increased from $109,089,000 at December 31, 2007 to $121,632,000 at June 30, 2008 (an increase of $12.5 million or 11.5%).

Loan balances, net of unearned interest, increased to $746,234,000 at June 30, 2008, compared to $722,647,000 at December 31, 2007 (an increase of $23.6 million or 3.3%). Non-performing loans increased to $14,567,000 or 1.95% of net loans at June 30, 2008, as compared to $7,434,000 or 1.03% of net loans at December 31, 2007. Although non-performing loans have increased in terms of total dollars since year-end, the increase occurred in the first quarter of 2008 and is comprised of two larger credits with substantial collateral. All loans are individually evaluated and management continues to maintain adequate reserves in the allowance for loan losses.

ASSET QUALITY

For the six months ended June 30, 2008, the subsidiary bank charged off $769,000 of loans and had recoveries of $99,000, compared to charge-offs of $368,000 and recoveries of $125,000 during the six months ended June 30, 2007. The allowance for loan losses is based on factors that include the overall composition of the loan portfolio, types of loans, underlying collateral, past loss experience, loan delinquencies, substandard and doubtful credits, and such other factors that, in management's reasonable judgment, warrant consideration. The adequacy of the allowance is monitored monthly. At June 30, 2008, the allowance was $3,396,000 which is 23.3% of non-performing loans and 0.46% of total loans, compared with $3,248,000 which was 43.7% of non-performing loans and 0.45% of total loans at December 31, 2007. Although the balance of non-performing loans has increased, management has reviewed these loans and deemed they are adequately collateralized.

At June 30, 2008 non-accrual loans were $14,551,000 compared to $7,361,000 at December 31, 2007. Impaired loans totaled $11,032,000 at June 30, 2008 compared to $4,523,000 at December 31, 2007. The total amount of loans ninety days or more past due and still accruing interest at June 30, 2008 was $16,000 compared to $73,000 at December 31, 2007. There was a specific loan loss reserve of $193,000 established for impaired loans as of June 30, 2008 compared to a specific loan loss reserve of $207,000 at December 31, 2007. PNBC’s management analyzes the allowance for loan losses monthly and believes the current level of allowance is adequate to meet probable losses as of June 30, 2008.

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CAPITAL RESOURCES

Federal regulations require all financial institutions to evaluate capital adequacy by the risk-based capital method, which makes capital requirements more sensitive to the differences in the level of risk assets. At June 30, 2008, total risk-based capital of PNBC was 8.35%, compared to 8.41% at December 31, 2007. The Tier 1 capital ratio decreased slightly from 6.16% at December 31, 2007, to 6.15% at June 30, 2008. Total stockholders' equity to total assets at June 30, 2008 decreased to 6.25% from 6.35% at December 31, 2007.

LIQUIDITY

Liquidity is measured by a financial institution's ability to raise funds through deposits, borrowed funds, capital, or the sale of assets. Additional sources of liquidity include cash flow from the repayment of loans and the maturity of investment securities. Major uses of cash include the origination of loans and purchase of investment securities. Cash flows used in investing activities, offset by those provided by operating and financing activities, resulted in a net decrease in cash and cash equivalents of $1,205,000 from December 31, 2007 to June 30, 2008. This decrease was primarily due to a net increase in loans and investments, offset by an increase in deposits and borrowings. For more detailed information, see PNBC's Consolidated Statements of Cash Flows.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Corporation generates agribusiness, commercial, mortgage and consumer loans to customers located primarily in North Central Illinois. The Corporation’s loans are generally secured by specific items of collateral including real property, consumer assets and business assets. Although the Corporation has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions in the agricultural industry.

In the normal course of business to meet the financing needs of its customers, the subsidiary bank is party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the subsidiary bank has in particular classes of financial instruments.

The subsidiary bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The subsidiary bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments. At June 30, 2008, commitments to extend credit and standby letters of credit were approximately $137,204,000 and $8,532,000 respectively.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The subsidiary bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, by the subsidiary bank upon extension of credit is based on management's credit evaluation of the counterparty. Collateral held varies, but may include real estate, accounts receivable, inventory, property, plant and equipment, and income-producing properties.

Standby letters of credit are conditional commitments issued by the subsidiary bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The subsidiary bank secures the standby letters of credit with the same collateral used to secure the loan. The maximum amount of credit that would be extended under standby letters of credit is equal to the off-balance sheet contract amount. The standby letters of credit have terms that expire in one year or less.

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MERGERS AND ACQUISITIONS

On February 23, 2007, the Company completed the acquisition, for $10.2 million in cash, of the fixed assets and loans while assuming the deposit liabilities of the Plainfield, Illinois branch of HomeStar Bank in order to expand its market presence in this area. The Company financed the purchase price with existing cash and federal funds sold on the balance sheet at the time of purchase. Since the completion of the merger, the Plainfield location operates as a branch of the Company’s subsidiary bank.

The transaction has been accounted for as a purchase, and the results of operations of Plainfield since the acquisition date have been included in the consolidated financial statements.

LAND HELD FOR SALE

In 2004, the Corporation purchased approximately 14 acres of land in Aurora, Illinois in anticipation of the construction of a new branch facility. Construction of the facility was completed in May, 2006 with the remaining acreage sub-divided in two lots and the necessary infrastructure completed. These lots, with a cost basis of $1,344,000, were determined to be held for sale as of March 31, 2007. A real estate appraisal has been completed indicating the market value of each lot to be approximately $2,000,000. Accordingly, these lots were removed from the land balance and are now shown on the Corporation’s balance sheet as land held-for-sale, at the lower of cost or market.

LEGAL PROCEEDINGS

There are various claims pending against the Corporation's subsidiary bank, arising in the normal course of business. Management believes, based upon consultation with legal counsel, that liabilities arising from these proceedings, if any, will not be material to the Corporation’s financial position or results of operation.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in market risk since December 31, 2007, as reported in PNBC's 2007 Annual Report on Form 10-K.

EFFECTS OF INFLATION

The consolidated financial statements and related consolidated financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America and practices within the banking industry which require the measurement of financial condition and operating results in terms of historical dollars, without considering the changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation.

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PRINCETON NATIONAL BANCORP, INC. AND SUBSIDIARY

The following table sets forth (in thousands) details of average balances, interest income and expense, and resulting annualized yields/costs for the Corporation for the periods indicated, reported on a fully taxable equivalent basis, using a tax rate of 34%.

	Six Months Ended, June 30, 2008					Six Months Ended, June 30, 2007
	Average Balance		Interest		Yield/ Cost	Average Balance		Interest		Yield/ Cost
Average Interest-Earning Assets
Interest-bearing deposits	$	1,672	$	21	2.47%	$	3,507	$	76	4.37%
Taxable investment securities		154,210		3,297	4.30%		151,945		3,619	4.80%
Tax-exempt investment securities		77,863		3,091	7.98%		102,778		3,385	6.64%
Federal funds sold		2,152		29	2.68%		7,990		221	5.58%
Net loans		720,843		24,188	6.75%		645,974		23,947	7.48%
Total interest-earning assets		956,741		30,626	6.44%		912,194		31,248	6.91%
Average non-interest earning assets		124,640					115,920
Total average assets	$	1,081,381				$	1,028,114
Average Interest-Bearing Liabilities
Interest-bearing demand deposits	$	252,805		2,428	1.93%	$	233,766		3,230	2.79%
Savings deposits		62,152		38	0.12%		66,349		144	0.44%
Time deposits		488,364		10,013	4.12%		479,728		11,727	4.93%
Interest-bearing demand notes issued to the U.S. Treasury		995		10	2.06%		1,030		25	4.96%
Federal funds purchased		8,009		110	2.77%		154		4	5.59%
Customer repurchase agreements		36,427		402	2.22%		30,618		711	4.68%
Advances from Federal Home Loan Bank		11,046		214	3.89%		6,973		176	5.10%
Trust preferred securities		25,000		710	5.71%		25,000		710	5.73%
Note payable		14,550		343	4.74%		9,727		345	7.14%
Total interest-bearing liabilities		899,348		14,268	3.19%		853,345		17,072	4.03%
Net yield on average interest-earning assets			$	16,358	3.44%			$	14,176	3.13%
Average non-interest-bearing liabilities		113,031					109,277
Average stockholders' equity		69,002					65,492
Total average liabilities and stockholders' equity	$	1,081,381				$	1,028,114

The following table reconciles tax-equivalent net interest income (as shown above) to net interest income as reported on the Consolidated Statements of Income.

	For the Six Months Ended June 30,
	2008		2007
Net interest income as stated	$	15,271	$	12,978
Tax equivalent adjustment-investments		1,051		1,151
Tax equivalent adjustment-loans		36		47
Tax equivalent net interest income	$	16,358	$	14,176

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Schedule 7. Controls and Procedures

(a) Disclosure controls and procedures. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2008. 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. Tony J. Sorcic, President and Chief Executive Officer, and Todd D. Fanning, Senior Vice-President and Chief Financial Officer, reviewed and participated in this evaluation. Based on this evaluation, Messrs. Sorcic and Fanning concluded that, as of the date of their evaluation, our disclosure controls were effective.

(b) Internal controls. There have not been any significant changes in our internal accounting controls or in other factors during the quarter ended June 30, 2008 that could significantly affect those controls.

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INDEX TO EXHIBITS

Exhibit Number	Exhibit
31.1	Certification of Tony J. Sorcic required by Rule 13a-14(a).
31.2	Certification of Todd D. Fanning required by Rule 13a-14(a).
32.1	Certification of Tony J. Sorcic required by Rule 13a-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
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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