Exhibit 10.1

UNITED STATES OF AMERICA

BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

WASHINGTON, D.C.

 

Written Agreement by and between         Docket No. 11-114-WA /RB-HC

PRINCETON NATIONAL BANCORP, INC.

  

Princeton, Illinois

  

and

  

FEDERAL RESERVE BANK OF

  

CHICAGO

  

Chicago, Illinois

  

WHEREAS, Princeton National Bancorp, Inc., Princeton. Illinois (“Princeton”), a
registered bank holding company, owns and controls Citizens First National Bank,
Princeton, Illinois (the “Bank”), and a nonbank subsidiary;

WHEREAS, it is the common goal of Princeton and the Federal Reserve Bank of
Chicago (the “Reserve Bank”) to maintain the financial soundness of Princeton so
that Princeton may serve as a source of strength to the Bank;

WHEREAS, Princeton and the Reserve Bank have mutually agreed to enter into this
Written Agreement (the “Agreement”); and

WHEREAS, on October 24 , 2011, the board of directors of Princeton, at a duly
constituted meeting, adopted a resolution authorizing and directing Thomas D.
Ogaard to enter into this Agreement on behalf of Princeton, and consenting to
compliance with each and every provision of this Agreement by Princeton and its
institution-affiliated parties, as defined in

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sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as amended (the
“FDI Act”) (12U.S.C. §§ 1813(u) and 1818(b)(3)).

NOW, THEREFORE, Princeton and the Reserve Bank agree as follows:

Source of Strength

1. The board of directors of Princeton shall take appropriate steps to fully
utilize Princeton’s financial and managerial resources, pursuant to section 38A
of the FDI Act (12 U.S.C. § 1830 o-l) and section 225.4 (a) of Regulation Y of
the Board of Governors of the Federal Reserve System (the “Board of Governors”)
(12 C.F.R. § 225.4(a)), to serve as a source of strength to the Bank, including,
but not limited to, taking steps to ensure that the Bank complies with the
Consent Order entered into with the Office of the Comptroller of the Currency
dated September 20, 2011, and any other supervisory action taken by the Bank’s
federal regulator.

Dividends and Distributions

2. (a) Princeton shall not declare or pay any dividends without the prior
written approval of the Reserve Bank and the Director of the Division of Banking
Supervision and Regulation (the “Director”) of the Board of Governors.

(b) Princeton shall not directly or indirectly take dividends or any other form
of payment representing a reduction in capital from the Bank without the prior
written approval of the Reserve Bank.

(c) Princeton and its nonbank subsidiary shall not make any distributions of
interest, principal, or other sums on subordinated debentures or trust preferred
securities without the prior written approval of the Reserve Bank and the
Director.

 

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(d) All requests for prior approval shall be received by the Reserve Bank at
least 30 days prior to the proposed dividend declaration date, proposed
distribution on subordinated debentures, and required notice of deferral on
trust preferred securities. All requests shall contain, at a minimum, current
and projected information on Princeton’s capital, earnings, and cash flow; the
Bank’s capital, asset quality, earnings, and allowance for loan and lease
losses; and identification of the sources of funds for the proposed payment or
distribution. For requests to declare or pay dividends, Princeton must also
demonstrate that the requested declaration or payment of dividends is consistent
with the Board of Governors’ Policy Statement on the Payment of Cash Dividends
by State Member Banks and Bank Holding Companies, dated November 14,1985
(Federal Reserve Regulatory Service, 4-877 at page 4-323).

Debt and Stock Redemption

3. (a) Princeton and any nonbank subsidiary shall not, directly or indirectly,
incur, increase, or guarantee any debt without the prior written approval of the
Reserve Bank. All requests for prior written approval shall contain, but not be
limited to, a statement regarding the purpose of the debt, the terms of the
debt, and the planned source(s) for debt repayment, and an analysis of the cash
flow resources available to meet such debt repayment.

(b) Princeton shall not, directly or indirectly, purchase or redeem any shares
of its stock without the prior written approval of the Reserve Bank.

Capital Plan

4. Within 60 days of this Agreement, Princeton shall submit to the Reserve Bank
an acceptable written plan to maintain sufficient capital at Princeton on a
consolidated basis. The plan shall, at a minimum, address, consider, and
include:

 

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(a) The consolidated organization’s and the Bank’s current and future capital
requirements, including compliance with the Capital Adequacy Guidelines for Bank
Holding Companies: Risk-Based Measure and Tier 1 Leverage Measure, Appendices A
and D of Regulation Y of the Board of Governors (12 C.F.R. Part 225, App. A and
D) and the applicable capital adequacy guidelines for the Bank issued by the
Bank’s federal regulator;

(b) the adequacy of the Bank’s capital, taking into account the volume of
classified credits, concentrations of credit, allowance for loan and lease
losses, current, and projected asset growth, and projected retained earnings;

(c) the source and timing of additional funds necessary to fulfill the
consolidated organization’s and the Bank’s future capital requirements;

(d) supervisory requests for additional capital at the Bank or the requirements
of any supervisory action imposed on the Bank by its federal regulator; and

(e) the requirements of section 38A of the FDI Act and section 225,4(a) of
Regulation Y of the Board of Governors that Princeton serve as a source of
strength to the Bank.

5. Princeton shall notify the Reserve Bank, in writing, no more than 45 days
after the end of any quarter in which any of Princeton’s capital ratios fall
below the approved plan’s minimum ratios. Together with the notification,
Princeton shall submit an acceptable written plan that details the steps that
Princeton will take to increase Princeton’s capital ratios to or above the
approved plan’s minimums.

Cash Flow Projections

6. Within 60 days of this Agreement, Princeton shall submit to the Reserve Bank
a written statement of its planned sources and uses of cash for debt service,
operating expenses, and other purposes (“Cash Flow Projection”) for 2012.
Princeton shall submit to the Reserve

 

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Bank a Cash Flow Projection for each calendar year subsequent to 2012 at least
one month prior to the beginning of that calendar year.

Compliance with Laws and Regulations

7. (a) In appointing any new director or senior executive officer, or changing
the responsibilities of any senior executive officer so that the officer would
assume a different senior executive officer position, Princeton shall comply
with the notice provisions of section 32 of the FDJ Act (12 U.S.C. §18311) and
Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§225.71
etseg.’).

(b) Princeton shall comply with the restrictions on indemnification and
severance payments of section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and
Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R.
Part 359).

Progress Reports

8. Within 45 days after the end of each calendar quarter following the date of
this Agreement, the board of directors shall submit to the Reserve Bank written
progress reports detailing the form and manner of all actions taken to secure
compliance with the provisions of this Agreement and the results thereof, and a
parent company only balance sheet, income statement, and, as applicable, report
of changes in stockholders’ equity.

Approval and Implementation of Flan

9. (a) Princeton shall submit a written capital plan that is acceptable to the
Reserve Bank within the applicable time period set forth in paragraph 4 of this
Agreement.

(b) Within 10 days of approval by the Reserve Bank, Princeton shall adopt the
approved capital plan. Upon adoption, Princeton shall promptly implement the
approved plan, and thereafter fully comply with it.

 

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(c) During the term of this Agreement, the approved capital plan shall not be
amended or rescinded without the prior written approval of the Reserve Bank.

Communications

10. All communications regarding this Agreement shall be sent to:

(a) Mr. David A. Ward

Assistant Vice President

Federal Reserve Bank of Chicago

230 South LaSalle Street

Chicago, Illinois 60604-1413

(b) Mr. Thomas D. Ogaard

President and Chief Executive Officer

Princeton National Bancorp, Inc.

606 South Main Street

Princeton, Illinois 61356

Miscellaneous

11. Notwithstanding any provision of this Agreement, the Reserve Bank may, in
its sole discretion, grant written extensions of time to Princeton to comply
with any provision of this Agreement.

12. The provisions of this Agreement shall be binding upon Princeton and its
institution-affiliated parties, in their capacities as such, and their
successors and assigns.

13. Each provision of this Agreement shall remain effective and enforceable
until stayed, modified, terminated, or suspended in writing by the Reserve Bank.

14. The provisions of this Agreement shall not bar, estop, or otherwise prevent
the Board of Governors, the Reserve Bank, or any other federal or state agency
from taking any other action affecting Princeton, the Bank, any nonbank
subsidiary of Princeton, or any of their current or former
institution-affiliated parties and their successors and assigns.

 

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15. Pursuant to section 50 of the FDI Act(12U.S.C. § 183laa), this Agreement is
enforceable by the Board of Governors under section 8 of the FD1 Act (12 U.S.C.
§ 1818).

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the 27th day of October, 2011.

 

PRINCETON NATIONAL

BANCORP, INC.

   

FEDERAL RESERVE BANK

OF CHICAGO

By:   Thomas D. Ogaard     By:   /s/ Mark H. Kawa   President & CEO         Mark
H. Kawa           Vice President

 

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