8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 30, 2008 (October 28, 2008)

Princeton National Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

0-20050	36-3210283
(Commission File Number)	(IRS Employer Identification No.)
606 South Main Street Princeton, Illinois	61356
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (815) 875-4444

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99.1

Item 2.02 Results of Operations and Financial Condition

The following information, including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.

On October 28, 2008, Princeton National Bancorp, Inc. issued a news release to report its financial results for the quarter and nine month period ended September 30, 2008. The release is furnished as Exhibit 99.1 hereto.

Item 9.01 Financial Statements and Exhibits

         (d) Exhibits:

          Exhibit 99.1 October 28, 2008 Press Release

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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 hereunto duly authorized.

PRINCETON NATIONAL BANCORP, INC.                          (Registrant)
By:	/s/ Tony J. Sorcic
	Tony J. Sorcic, President and
	Chief Executive Officer

Dated: October 30, 2008

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EXHIBIT INDEX

Number	Description
99.1	October 28, 2008 Press Release

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EX-99.1

Exhibit 99.1

Princeton National Bancorp, Inc. Continues Positive Trends and Increases Year-to-date Earnings Per Share 34.8%

PRINCETON, ILLINOIS – October 28, 2008 – Princeton National Bancorp, Inc. (NASDAQ: PNBC) reported 2008 year-to-date fully diluted earnings per share increased 34.8% to $1.90 from $1.41 in the same period in 2007. Net income for the first nine months of 2008 increased 33.4% to $6,298,000 from $4,723,000 in 2007.

“Princeton National Bancorp, Inc. has consistently generated positive results during the first nine months of 2008,” said Tony J. Sorcic, President and Chief Executive Officer. “The net interest margin increased 9.2% to 3.46% compared to 3.17% for the nine months ending September 30, 2007. As a result, year-to-date net interest income of $23,443,000 represents an increase of 18.2%. Based on the September 30^th level of interest-earning assets compared to December 31, 2007, the improvement in the net interest margin and growth in interest earning assets equates to an increase in net (annualized pre-tax) interest income of $3,900,000. Management is very pleased with the improvement which has been generated.”

Mr. Sorcic continued, “Non-interest income of $8,755,000 for the first nine months of 2008 represents a 5.5% increase from the first nine months of 2007. One area that has contributed to the consistent results in non-interest income is mortgage banking income. During a time when many financial institutions are experiencing significant declines in their mortgage banking income, the Company experienced a 32.0% increase in 2008 and has exceeded its year-end volume goal. Our fixed rate mortgage loans have always been and will continue to be written to conforming standards of the secondary market.”

Mr. Sorcic concluded, “Citizens First National Bank, the subsidiary bank, has been successfully serving its communities since 1865 in good times and challenging times. Princeton National Bancorp, Inc. and Citizens First National Bank are very strong, stable organizations with long and prosperous track records.”

As a percentage of average assets, non-interest expense for the nine months ending September 30, 2008 was 2.77%, the lowest it has been since the late 1980s. Operating expenses are closely monitored and well controlled as emphasis is continually placed on improving efficiencies.

Significant improvement has been seen in the return on average equity in 2008. The return on average equity for the first nine months is 12.17%, compared to 9.67% for the same nine month period in 2007. Consistent results have been achieved in 2008 as the return on average equity was 12.22% in the first quarter, 11.71% in the second quarter and 12.54% in the third quarter.

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Net income for the third quarter of 2008 increased 8.3% from the second quarter of 2008 to $2,187,000 and 25.7% from the third quarter of 2007. Fully diluted earnings per share for the third quarter of 2008 were $.66, compared to $.61 in the second quarter of 2008 and $.52 in the third quarter of 2007.

Non-interest income for the quarter was $2,851,000. This represents a 3.6% increase from the second quarter and a 2.9% decrease from the third quarter of 2007. The Company’s non-interest income has equaled or exceeded 1% of average assets for 33 consecutive quarters. Non-interest income growth continues to be an integral component of the Company’s success.

The net interest margin for the third quarter was 3.50%, an improvement of 8.4% from the third quarter of 2007, and 10.4% from the recent low of 3.17% in the first quarter of 2007. Net-interest income for the quarter was $8,172,000, a significant improvement from $7,817,000 in the second quarter of 2008 and $6,850,000 in the same quarter in 2007.

Operating expenses as a percentage of average assets for the third quarter of 2008 were 2.72%, comparing favorably to 2.77% in the second quarter of 2008 and 2.85% in the third quarter of 2007.

Assets at September 30, 2008 were $1.124 billion, representing growth of $42.9 million, or 4.0%, since December 31, 2007. During the first nine months of 2008, total loans increased $39.5 million, ending the quarter at $762.1 million. The loan-to-asset ratio increased to 67.83% at September 30, 2008 from 66.87% at December 31, 2007. The investment portfolio has increased $13.1 million since year-end 2007. Non-performing loans total $16.4 million and represent 2.2% of the total loan portfolio at September 30, 2008. However, net loan charge-offs equaled $103,000 or on an annualized level of just 0.06% of the loan portfolio. The Subsidiary Bank has no sub-prime loans in the loan portfolio or as underlying collateral in the investment portfolio and the Subsidiary Bank has maintained its high quality underwriting standards.

The Company ended the third quarter of 2008 with total deposits and repurchase agreements of $971.9 million, a $46.2 million increase from $925.6 million at December 31, 2007. The increase occurred primarily in checking, money market accounts and time deposits.

The Board of Directors of Princeton National Bancorp, Inc. approved a 50,000 share, or approximately 1.50%, stock repurchase program on October 27, 2008. Under the plan, the Company will repurchase up to 50,000 shares of its outstanding shares of common stock in the open market or in private transactions over the next twelve months. Purchases will be dependent upon market conditions and the availability of shares. The Company currently has 3,296,669 outstanding shares of common stock. Since 1997, the Company has repurchased a total of 1,364,271 shares through stock repurchase programs.

Financial stocks, in general, continue to be negatively impacted by the poor earnings reports, due to compressed net interest margins, loan charge-offs, and sub-prime loan issues. Princeton National Bancorp, Inc.’s stock price closed at $25.01 on September 30, 2008, compared to $24.25 on December 31, 2007 and $26.18 on September 30, 2007.

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The Company’s Directors and Management are very pleased with the stable stock performance during this challenging environment.

Global and national economic issues have negatively impacted the banking industry; however, parts of the economy, such as agriculture in north central Illinois, are very strong. Princeton National Bancorp, Inc. has no sub-prime loans in its loan portfolio or as underlying collateral in the investment portfolio and does not own Fannie Mae or Freddie Mac preferred stock. Management is focused on building franchise value through the execution of the Company’s strategy. The staff of the Subsidiary Bank is committed to being the best community bank in each of the markets served. Additional financial information is available at www.pnbc-inc.com.

The Company offers shareholders the opportunity to participate in the Princeton National Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan. The Company also offers electronic direct deposit of dividends. To obtain information about the stock purchase plan or electronic direct deposit, please contact us at 815-875-4445, extension 650.

Princeton National Bancorp, Inc. is the parent holding company of Citizens First National Bank, a $1.124 billion community bank with strategic locations in 8 counties in northern Illinois. The Company is well-positioned in the high growth counties of Will, Kendall, Kane, Grundy, DeKalb and LaSalle plus Bureau and Marshall. Communities include: Aurora, DePue, Genoa, Hampshire, Henry, Huntley, Millbrook, Minooka, Newark, Oglesby, Peru, Plainfield, Plano, Princeton, Sandwich, Somonauk and Spring Valley. The Subsidiary Bank, Citizens First National Bank, provides financial services to meet the needs of individuals, businesses and public entities.

This press release contains certain forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. These forward-looking statements are identified by the use of words such as 1) believes, 2) anticipates, 3) estimates, 4) expects, 5) projects or similar words. Actual results could differ materially from those contained or implied by such statements for a variety of factors including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature, extent, and timing of governmental actions and reforms; and extended disruption of vital infrastructure. The figures included in this press release are unaudited and may vary from the audited results.

Inquiries should be directed to: Lou Ann Birkey, Vice President – Investor Relations,
Princeton National Bancorp, Inc. (815) 875-4444,
E-Mail address: pnbc@citizens1st.com

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CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)

	September 30,
	2008			December 31,
	(unaudited)			2007
ASSETS
Cash and due from banks	$	17,289		$	25,801
Interest-bearing deposits with financial institutions		100			1,803
Federal funds sold		800			0
Total cash and cash equivalents		18,189			27,604
Loans held for sale, at lower of cost or market		2,654			928
Investment securities available-for-sale, at fair value		230,495			218,095
Investment securities held-to-maturity, at amortized cost		15,296			14,578
Total investment securities		245,791			232,673
Loans, net of unearned interest		762,109			722,647
Allowance for loan losses		(3,842	)		(3,248	)
Net loans		758,267			719,399
Premises and equipment, net		30,290			30,801
Land held for sale, at lower of cost or market		1,344			1,344
Bank-owned life insurance		21,478			22,461
Interest receivable		10,253			10,876
Goodwill, net of accumulated amortization		24,521			24,521
Intangible assets, net of accumulated amortization		4,428			5,090
Other real estate owned		1,330			833
Other assets		5,027			4,172
TOTAL ASSETS	$	1,123,572		$	1,080,702
LIABILITIES
Demand deposits	$	97,430		$	102,452
Interest-bearing demand deposits		260,056			241,749
Savings deposits		59,871			58,401
Time deposits		520,089			488,805
Total deposits		937,446			891,407
Customer repurchase agreements		34,420			34,217
Advances from the Federal Home Loan Bank		30,490			6,984
Interest-bearing demand notes issued to the U.S. Treasury		1,805			1,838
Federal funds purchased		0			26,500
Trust Preferred securities		25,000			25,000
Note payable		16,050			14,550
Total borrowings		107,765			109,089
Other liabilities		9,080			11,599
Total liabilities		1,054,291			1,012,095
STOCKHOLDERS’ EQUITY
Common stock		22,391			22,391
Surplus		18,391			18,275
Retained earnings		54,225			51,279
Accumulated other comprehensive income (loss), net of tax		(1,631	)		344
Less: Treasury stock		(24,095	)		(23,682	)
Total stockholders’ equity		69,281			68,607
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY	$	1,123,572		$	1,080,702
CAPITAL STATISTICS (UNAUDITED)
YTD average equity to average assets		6.33	%		6.33	%
Tier 1 leverage capital ratio		6.14	%		6.16	%
Tier 1 risk-based capital ratio		7.98	%		8.00	%
Total risk-based capital ratio		8.44	%		8.41	%
Book value per share	$	21.02		$	20.66
Closing market price per share	$	25.01		$	24.25
End of period shares outstanding		3,296,669			3,308,447
End of period treasury shares outstanding		1,181,626			1,169,848

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CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except share data)

	THREE MONTHS			THREE MONTHS			NINE MONTHS			NINE MONTHS
	ENDED			ENDED			ENDED			ENDED
	September 30, 2008			September 30, 2007			September 30, 2008			September 30, 2007
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
INTEREST INCOME
Interest and fees on loans	$	11,977		$	12,980		$	36,129		$	36,880
Interest and dividends on investment securities		2,772			2,619			8,110			8,472
Interest on federal funds sold		37			24			66			246
Interest on interest-bearing time deposits in other banks		26			9			46			85
Total Interest Income		14,812			15,632			44,351			45,683
INTEREST EXPENSE
Interest on deposits		5,771			7,677			18,250			22,777
Interest on borrowings		869			1,105			2,658			3,077
Total Interest Expense		6,640			8,782			20,908			25,854
Net interest income		8,172			6,850			23,443			19,829
Provision for loan losses		550			250			1,368			550
Net interest income after provision		7,622			6,600			22,075			19,279
NON-INTEREST INCOME
Trust & farm management fees		309			353			1,120			1,124
Service charges on deposit accounts		1,174			1,174			3,376			3,259
Other service charges		563			535			1,587			1,492
Gain on sales of securities available-for-sale		54			149			331			358
Brokerage fee income		249			224			676			641
Mortgage banking income		243			257			879			666
Bank-owned life insurance		227			203			648			608
Other operating income		32			40			138			154
Total Non-Interest Income		2,851			2,935			8,755			8,302
NON-INTEREST EXPENSE
Salaries and employee benefits		4,459			4,257			13,082			12,574
Occupancy		619			569			1,908			1,770
Equipment expense		698			756			2,168			2,371
Federal insurance assessments		99			84			267			254
Intangible assets amortization		178			177			535			528
Data processing		272			268			852			797
Advertising		195			188			524			539
Other operating expense		1,108			1,088			3,360			3,219
Total Non-Interest Expense		7,628			7,387			22,696			22,052
Income before income taxes		2,845			2,148			8,134			5,529
Income tax expense		658			408			1,836			806
Net income	$	2,187		$	1,740		$	6,298		$	4,723
Net income per share:
BASIC	$	0.66		$	0.53		$	1.91		$	1.42
DILUTED	$	0.66		$	0.52		$	1.90		$	1.41
Basic weighted average shares outstanding		3,295,200			3,314,913			3,298,408			3,331,852
Diluted weighted average shares outstanding		3,305,195			3,322,292			3,309,560			3,342,689
PERFORMANCE RATIOS (annualized)
Return on average assets		0.78	%		0.67	%		0.77	%		0.61	%
Return on average equity		12.54	%		10.65	%		12.17	%		9.67	%
Net interest margin (tax-equivalent)		3.50	%		3.23	%		3.46	%		3.17	%
Efficiency ratio (tax-equivalent)		66.00	%		71.45	%		67.11	%		73.80	%
ASSET QUALITY
Net loan charge-offs	$	103		$	139		$	774		$	382
Total non-performing loans	$	16,383		$	6,408		$	16,383		$	6,408
Non-performing loans as a % of total loans		2.15	%		0.93	%		2.15	%		0.93	%

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