Note 12 - Regulatory Matters	3 Months Ended
Jun. 30, 2011
Regulatory Matters [Text Block]	NOTE 12 -- REGULATORY MATTERS On March 15, 2010, Citizens First National Bank, Princeton, Illinois (the “Bank”), a subsidiary of Princeton National Bancorp, Inc. (the “Corporation”) entered into a formal written agreement (the “Agreement”) with the Comptroller of the Currency (the “Comptroller”). The Agreement sets forth the Bank’s commitment to: (i) review and take action as necessary regarding its allowance for loan losses: (ii) improve the Bank’s asset quality through the development of workout plans for criticized assets and the assessment of credit risk; and (iii) revise the Bank’s credit risk rating management information system. The Bank has taken steps to address the issues raised in the Agreement and intends to fully comply with the requirements set forth in the Agreement. Pursuant to the Agreement, the Bank’s Board of Directors has reviewed the adequacy of the Bank’s allowance for loan losses and established a program for the maintenance of an adequate allowance. The Bank also took immediate action to protect its interest in criticized assets and to adopt individual written workout plans with respect to such assets. A copy of the workout plans is provided to the Comptroller on a quarterly basis for any criticized asset equal to or exceeding $100,000. Under the Agreement, the Board of Directors ensures that the Bank’s internal ratings of loan relationships are timely, accurate and consistent with the regulatory credit classification criteria established by the Comptroller. In the fourth quarter of 2010, the Bank filled a newly created role of Chief Credit Officer and established a credit administration division to oversee the development, maintenance and monitoring of loan policies and procedures. Other responsibilities of the credit administration division include credit analysis, credit risk management, loan servicing and administration, collections and the special assets group, as well as loan portfolio analysis and the allowance for loan losses. The functions of the special assets group include loss mitigation and workout of non-performing loans, liquidation of non-performing assets and other responsibilities to accelerate and maximize loan recoveries. As part of establishing the new credit administration division and improving internal controls, the Bank’s Chief Credit Officer identified and engaged experienced personnel to fill key roles within credit administration. In 2010, the internal loan review staff, and the scope of their reviews, was expanded. Considerable progress was achieved in meeting the expanded loan review scope and evaluating and verifying internal loan ratings on a timely basis consistent with credit classification criteria set forth in the Comptroller's Handbook. Loan review grading methodology was refined to ensure that loans with a probability of payment default or well defined weaknesses are graded substandard regardless of mitigating controls which might reduce credit risk. The Directors Loan Committee monitored this process with bi-monthly meetings and reviewed loan review reports to ensure compliance with the terms of the Agreement. In March of 2011, the risk management department’s loan review function was restructured, and the majority of the loan review responsibilities were out-sourced to a loan review risk advisory firm. The external loan review services began in April of 2011 and are structured to cover 75% of the loan portfolio annually (excluding residential and consumer loans). The external loan review services are managed by the Loan Review Officer or another designee deemed independent and appropriate within the risk management department with reports made independently to the Directors Loan Committee. The Directors Loan Committee then reports results to the Bank’s Board of Directors. The outsourcing of the loan review function has assisted management in ensuring the Bank’s internal ratings of commercial credit relationships are timely, accurate and consistent with regulatory credit classification criteria. In addition, this process has contributed in the identification of trends and the assessment of the overall quality of the loan portfolio.

Note 12 - Regulatory Matters

3 Months Ended

Jun. 30, 2011

NOTE 12 -- REGULATORY MATTERS

On March 15, 2010, Citizens First National Bank, Princeton, Illinois (the “Bank”), a subsidiary of Princeton National Bancorp, Inc. (the “Corporation”) entered into a formal written agreement (the “Agreement”) with the Comptroller of the Currency (the “Comptroller”). The Agreement sets forth the Bank’s commitment to: (i) review and take action as necessary regarding its allowance for loan losses: (ii) improve the Bank’s asset quality through the development of workout plans for criticized assets and the assessment of credit risk; and (iii) revise the Bank’s credit risk rating management information system. The Bank has taken steps to address the issues raised in the Agreement and intends to fully comply with the requirements set forth in the Agreement.

Pursuant to the Agreement, the Bank’s Board of Directors has reviewed the adequacy of the Bank’s allowance for loan losses and established a program for the maintenance of an adequate allowance. The Bank also took immediate action to protect its interest in criticized assets and to adopt individual written workout plans with respect to such assets. A copy of the workout plans is provided to the Comptroller on a quarterly basis for any criticized asset equal to or exceeding $100,000. Under the Agreement, the Board of Directors ensures that the Bank’s internal ratings of loan relationships are timely, accurate and consistent with the regulatory credit classification criteria established by the Comptroller.

In the fourth quarter of 2010, the Bank filled a newly created role of Chief Credit Officer and established a credit administration division to oversee the development, maintenance and monitoring of loan policies and procedures. Other responsibilities of the credit administration division include credit analysis, credit risk management, loan servicing and administration, collections and the special assets group, as well as loan portfolio analysis and the allowance for loan losses. The functions of the special assets group include loss mitigation and workout of non-performing loans, liquidation of non-performing assets and other responsibilities to accelerate and maximize loan recoveries. As part of establishing the new credit administration division and improving internal controls, the Bank’s Chief Credit Officer identified and engaged experienced personnel to fill key roles within credit administration.

In 2010, the internal loan review staff, and the scope of their reviews, was expanded. Considerable progress was achieved in meeting the expanded loan review scope and evaluating and verifying internal loan ratings on a timely basis consistent with credit classification criteria set forth in the Comptroller's Handbook. Loan review grading methodology was refined to ensure that loans with a probability of payment default or well defined weaknesses are graded substandard regardless of mitigating controls which might reduce credit risk. The Directors Loan Committee monitored this process with bi-monthly meetings and reviewed loan review reports to ensure compliance with the terms of the Agreement.

In March of 2011, the risk management department’s loan review function was restructured, and the majority of the loan review responsibilities were out-sourced to a loan review risk advisory firm. The external loan review services began in April of 2011 and are structured to cover 75% of the loan portfolio annually (excluding residential and consumer loans). The external loan review services are managed by the Loan Review Officer or another designee deemed independent and appropriate within the risk management department with reports made independently to the Directors Loan Committee. The Directors Loan Committee then reports results to the Bank’s Board of Directors. The outsourcing of the loan review function has assisted management in ensuring the Bank’s internal ratings of commercial credit relationships are timely, accurate and consistent with regulatory credit classification criteria. In addition, this process has contributed in the identification of trends and the assessment of the overall quality of the loan portfolio.