UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549


FORM 10-K

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

For the Fiscal Year Ended December 31, 2010

Commission File Number 0-20050

PRINCETON NATIONAL BANCORP, INC.(Exact name of registrant as specified in its charter)

|                                          |  |                     
|----------------------------------------- |  | --------------------
|Delaware                                  |  | 36-32110283         
|                                          |  |                     
|(State
 or other jurisdiction of          |  | (I.R.S.
 Employer   
|incorporation
 or organization)           |  | Identification
 No.)
|                                          |  |                     
|606 South Main Street                     |  |                     
|Princeton, Illinois                       |  | 61356-2080          
|                                          |  |                     
|(Address
 of principal executive offices) |  | (Zip
 Code)         

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

Securities registered pursuant to Section 12(b) of the Act:

|                    |  |                                              
|------------------- |  | ---------------------------------------------
|Title of each class |  | Name of each 
 exchange on 
 which registered
|                    |  |                                              
|Common
 Stock       |  | The
 Nasdaq                                  
|                    |  | Stock
 Market                                
|Preferred
 Share    |  |                                              
|Purchase
 Rights    |  |                                              

Securities registered pursuant to Section 12(g) of the Act: None

|                                                                                                                                                                                                                                                                                                                                                                                                 |     |   |    |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --- | - | -- | -
|Indicate by check mark if
 the registrant is a well-known season issuer, as defined in Rule 405 of the
 Securities Act.                                                                                                                                                                                                                                                                          | Yes | o | No | x
|                                                                                                                                                                                                                                                                                                                                                                                                 |     |   |    |  
|Indicate by check mark if
 the registrant is not required to file reports pursuant to Sections 13 or
 15(d) of the Act.                                                                                                                                                                                                                                                                          | Yes | o | No | x
|                                                                                                                                                                                                                                                                                                                                                                                                 |     |   |    |  
|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 for 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 has submitted electronically and posted on its corporate Website, if
any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter)
during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such
files). | Yes | o | No | o
|                                                                                                                                                                                                                                                                                                                                                                                                 |     |   |    |  
|Indicate by check mark if
 disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
 contained herein, and will not be contained, to the best of registrants
 knowledge, in definitive proxy or information statements incorporated by
 reference in Part III of this Form 10-K or any amendment to this Form 10-K.                                                        |     | 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 the definitions of
 large accelerated filer, accelerated filer and smaller reporting
 company in Rule 12b-2 of the Exchange Act. (Check one):                                                                             |     |   |    |  



| |                                                |   |                            |  |   |  | 
| | ---------------------------------------------- | - | -------------------------- |  | - |  | 
| | Large accelerated filer                        | o | Accelerated
 filer         |  | o |  | 
| |                                                |   |                            |  |   |  | 
| | Non-accelerated filer                          | o | Smaller
 reporting company |  | x |  | 
| | (do not check if a smaller
 reporting company) |   |                            |  |   | 

|                                                                                                                                                                                                                                                                                                                                                                                                         |     |   |    |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --- | - | -- | -
|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
|                                                                                                                                                                                                                                                                                                                                                                                                         |     |   |    |  
|At March 23, 2011, 3,325,941 shares of Common Stock,
$5.00 Par
Value, were outstanding, and the aggregate market value of the common stock
(based upon the closing representative bid price of the common stock on June
30, 2010 of $6.15, the last business day of the Registrants most recently
completed second quarter, as reported by NASDAQ) held by nonaffiliates was
approximately $20,454,537. |     |   |    |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |     |   |    |  
|Determination
 of stock ownership by nonaffiliates was made solely for the purpose of
 responding to this requirement and the registrant is not bound by this
 determination for any other purpose.                                                                                                                                                                                                      |     |   |    |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |     |   |    |  
|Portions
 of the following documents are incorporated by reference:                                                                                                                                                                                                                                                                                                                                      |     |   |    |  
|                                                                                                                                                                                                                                                                                                                                                                                                         |     |   |    |  
|2011 Notice and Proxy Statement for the Annual Meeting of
Stockholders May 10, 2011 (the Proxy Statement) - Part III and portions of
the Corporations 2010 Annual Report (the Annual Report) - Part II                                                                                                                                                                                              |     |   |    |  

Page 1 of 84 pages





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PART I

Item 1. Business

Princeton
National Bancorp, Inc. (PNBC, the Corporation, or the Company) is a
single-bank holding company which operates in one business segment conducting a
full-service banking and trust business through its subsidiary bank, Citizens
First National Bank (Citizens Bank, the Bank, or the subsidiary bank).
PNBC was incorporated as a Delaware corporation in 1981 in contemplation of the
acquisition of all of the outstanding common stock of Citizens Bank and other future
acquisitions. At December 31, 2010, the Corporation had consolidated total
assets of $1,096,471,000 and stockholders equity of $56,861,000.

PNBC
operates the Bank as a community bank with offices located for convenience and
with professional, highly-motivated, progressive employees who know the Banks
customers and provide individualized, quality service. As part of its community
banking approach, officers of the Bank actively participate in community
organizations. In addition, within certain credit and rate of return
parameters, the subsidiary bank strives to meet the lending needs of the
communities in which offices are located and invests in local municipal
securities.

Corporate
policy, strategy and goals are established by the Board of Directors of PNBC.
Pursuant to PNBCs holding company philosophy, operational and administrative
policies for the Bank are also established at the holding company level. Within
this framework, the Bank focuses on providing personalized services and quality
products to its customers to meet the needs of the communities in which its
offices are located. In 2010, the majority of the directors of PNBC also served
as the directors of Citizens Bank, which further assists PNBC to directly
implement its policies at Citizens Bank.

Acquisition and Expansion Strategy

Though
distinct economic challenges exist in the current environment that have created
the need to manage growth, PNBC continues to seek to identify available
opportunities to diversify both its market area and asset base and increase
profitability through acquisitions and expansion. PNBCs goal, as reflected by
its acquisition policy, is to resume expansion through the acquisition of
established financial service organizations (primarily commercial banks to the
extent suitable candidates may be identified) and by expanding into potential
high-growth areas. In integrating acquisitions, PNBC focuses on, among other
actions, implementing the policies established at Citizens Bank, improving
asset quality, the net interest margin, and encouraging community involvement.
In 2007, PNBC acquired the Plainfield office of HomeStar Bank and in 2005, PNBC
acquired Somonauk FSB Bancorp, Inc. and its subsidiary, Farmers State Bank,
with branches in Somonauk, Millbrook, Newark and Sandwich (subsequently merged
into Citizens Bank).

PNBC
will also consider establishing branch facilities as a means of expanding its
presence into new market areas. PNBC opened new branch facilities in the
Peru/LaSalle/Oglesby area in 1994, in Minooka in 1994, Hampshire in 1995, Henry
in 1999, Huntley in 2001, Plano in 2005 and Aurora in 2006. Several of these
locations are located in rapidly growing communities that will provide
significant loan and deposit growth opportunities, as well as increased revenue
potential.

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Citizens First National Bank

Citizens
Bank was organized in 1865 as a national banking association under the National
Bank Act. Currently in its one hundred and forty-sixth year, Citizens Bank has
twenty-one offices in seventeen different communities in north central
Illinois: Aurora, DePue, Genoa, Hampshire, Henry, Huntley, Millbrook, Minooka,
Newark, Oglesby, Peru, Plainfield, Plano, Princeton, Sandwich, Somonauk, and
Spring Valley.

Citizens
Bank serves individuals, businesses and governmental bodies in Bureau, DeKalb,
Grundy, Kane, Kendall, LaSalle, Marshall, McHenry, Will and contiguous
counties. Citizens Bank operates a full-service community commercial bank and
trust business that offers a broad range of financial services to customers.
Citizens Banks services consist primarily of commercial, real estate and
agricultural lending, consumer deposit and financial services, and trust,
brokerage, insurance, and farm management services.

Commercial, Real Estate, and Agricultural Lending

Citizens
Banks commercial loan department provides secured and to a much lesser extent
unsecured loans, including real estate loans, to companies and individuals for
business purposes and to governmental units within the Banks market area. As
of December 31, 2010, Citizens Bank had commercial loans of $138.3 million
(19.6% of the Banks total loan portfolio) and commercial real estate loans of
$205.3 million (29.2% of the Banks total loan portfolio). Citizens Bank has a
concentration of commercial loans to the agricultural industry as more fully
disclosed below.

Agricultural
and agricultural real estate loans are primarily related to ventures within 30
miles of branch locations. As of December 31, 2010, Citizens Bank had
agricultural loans of $78.1 million and agricultural real estate loans of $46.4
million, which represent approximately 11.1% and 6.6%, respectively, of the
Banks total loan portfolio.

Agricultural
loans, many of which are secured by crops, machinery, and real estate, are
provided to finance capital improvements and farm operations as well as
acquisitions of livestock and machinery. The agricultural loan department,
which has the equivalent of five lending officers, works closely with all
agricultural customers (including companies and individual farmers) and assists
in the preparation of budgets and cash flow projections for the ensuing crop
year. These budgets and cash flow projections are monitored closely by the bank
during the year. In addition, Citizens Bank works closely with governmental
agencies, including the Farm Service Agency, to assist agricultural customers
in obtaining credit enhancement products, such as loan guaranties.

In
accordance with its loan policy, Citizens Bank maintains a diversified loan
portfolio. Citizens Bank had syndicated loans with other lending institutions
totaling $26.7 million at December 31, 2010 (3.8% of the Banks total loan
portfolio). Citizens Bank does buy and sell loan participations with other
community banks. In connection with its credit relationships, Citizens Bank
encourages commercial and agricultural borrowers to maintain deposit accounts
at the Bank.

3

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Personal Financial Services

The
principal consumer services offered by Citizens Bank are demand, savings and
time deposit accounts, home mortgage loans, installment loans, and brokerage
services.

One
of the strengths of Citizens Bank is the stability of its retail deposit base.
This stability is due primarily to the Banks service oriented competitive
strategy and the economically diverse populations of the counties encompassing
the twenty-one banking offices. These locations provide convenience for
customers and visibility for Citizens Bank. A variety of marketing strategies
are used to attract and retain stable depositors, the most important of which
is the officer call program. Nearly all officers of the Bank call on customers
and potential customers of the Bank to maintain and develop relationships.

Citizens
Bank is active in consumer and mortgage lending with approximately $90.9
million in home mortgage loans (12.9% of the Banks total loan portfolio) and
$56.7 million in consumer installment loans (8.1% of the Banks total loan
portfolio) as of December 31, 2010. To better serve its retail customers,
Citizens Bank is active in the secondary residential mortgage market. As a
matter of policy, Citizens
Bank does not hold in portfolio, long term, fixed rate, single-family home
mortgage loans, however, the servicing of such loans is maintained. As of
December 31, 2010, Citizens Bank had $395 million of loans that have been sold,
but servicing has been maintained. Management believes customers receive a higher
level of quality service with this arrangement. Citizens Bank does not
originate sub-prime loans.

Citizens
Bank maintains twenty-five automated teller machines. The Bank is a member of
ACCEL/Exchange and NYCE as well as other major nationwide networks such as,
CIRRUS and PLUS. To enhance customer service and convenience, Citizens Bank
offers ATM & debit cards, which can be used anywhere VISA is accepted, and
is viewed as a tremendous benefit to our customers. Citizens Bank also offers a
host of Internet Banking services including Online Banking, Mobile Banking and
Bill Pay as an additional and convenient alternative delivery mechanism for its
product and service line.

Citizens
Bank continues to maintain an intensive sales training program, which includes
team coaching, setting goals, measuring results, and reward recognition. In
2010, Citizens Bank continued to focus on making quality product referrals and
sales.

Citizens Financial Advisors (CFA)

The
Fiduciary and Investment Services departments experienced growth in 2010
through efforts to improve staff through education, technology, and licensing
enhancement. Fiduciary Services substantially achieved these objectives by the
addition of new Investment and Business Development Officers. The new
Investment Officer has enhanced the departments equity, bond and mutual fund
portfolio management abilities, leading to a dramatic improvement in the
regular oversight and timeliness of the portfolios trading and has improved
customer communication. Enhanced portfolio management processes have improved
the ability of the new Business Development Officer to offer quality service to
prospective new customers.

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Investment
Services is focused on the growing need for Financial Planning services as well
as the use of Separately Managed Advisory Accounts. Two new Certified Financial
Planners have been added to the Client Advisor roster, one each in the Northern
and Eastern Regions. In addition, the organic development of a sales assistant
into a licensed Client Advisor was accomplished in the Princeton area.

As
of the end of 2010 the Fiduciary Services department was the manager or
administrator of 907 trust accounts totaling approximately $175,519 compared to
965 trust accounts totaling approximately $171,429 at December 31, 2009.

Competition

PNBC
is committed to community banking and to providing quality products and
services at competitive loan rates and deposit pricing in order to remain
competitive in its North Central Illinois market. Citizens Bank competes with
both small, locally owned banks, as well as regional financial institutions
which have numerous offices. The Bank competes with these organizations, as
well as with savings and loan associations, credit unions, mortgage companies,
insurance companies and other local financial institutions for deposits, loans
and other business. The principal methods of competition include loan and
deposit pricing, the types and quality of services provided, as well as
advertising and marketing programs.

Supervision and Regulation

Bank
holding companies and banks are extensively regulated under federal and state
law. Any change in applicable law or regulations may have a material effect on
the business of PNBC and the Bank.

PNBC
is registered as a bank holding company with the Board of Governors of the
Federal Reserve System (the FRB), and is subject to supervision by the FRB
under the Bank Holding Company Act of 1956, as amended (the BHC Act). PNBC is
required to file with the FRB periodic reports and such additional information
as the FRB may require pursuant to the BHC Act. The FRB examines PNBC.

The
BHC Act requires prior FRB approval for, among other things, the acquisition by
a bank holding company of direct or indirect ownership or control of more than
5% of the voting shares or substantially all the assets of any bank or bank
holding company, or for a merger or consolidation of a bank holding company
with another bank holding company. With certain exceptions, the BHC Act
prohibits a bank holding company from acquiring direct or indirect ownership or
control of voting shares of any company which is not a bank or bank holding
company and from engaging directly or indirectly in any activity other than
banking or managing or controlling banks or performing services for its
authorized subsidiaries. A bank holding company may, however, engage in or
acquire an interest in a company that engages in activities which the FRB has
determined by regulation or order to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto.

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In
November 1999, the Gramm-Leach-Bliley Act (GLB Act) was signed into law.
Under the GLB Act, bank holding companies that meet certain standards and elect
to become financial holding companies are permitted to engage in a wider
range of activities than those permitted for bank holding companies, including
securities and insurance activities. Specifically, a bank holding company that
elects to become a financial holding company may engage in
any activity that the FRB, in consultation with the Secretary of the Treasury,
determines is (i) financial in nature or incidental thereto, or (ii)
complementary to any such financial-in-nature activity, provided that such
complementary activity does not pose a substantial risk to the safety and
soundness of depository institutions or the financial system generally. A bank
holding company may elect to become a financial holding company only if each of
its depository institution subsidiaries is well-capitalized, well-managed, and
has a Community Reinvestment Act rating of satisfactory or better at their
most recent examination.

The
GLB Act specifies many activities that are financial in nature, including
lending, exchanging, transferring, investing for others, or safeguarding money
or securities; underwriting and selling insurance; providing financial,
investment, or economic advisory services; underwriting, dealing in, or making
a market in securities; and those activities currently permitted for bank
holding companies that are so closely related to banking or managing or
controlling banks, as to be a proper incident thereto. PNBC has not elected to
be treated as a financial holding company.

The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank
Act) became law on July 21, 2010. The Dodd-Frank Act constitutes one of the
most significant efforts in recent history to comprehensively overhaul the
financial services industry and will affect large and small financial
institutions alike. While some of the provisions of the Dodd-Frank Act take
effect immediately, many of the provisions have delayed effective dates and
their implementation will require the issuance of numerous new regulations.

The
Dodd-Frank Act deals with a wide range of regulatory issues including, but not
limited to: mandating new capital requirements that would require certain bank
holding companies to be subject to the same capital requirements as their
depository institutions; eliminating (with certain exceptions) trust preferred
securities; codifying the Federal Reserves Source of Strength doctrine;
creating a Bureau of Consumer Financial Protection which will have the power to
exercise broad regulatory, supervisory and enforcement authority concerning
both existing and new consumer financial protection laws; permanently
increasing federal deposit insurance protection to $250,000 per depositor;
extending the unlimited coverage for qualifying non-interest bearing
transactional accounts until December 31, 2012; increasing the ratio of
reserves to deposits minimum to 1.35 percent; assessing premiums for deposit
insurance coverage on average consolidated total assets less average tangible
equity, rather than on a deposit base; authorizing the assessment of
examination fees; establishing new standards and restrictions on the
origination of mortgages; permitting financial institutions to pay interest on
business checking accounts; limiting interchange fees payable on debit card
transactions; and implementing requirements on boards, corporate governance and
executive compensation for public companies.

The
complete impact of the Dodd-Frank Act is unknown since many of the substantive
requirements will be contained in the many rules and regulations to be
implemented. However, the Dodd-Frank Act will have significant and immediate
effects on banks and bank holding companies in many areas.

The
GLB Act changed federal laws to facilitate affiliation between banks and
entities engaged in securities and insurance activities. The law also
established a system of functional regulation under which banking activities,
securities activities, and insurance activities conducted by financial holding
companies and their subsidiaries and affiliates will be separately regulated by
banking, securities, and insurance regulators, respectively.

6

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PNBC
is a legal entity separate and distinct from the Bank. The major source of
PNBCs revenue is dividends received from the Bank. The right of PNBC to
participate as a stockholder in any distribution of assets of the Bank upon its
liquidation or reorganization or otherwise is subject to the prior claims of
creditors of the Bank. The Bank is subject to claims by creditors for long-term
and short-term debt obligations, including obligations for federal funds
purchased and securities sold under repurchase agreements, as well as deposit
liabilities. The Bank is subject to regulation and examinations by the Office
of the Comptroller of the Currency (the OCC).

The
Bank may declare dividends out of undivided profits, except that until the
surplus fund of the Bank is equal to its common capital, no dividend can be
declared until one-tenth of the Banks net income for the applicable period has
been carried to the surplus fund. The Bank, however, cannot declare or pay a
dividend, if after making the dividend, the Bank would be undercapitalized. In
addition, prior approval of the OCC is required if dividends declared by the
Bank in any calendar year will exceed its net income for that year combined
with its retained net income for the preceding two years. Under national
banking regulations and capital guidelines, as of December 31, 2010, the Bank
was authorized to distribute $0 as dividends without prior approval from the
OCC, based on net income for 2010 and retained net income for 2008 and 2009. As
of January 1, 2011, retained net income for the prior two years was $0 and during
2011 the Bank will need prior approval from the OCC to pay dividends. Future
payments of dividends by the Bank will be dependent on individual regulatory
capital requirements and levels of profitability. The ability of the Bank to
pay dividends may be further restricted as a result of regulatory policies and
guidelines relating to dividend payments and capital adequacy.

In
February, 2011, as required by PNBCs primary regulator, the Federal Reserve
Bank, a resolution of PNBCs Board of Directors was passed requiring that PNBC
obtain written approval from the Federal Reserve Bank prior to any of the
following:

|  |                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------
| | the declaration or payment of corporate dividends;                                                                                 
|  |                                                                                                                                    
| | any increase in debt;                                                                                                              
|  |                                                                                                                                    
| | any distribution of interest, principal, or other
 sum associated with subordinated debentures or trust preferred securities;
 and,
|  |                                                                                                                                    
| | the redemption of holding company stock.                                                                                           

Federal
laws limit certain transactions between the Bank and its affiliates, including
PNBC. Such transactions include loans or extensions of credit by the Bank to
PNBC, the purchase of assets or securities of PNBC, the acceptance of PNBCs
securities as collateral for loans, and the issuance of a guaranty, acceptance
or letter of credit on behalf of PNBC. Transactions of this kind are limited to
10% of the Banks capital and surplus for transactions with one affiliate, and
20% of the Banks capital and surplus for transactions with all affiliates.
Such transactions are also subject to certain collateral requirements. These
transactions, as well as other transactions between the Bank and PNBC, must
also be on terms substantially the same as, or at least as favorable as, those
prevailing at the time for comparable transactions with nonaffiliated companies
or, in the absence of comparable transactions, on terms, or under
circumstances, including credit standards, that would be offered to, or would
apply to, nonaffiliated companies.

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FRB
policy requires PNBC to act as a source of financial strength to the Bank and
commit resources to support the Bank. The FRB takes the position that in
implementing this policy, it may require PNBC to provide such support when PNBC
otherwise would not consider itself able to do so.

The
various federal bank regulators, including the FRB and the OCC, have adopted
risk-based capital requirements for assessing bank holding company and bank
capital adequacy. These standards establish minimum capital standards in
relation to assets and off-balance sheet exposures, as adjusted for credit
risks. Capital is classified into two tiers. For bank holding companies, Tier 1
or core capital consists of common shareholders equity, perpetual preferred
stock (subject to certain limitations) and minority interests in the equity accounts
of consolidated subsidiaries, and is reduced by goodwill and certain other
intangible assets (Tier 1 Capital). Tier 2 capital consists of (subject to
certain conditions and limitations) the allowance for possible credit losses,
perpetual preferred stock, hybrid capital instruments, perpetual debt and
mandatory convertible debt securities, and term subordinated debt and
intermediate-term preferred stock (Tier 2 Capital). Total capital is the sum
of Tier 1 Capital and Tier 2 Capital (the latter being limited to 100% of Tier
1 Capital). Components of Tier 1 and Tier 2 Capital for national banks are
similar, but not identical, to those for holding companies.

Under
the risk-adjusted capital standards, a minimum ratio of qualifying total capital
to risk-weighted assets of 8% and of Tier l Capital to risk-weighted assets of
4% is required. The FRB and OCC also have adopted a minimum leverage ratio of
Tier 1 Capital to total assets of 3% for banks rated 1 under the Uniform
Financial Institutions Rating System or bank holding companies rated 1 under
the rating system of bank holding companies. All other banks and bank holding
companies must maintain a leverage ratio of 4%. In addition, all banks and bank
holding companies are expected to have capital commensurate with the level and
nature of all risks to which they are exposed.

At
December 31, 2010, PNBC had a total capital to risk-weighted assets ratio of
9.68%, a Tier 1 capital to risk-based assets ratio of 8.40%, and a leverage ratio
of 5.76%. PNBC is classified as adequately capitalized for the first ratio and
well-capitalized for the last two ratios. At December 31, 2010, the Bank had a
total capital to risk-weighted assets ratio of 10.29%, a Tier 1 capital to
risk-weighted assets ratio of 9.01%, and a leverage ratio of 6.18%. The Bank is
classified as well-capitalized for all three ratios.

The
Banks deposits are insured by the Deposit Insurance Fund, which is
administered by the Federal Deposit Insurance Corporation (the FDIC). As an
FDIC-insured institution, the Bank is required to pay deposit insurance premium
assessments to the Deposit Insurance Fund pursuant to a risk-based assessment
system. Pursuant to the Dodd-Frank Act, the basic limit on federal deposit insurance
coverage was raised from $100,000 to $250,000 per depositor. In addition, in
November 2010, pursuant to the Dodd-Frank Act, the FDIC issued a final rule to
provide temporary unlimited deposit insurance coverage for non-interest bearing
accounts from December 31, 2010 through December 31, 2012, at no additional
surcharge.

Under
the FDICs risk-based assessment regulations there are four risk categories,
and each insured institution is assigned to a risk category based on capital
levels and supervisory ratings. Well-capitalized institutions with CAMELS
composite ratings of 1 or 2 are placed in Risk Category I while other
institutions are placed in Risk Categories II, III or IV depending on their
capital levels and CAMELS composite ratings. The assessment rates may be
changed by the FDIC as necessary to maintain the insurance fund at the reserve
ratio designated by the FDIC. The FDIC may set the reserve ratio annually at
between 1.15% and 1.50% of insured deposits. Deposit
insurance assessments are collected for a quarter at the end of the next
quarter. Assessments are based on deposit balances at the end of the quarter,
except institutions with $1 billion or more in assets and institutions that
become insured on or after January 1, 2007 will have their assessment base
determined using average daily balances of insured deposits.

8

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Due
to a decrease in the reserve ratio of the Deposit Insurance Fund, in October
2008, the FDIC established a restoration plan to restore the reserve ratio to at
least 1.15% within five years (the FDIC has extended this time to eight years).
The reserve ratio has now been increased to 1.35% by the Dodd-Frank Act. The
FDIC has been directed to offset the effects of increased assessments on
depository institutions with less than $10 billion in assets. To achieve these
levels, the FDIC is authorized by the Dodd-Frank Act to make special
assessments and charge examination fees.

On
December 16, 2008, the FDIC adopted and issued a final rule increasing the
rates banks pay for deposit insurance uniformly by 7 basis points (annualized)
effective January 1, 2009. Under the final rule, risk-based rates for the
first quarter 2009 varied between 12 and 50 basis points depending on an
institutions risk category. On February 27, 2009, the FDIC adopted a final
rule amending the way that the assessment system differentiates for risk and
setting new assessment rates beginning with the second quarter of 2009. As of
April 1, 2009, for the highest rated institutions, those in Risk Category I,
the initial base assessment rate was between 12 and 16 basis points and for the
lowest rated institutions, those in Risk Category IV, the initial base
assessment rate was 45 basis points. The final rule modified the means to
determine a Risk Category I institutions initial base assessment rate. It also
provided for the following adjustments to an institutions assessment rate: (1)
a decrease for long-term unsecured debt, including most senior and subordinated
debt and, for small institutions, a portion of Tier 1 capital; (2) an increase
for secured liabilities above a threshold amount; and (3) for institutions in
risk categories other than Risk Category I, an increase for brokered deposits
above a threshold amount. After applying these adjustments, for the highest
rated institutions, those in Risk Category I, the total base assessment rate is
between 7 and 24 basis points and for the lowest rated institutions, those in
Risk Category IV, the total base assessment rate is between 40 and 77.5 basis
points.

On
May 22, 2009, the FDIC imposed a special assessment of five basis points on
each FDIC-insured depository institutions assets, minus its Tier 1 capital, as
of June 30, 2009. The special assessment was collected on
September 30, 2009, and the Bank paid an additional assessment of
$588,000.

On
November 12, 2009, the FDIC adopted a final rule that required insured
institutions to prepay on December 31, 2009, estimated quarterly
risk-based assessments for the fourth quarter of 2009 and for all of 2010,
2011, and 2012. For purposes of calculating the prepayment amount, the
institutions third quarter 2009 assessment base was increased quarterly at a
five percent annual growth rate through the end of 2012. On September 29,
2009, the FDIC also increased annual assessment rates uniformly by three basis
points beginning January 1, 2011. On December 31, 2009, the Bank prepaid
estimated assessments of $6.3 million.

As
required by the Dodd-Frank Act, on February 7, 2011, the FDIC adopted a final
rule that redefines its deposit insurance premium assessment base to be an
insured depository institutions average consolidated total assets minus
average tangible equity. In addition, the FDIC has revised its deposit
insurance rate schedules as a consequence of the changes to the assessment
base. The proposed rate schedule and other revisions become effective on April
1, 2011.

9

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On
November 21, 2008, the FDIC adopted final regulations implementing the
Temporary Liquidity Guarantee Program (TLGP) pursuant to which depository
institutions could elect to participate. Pursuant to the TLGP, the FDIC will
(i) guarantee, through the earlier of maturity or June 30, 2012, certain newly
issued senior unsecured debt issued by participating institutions on or after
October 14, 2008 and before October 31, 2009 (the Debt Guarantee), and (ii)
provide full FDIC deposit insurance coverage for non-interest bearing deposit
transaction accounts regardless of dollar amount for an additional fee
assessment by the FDIC (the Transaction Account Guarantee). The Bank opted
out of the Transaction Account Guarantee portion of the TLGP. PNBC and the Bank
did not opt out of the Debt Guarantee program, but did not issue any debt under
the Debt Guarantee program. The Transaction Account Guarantee was to expire on
December 31, 2009; however, it was extended to December 31, 2010 for
those participating institutions that did not opt out.

The
Dodd-Frank Act extended unlimited federal deposit insurance until January 1,
2013 to non-interest bearing transaction deposit accounts at all insured
depository institutions. This coverage is applicable to all qualifying accounts
at any FDIC-insured institution. There is no additional surcharge related to
this coverage.

All
FDIC-insured depository institutions must pay a quarterly assessment to provide
funds for the payment of interest on bonds issued by the Financing Corporation,
a federal corporation chartered under the authority of the Federal Housing
Finance Board. The bonds (commonly referred to as FICO bonds) were issued to
capitalize the Federal Savings and Loan Insurance Corporation.

Federal
law permits adequately capitalized and adequately managed bank holding
companies to acquire banks across state lines, without regard to whether the
transaction is prohibited by state law. Any state law relating to the minimum
age of target banks (not to exceed five years) or limits on the amount of
deposits that may be controlled by a single bank or bank holding company
applies. The FRB is not permitted to approve any acquisition if, after the
acquisition, the bank holding company would control more than 10% of the
deposits of insured depository institutions nationwide or 30% or more of the deposits
in the state where the target bank is located. The FRB could approve an
acquisition, notwithstanding the 30% limit, if the state waives the limit
either by state regulation or order of the appropriate state official.

Banks
are permitted to merge with one another across state lines and thereby create a
main bank with branches in separate states. After establishing branches in a
state through an interstate merger transaction, a bank can establish and
acquire additional branches at any location in the state where any bank
involved in the merger could have established or acquired branches under
applicable federal or state law. Some states prohibited de novo branching or
had reciprocity requirements; however, the Dodd-Frank Act removed such restrictions
on interstate branching. As a result of the Dodd-Frank Act, interstate
branching authority has been expanded and a state or national bank may open a
de novo branch in another state if the law of the state where the branch is to
be located would permit a state bank chartered by that state to open the
branch. PNBC does not have current plans to acquire banking organizations
located outside the state of Illinois.

National
banks may establish operating subsidiaries to engage in activities in which the
bank could engage directly.

10

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National
banks are also authorized by the GLB Act to engage, through financial
subsidiaries, in activities that are permissible for financial holding
companies and activities that the Secretary of the Treasury, in consultation with the FRB, determines are
financial in nature or incidental to any such financial activity, except (i)
insurance underwriting, (ii) real estate development or real estate investment
activities (unless otherwise permitted by law), (iii) insurance company
portfolio investments, and (iv) merchant banking. A national banks authority
to invest in a financial subsidiary is subject to a number of conditions,
including, among other things, requirements that the bank be well-managed and
well-capitalized (after deducting from capital the banks outstanding
investment in financial subsidiaries).

The
GLB Act affected many other changes to federal law applicable to PNBC and the
Bank. One of these changes was a requirement that financial institutions take
steps to protect customers nonpublic personal information.

Pursuant
to EESA, the U.S. Department of the Treasury (the Treasury) has the authority
to among other things, purchase up to $700 billion of mortgages, mortgage-backed
securities and certain other financial instruments from financial institutions
for the purpose of stabilizing and providing liquidity to the U.S. financial
markets. Pursuant to its authority under EESA, the Treasury created the
Troubled Asset Relief Program (TARP) Capital Purchase Program (CPP) under
which the Treasury was authorized to invest in non-voting, senior preferred
stock of U.S. banks and savings associations or their holding companies.

PNBC
elected to participate in the CPP and on January 23, 2009, PNBC completed the
sale of $25.1 million of preferred stock to the Treasury. PNBC issued and sold
(1) 25,083 shares of Fixed Rate Cumulative Perpetual Preferred Stock
Series B, with a liquidation preference of $1,000 per share (the Series B
Preferred Shares), and (2) a ten-year warrant (the Warrant) to purchase
up to 155,025 shares of the PNBCs common stock (Common Stock) at an exercise
price of $24.27 per share, or an aggregate purchase price of $3.8 million in cash.
Cumulative dividends on the Series B Preferred Shares will accrue at a rate of
5% per annum for the first five years, and at a rate of 9% per annum
thereafter.

The
securities purchase agreement, dated January 23, 2009 (the Purchase
Agreement), between PNBC and the Treasury, pursuant to which the Series B
Preferred Shares and the Warrant were sold, limits the payment of dividends on
the Common Stock to the current quarterly cash dividend of $0.28 per share,
limits PNBCs ability to repurchase its Common Stock, and subjects PNBC to
certain of the executive compensation limitations included in the EESA.

The
restrictions on stock repurchases are in effect until the earlier to occur of
January 23, 2012 (the third anniversary of the issuance of the Series B
Preferred Shares to the Treasury) or the date on which the Company has redeemed
all of the Series B Preferred Shares issued or the date on which the Treasury
has transferred all of the Series B Preferred Shares to third parties not
affiliated with the Treasury The terms of the Series B Preferred Shares, as
amended by the American Recovery and Reinvestment Act of 2009 (ARRA), provide
that the Series B Preferred Shares, may be redeemed by PNBC, in whole or in
part, upon approval of the Treasury and PNBCs primary banking regulators.

As
a condition to the closing of the transaction, each of PNBCs senior executive
officers (as defined in the Purchase Agreement) executed a waiver voluntarily
waiving any claim against the Treasury or PNBC for any changes to their
compensation or benefits, as required to comply with the regulations issued by
the Treasury under the TARP CPP. The senior executive officers also
acknowledged that the regulations may require modification of the compensation,
bonus, incentive and other benefit plans, arrangements and policies and agreements (including
so-called golden parachute agreements) as they relate to the period the
Treasury holds any securities of PNBC acquired through the CPP.

11

---



ARRA
was enacted on February 17, 2009. Among other things, ARRA sets forth
additional limits on executive compensation at all financial institutions
receiving federal funds under any program, including the TARP CPP, both
retroactively and prospectively. The executive compensation restrictions in
ARRA include, among others: limits on compensation incentives, prohibitions on
Golden Parachute Payments to certain employees, the establishment by publicly
registered TARP CPP recipients of a board compensation committee comprised
entirely of independent directors for the purpose of reviewing employee
compensation plans, and the requirement of a non-binding vote on executive pay
packages at each annual shareholder meeting until the government funds are
repaid.

On
January 24, 2011, PNBC notified the U.S. Treasury that it will defer
regularly scheduled dividend payments on PNBCs $25.1 million in Series B
Preferred Shares and PNBC provided notice to Bank of America, N.A., as
successor Trustee by merger, of PNBCs $25 million in junior subordinated debt
securities due 2035 (PNBC Capital Trust I) that PNBC is exercising its right to
defer interest payments for a period of twenty (20) consecutive quarterly
interest payment periods beginning with the next interest payment period of
March 15, 2011, unless PNBC subsequently gives notice that it has elected
to shorten such deferral period. By taking these actions, PNBC expects to save
approximately $1.7 million in annual cash payments, based on current rates.

In
June 2010, the Federal Reserve issued final guidance to ensure that incentive
compensation arrangements at financial institutions take into account risk and
are consistent with safe and sound practices. The guidance does not set forth
any formulas or pay caps, but sets forth certain principles which companies
would be required to follow with respect to employees and groups of certain
employees that may expose the institution to material amounts of risk.

On
March 15, 2010 the Bank entered into a written agreement (the Agreement)
with the OCC. The Agreement sets forth the Banks commitments to: (i) review
and take action as necessary regarding its allowance for loan and lease 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 Directors has reviewed on a monthly
basis 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 OCC on a quarterly basis for any criticized
asset equal to or exceeding $100,000. Under the agreement, the board ensures
that the Banks internal ratings of loan relationships are timely, accurate,
and consistent with the regulatory credit classification criteria established
by the OCC.

The
Banks risk management loan review staff reports independently to the
Directors Loan Committee. The Directors Loan Committee reports further to the
Banks Board of Directors. Management furnishes its reports and additional
documentation to these committees on a regular basis. The internal loan review
staff has been expanded, as has the scope of their loan reviews. The Directors
Loan Committee has directed risk management to refine its
loan review grading methodology to ensure that loans with a probability of
payment default or well-defined weaknesses are graded substandard regardless of
mitigating controls which might reduce the credit risk. The Directors Loan
Committee monitors this process through bi-monthly meetings and reviews loan
review reports to ensure compliance with the terms of the Agreement.

12

---



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 & 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, the Banks Chief Credit Officer identified and engaged experienced
personnel to fill key roles within credit administration in continuing to
address the Banks commitments relative to the Agreement.

Employees

Because
PNBCs principal activity is its ownership of Citizens Bank, it has a limited
number of employees, generally the President and Chief Executive Officer, the
Chief Financial Officer, the Corporate Secretary, and certain other officers
who are necessary to fulfill the corporate requirements of PNBC. Each of these
employees is dually-employed by Citizens Bank which is responsible for payroll.

As
of December 31, 2010, Citizens Bank employed 275 full-time and 88 part-time
employees. The Bank offers a variety of employee benefits. Citizens Bank
employees are not represented by a union or a collective bargaining agreement,
and employee relations are considered to be excellent.

Citizens
Bank believes one of its strengths is its ability to attract and retain
experienced and well-trained personnel who are knowledgeable of the market
areas in which it operates. Management believes that PNBC generally has an
easier time attracting and retaining quality employees than other banks in
North Central Illinois. This is due primarily to its size and management style,
which affords greater opportunities to employees for direct participation and
development of managerial and banking skills.

In
order to implement PNBCs community banking philosophy and to promote itself as
a community oriented organization, the Bank has a formal officer call program.
Nearly every officer of the Bank calls on existing or potential customers and
is expected to become actively involved in leadership positions in community
organizations. As of December 31, 2010, officers and employees of the Bank
participated in approximately 686 community organizations, providing over
16,150 hours of community service.

Available Information

Our
Internet address is www.pnbc-inc.com. There we make available, free of charge,
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and any amendments to those reports, as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. Our
SEC reports can be accessed through the investor relations section of our Web
site. The information found on our Web site is not part of this or any other
report we file with or furnish to the SEC.

13

---



You
may also read and copy materials we file with the SEC at the SECs Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an internet site (www.sec.gov) that contains
reports, proxy statements and other information that we electronically file
with the SEC.

Item 1A. Risk Factors

As
a smaller reporting company under the SECs scaled reporting requirements, the
Company is not required to include the information required by Item 1A of Forms
10-Q and 10-K, respectively. Accordingly, this information is omitted from this
10-K filing,

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

PNBCs
headquarters and Citizens Banks principal offices are located at 606 South
Main Street, Princeton, Illinois. Also located at this address is an annex
building completed in 1990. The two buildings at this location are owned by
Citizens Bank and contain approximately 36,000 square feet of space, all of
which is occupied by PNBC and Citizens Bank. Citizens Bank also has two
drive-up facilities in Princeton and branch offices in Aurora, DePue, Genoa,
Hampshire, Henry, Huntley, Millbrook, Minooka, Newark, Oglesby, Peru,
Plainfield, Plano, Sandwich, Somonauk and Spring Valley. Citizens Bank is the
owner of each of these facilities. None of the facilities owned by the Bank are
subject to a mortgage. Additionally, the mortgage banking department of the
Bank is located in Spring Valley in a separate location from the branch office.
This location is not owned by the Bank and is rented by lease agreement. For
additional information regarding these properties, see Footnote 6 of Item 8 of
this report.

Item 3. Legal Proceedings

The
Bank is subject to legal proceedings and claims that arise in the ordinary
course of business. Although management of the Corporation cannot predict the
ultimate outcome of such matters, it believes that the ultimate resolution of
these matters will not have a material adverse effect on the Corporation, the
Bank, or the Corporations financial position, liquidity, and results of
operations.

14

---



Item 4. Reserved

Supplemental Item - Executive Officers

The
following table sets forth information regarding the executive officers:

|                      |  |     |  |                                                
|--------------------- |  | --- |  | -----------------------------------------------
|Name                  |  | Age |  | Position                                       
|                      |  |     |  |                                                
|Thomas D. Ogaard      |  | 54  |  | President & Chief Executive Officer            
|Todd D. Fanning       |  | 48  |  | Executive Vice President & COO / CFO           
|Kenneth W. Grams      |  | 46  |  | Executive Vice President & Chief Credit Officer
|Jacqualyn L. Karlosky |  | 50  |  | Senior Vice President  Consumer Banking       

Thomas
D. Ogaard has been President and Chief Executive Officer of PNBC since February
2, 2010, and was appointed to the Board of Directors of PNBC and Citizens Bank
on September 25, 2009. He joined Citizens Bank on August 31, 2009. Mr. Ogaard
started his career in banking in 1978 and most recently was employed by State
Bank of Park Rapids, Minnesota as Executive Vice President and Chief Loan
Officer.

Todd
D. Fanning joined Citizens Bank in 1990 as Assistant Vice President &
Controller and has been the Chief Financial Officer of PNBC since 1997. He was
appointed to the Board of Directors of PNBC and Citizens Bank on February 2,
2010. Mr. Fanning currently is the Executive Vice-President & Chief
Operating Officer/Chief Financial Officer of Citizens Bank.

Jacqualyn
L. Karlosky joined Citizens Bank in 1994 as Assistant Vice President &
Branch Manager. Ms. Karlosky became Senior Vice President  Consumer Banking in
2002 and remains in that capacity.

Kenneth
W. Grams joined Citizens Bank in 2010 as Executive Vice President & Chief
Credit Officer and remains in that capacity. Prior to joining Citizens Bank,
Mr. Grams served as Senior Vice President and Chief Administration Officer for
Loan Star National Bank, McAllen, Texas from 2009 to 2010 and as Senior Vice
President of Credit Administration for Viewpoint Bank, Plano, Texas from 2004
to 2009.

15

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PART II

|        |                                                                                                            
|------- | -----------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Stock, Related
Stockholder Matters and Issuer Purchases of Equity Securities

(a)
Since May 15, 1992, PNBCs Common Stock has been listed on the NASDAQ Stock
Market, under the symbol PNBC.

The
table below indicates the high and low sales prices, and the dividends declared
per share for PNBC Common Stock during the periods indicated.

|                |  |        |       |     |   |                           |  |   |     | 
|--------------- |  | ------ | ----- | --- | - | ------------------------- |  | - | --- | 
|                |  |        |       |     |   | Cash
 Dividends
 Declared | 
|                |  | Prices |       |    
|                |  | High   |       | Low |   |                          
|                |  |        |       |     |   |                           | 
|2010            |  |        |       |     |   |                           |  |   |     | 
|Fourth
 Quarter |  | $      | 5.50  |     | $ | 2.73                      |  | $ | .00 | 
|Third
 Quarter  |  |        | 6.50  |     |   | 4.65                      |  |   | .00 | 
|Second
 Quarter |  |        | 10.00 |     |   | 5.50                      |  |   | .00 | 
|First
 Quarter  |  |        | 11.50 |     |   | 8.01                      |  |   | .00 | 
|                |  |        |       |     |   |                           |  |   |     | 
|2009            |  |        |       |     |   |                           |  |   |     | 
|Fourth
 Quarter |  | $      | 15.99 |     | $ | 9.70                      |  | $ | .14 | 
|Third
 Quarter  |  |        | 18.94 |     |   | 13.39                     |  |   | .14 | 
|Second
 Quarter |  |        | 15.75 |     |   | 13.49                     |  |   | .14 | 
|First
 Quarter  |  |        | 23.06 |     |   | 12.30                     |  |   | .28 | 

On
December 31, 2010, PNBC had 758 registered holders of record of its Common
Stock.

The
holders of the Common Stock are entitled to receive such dividends as are
declared by the Board of Directors of PNBC, which considers payment of
dividends quarterly. The ability of PNBC to pay dividends is dependent upon
receipt of dividends from the Bank. In determining cash dividends, the Board of
Directors considers the earnings, capital requirements, debt servicing
requirements, financial ratio guidelines established by the Board, the
financial condition of PNBC and other relevant factors. The Banks ability to
pay dividends to PNBC is subject to regulatory restrictions. See Supervision
and Regulation.

PNBC
paid regular cash dividends on the Common Stock since it commenced operations
in 1982 through 2009. The Company suspended its dividend in the first quarter
of 2010. There can be no assurance when dividends will be resumed by PNBC. The
timing and amount of dividends will depend upon the earnings, capital
requirements, and financial condition of PNBC and the Bank as well as the
general economic conditions and other relevant factors affecting PNBC and the
Bank. See Managements Discussion and Analysis of Financial Condition and
Results of Operations.

16

---



| |     |                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | The
 following table provides information about purchases of the Companys common
 stock by the Company during the quarter ended December 31, 2010:

|                   |  |                                       |   |                                   |  |                                                                                                |      |                                                                                                                       |  |  |   |  |  |   | 
|------------------ |  | ------------------------------------- | - | --------------------------------- |  | ---------------------------------------------------------------------------------------------- | ---- | --------------------------------------------------------------------------------------------------------------------- |  |  | - |  |  | - | 
|Period             |  | (a) Total number of
 shares purchased |   | (b) Average price paid
 per share |  | (c) Total number
 of shares purchased
 as part of a
 publicly announced
 plans or programs (1) |      | (d) Maximum number
 (or approximate dollar
 value) of shares that
 may yet be purchased
 under the plans
 or programs | 
|                   |  |                                       |   |                                   |  |                                                                                                |      |                                                                                                                       | 
|10/1/10  10/31/10 |  |                                       | 0 |                                   |  | $                                                                                              | 0.00 |                                                                                                                       |  |  | 0 |  |  | 0 | 
|11/1/10  11/30/10 |  |                                       | 0 |                                   |  | $                                                                                              | 0.00 |                                                                                                                       |  |  | 0 |  |  | 0 | 
|12/1/10  12/31/10 |  |                                       | 0 |                                   |  | $                                                                                              | 0.00 |                                                                                                                       |  |  | 0 |  |  | 0 | 
|                   |  |                                       |   |                                   |  |                                                                                                |      |                                                                                                                       |  |  |   |  |  |   | 
|Total              |  |                                       | 0 |                                   |  | $                                                                                              | 0.00 |                                                                                                                       |  |  | 0 |  |  | 0 | 

(1)
The Company does not currently have a stock repurchase plan in place.

The
performance graph required by item 201(e) of Regulation S-K is incorporated by
reference from Page 55 of the Companys Annual Report.

Item 6. Selected Financial Data

Information
regarding the Companys selected financial data is included on page 53 of the
Companys Annual Report, which information is incorporated by reference herein.

Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations

Information
regarding the Companys managements discussion and analysis of financial
condition and results of operations is included on pages 38-51 in the Companys
Annual Report, which information is incorporated by reference herein.

Item 7A. Quantitative and Qualitative
Disclosures about Market Risk

The
information required by Item 305 of Regulation S-K is contained in the
Companys Annual Report on pages 49-51, under the headings Asset Liability
Management and Contractual Obligations, Commercial Commitments and
Off-Balance Sheet Arrangements, which information is incorporated herein by
reference.

Item 8. Consolidated Financial Statements and
Supplementary Data

Information
regarding the Companys consolidated financial statements and supplementary
data is included on pages 10-37 and page 52 in the Companys Annual Report,
which information is incorporated by reference herein.

17

---



Item 9. Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure

None.

Item 9A. 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 December 31, 2010.
 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. Thomas D. Ogaard, President and Chief Executive
 Officer, and Todd D. Fanning, Executive Vice President and Chief Operating
 Officer / Chief Financial Officer, reviewed and participated in this
 evaluation. Based on this evaluation, Messrs. Ogaard and Fanning concluded
 that, as of the date of their evaluation, our disclosure controls were
 effective.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (b) | Internal
 controls. The report required by Item 308 of Regulation S-K is attached
 hereto as Exhibit 99.1 and is incorporated herein by reference. Included in
 Exhibit 99.1 is a discussion of changes in our internal controls over
 financial reporting during the quarter ended December 31, 2010 that
 materially affected or are reasonably likely to materially affect those
 controls.                                                                                                                                                                                                                                                                                                                                                                                                        

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and
Corporate Governance

Certain
information regarding executive officers of the Company is included as a
Supplementary Item at the end of Part I of this Form 10-K.

Information
regarding executive officers and directors of the Company and the Companys
Audit Committee is included in the Corporations Definitive Proxy Statement for
the Annual Meeting of Stockholders to be held May 10, 2011 (the Proxy Statement)
under the captions Proposal 1-Election of Directors and Board of Directors
Meetings and Committees, which information is incorporated by reference
herein.

Information
regarding compliance with Section 16(a) of the Exchange Act is included in the
Proxy Statement under the caption Section 16(a) Beneficial Ownership
Compliance Reporting, which information is incorporated by reference herein.

Information
regarding the Corporations Code of Ethics is included in the Proxy Statement
under the caption Code of Ethics, which information is incorporated by
reference herein.

18

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Information
regarding an Audit Committee Financial Expert is included in the Proxy
Statement under the caption Audit Committee Financial Expert, which information
is incorporated by reference herein.

Item 11. Executive Compensation

Information
regarding executive compensation is included in the Proxy Statement under the
captions Board of Directors Meetings and Committees, Compensation of Directors,
and Executive Compensation Discussion, which information is incorporated by
reference herein.

The
information called for by items 407(e)(4) and (5) is not required for smaller
reporting companies.

Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholders Matters

Information
regarding security ownership is included in the Proxy Statement under the
captions Security Ownership of Directors, Nominees for Director, Most Highly
Compensated Executive Officers and All Directors and Executive Officers as a
Group and Security Ownership of Certain Beneficial Owners, which information
is incorporated by reference herein.

Equity Compensation Plan Information

|                                                            |  |                                                                                                     |  |                                                                                     |  |                                                                                                                                             |  |   |       |  |  |  |  |        |     | 
|----------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ----- |  |  |  |  | ------ | --- | 
|Plan Category                                               |  | Number of securities to
 be issued upon exercise
 of outstanding options,
 warrants and rights
 (a) |  | Weighted-average
 exercise price of
 outstanding options,
 warrants and rights
 (b) |  | Number of securities
 remaining available for
 future issuance under
 equity compensation
 plans (excluding
 securities in column (a))
 (c) | 
|                                                            |  |                                                                                                     |  |                                                                                     |  |                                                                                                                                             | 
|Equity compensation plans approved by
 security holders     |  |                                                                                                     |  | 555,277                                                                             |  |                                                                                                                                             |  | $ | 23.60 |  |  |  |  | 63,082 |     | 
|Equity compensation plans not approved by
 security holders |  |                                                                                                     |  | N/A                                                                                 |  |                                                                                                                                             |  |   | N/A   |  |  |  |  | 5,548  | (1) | 
|                                                            |  |                                                                                                     |  |                                                                                     |  |                                                                                                                                             |  |   |       |  |  |  |  |        |     | 
|Total                                                       |  |                                                                                                     |  | 555,277                                                                             |  |                                                                                                                                             |  | $ | 23.60 |  |  |  |  | 68,440 |     | 

(1) Represents
shares issuable under the Companys Amended and Restated Employee Stock
Purchase Plan (the ESPP). The ESPP is a broad-based plan which was originally
adopted by the Company
in October, 1994 and has been amended and restated to increase the number of
shares issuable under the ESPP to the current maximum of 140,000 shares. Under
the ESPP, eligible employees and directors may purchase PNBC common stock
without incurring any brokerage commissions or service charges using lump sum
contributions and/or payroll deductions, in the case of employees.

19

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Item 13. Certain Relationships and Related
Transactions, and Director Independence

Information
regarding relationships and transactions is included in the Proxy Statement
under the captions Certain Transactions and Board of Directors Meetings and
Committees, which information is incorporated by reference herein.

Item 14. Principal Accountant Fees and
Services

Information
regarding principal accountant fees and services is included in the Proxy
Statement under the caption Audit Committee Report, which information is
incorporated by reference herein.

Item 15. Exhibits and Financial Statement
Schedules

|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------
|(a)(1) |  | The
 following is a list of the Financial Statements included in Part II, Item 8
 of this report:                                                                                                                                                          
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Report of
 Independent Registered Public Accounting Firm                                                           
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Consolidated
 Balance Sheets as of December 31, 2010 and 2009.                                                     
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Consolidated
 Statements of Income for the years ended December 31,
 2010, 2009 and 2008.                          
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Consolidated
 Statements of Changes in Stockholders Equity for the years ended December
 31, 2010, 2009, and 2008.
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Consolidated
 Statements of Cash Flows for the years ended December 31,
 2010, 2009, and 2008.                     
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | Notes to
 Consolidated Financial Statements.                                                                       
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|(a)(2) |  | Financial
 Statement Schedules                                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  |                                                                                                                                                                                                                                                             | No
 consolidated financial statement schedules are required to be included in
 this Report on Form 10-K.           
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|(a)(3) |  | Exhibits                                                                                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                             |                                                                                                                    
|       |  | The
 exhibits filed herewith are listed on the Exhibit Index filed as part of this
 report on Form 10-K. Each management contract or compensatory plan or
 arrangement of the Company listed on the Exhibit Index is separately
 identified by an asterisk.

20

---



SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registration has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

| |                                   |                                                         
| | --------------------------------- | --------------------------------------------------------
| | PRINCETON
 NATIONAL BANCORP, INC.
| |                                   |                                                         
| | By.                               | /s/
 Thomas D. Ogaard                                   
| |                                   |                                                         
| |                                   | Thomas
 D. Ogaard, President and Chief Executive Officer
| | Date:                             | March
 30, 2011                                         

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

|                      |  |                                                             |                              |      | 
|--------------------- |  | ----------------------------------------------------------- | ---------------------------- | ---- | 
|Signature             |  | Title                                                       |                              | Date
|                      |  |                                                             |                              |     
|                      |  |                                                             |                              |      | 
|/s/
 Thomas D. Ogaard |  | President
 & Chief Executive Officer & Director             |                              |     
|                      |  | (Principal
 Executive Officer)                              |                              |     
|Thomas
 D. Ogaard     |  |                                                             |                              |     
|                      |  |                                                             |                              |      | 
|/s/ Todd D. Fanning   |  | Executive
 Vice-President & Chief Operating Officer / Chief |                             
|                      |  |                                                             | Financial Officer & Director |      | 
|Todd
 D. Fanning      |  | (Principal
 Accounting and Financial Officer)               |                              |     
|                      |  |                                                             |                              |      | 
|/s/                   |  |                                                             | Chairman
 of the Board       |      | 
|                      |  |                                                             |                              |      | 
|Craig
 O. Wesner      |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/                   |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Gretta
 E. Bieber     |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/
 Gary C. Bruce    |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Gary
 C. Bruce        |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/ Sharon
 L. Covert |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Sharon
 L. Covert     |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/                   |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|John
 R. Ernat        |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/ Mark
 Janko       |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Mark
 Janko           |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/                   |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Willard
 Lee          |  |                                                             |                              |      | 
|                      |  |                                                             |                              |      | 
|/s/ Stephen
 W. Samet |  |                                                             | Director                     |      | 
|                      |  |                                                             |                              |      | 
|Stephen
 W. Samet     |  |                                                             |                              |      | 

21

---



INDEX TO EXHIBITS

|                   |  |         |  | 
|------------------ |  | ------- |  | 
|Exhibit
    Number |  | Exhibit | 
|                   |  |         | 

| |        |                                                                                                                                                                                                                             
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1    | Amended and Restated
 Certificate of Incorporation of Princeton National Bancorp, Inc. (PNBC)
 (incorporated by reference from Exhibit 4.1 to the PNBC Registration
 Statement on Form S-3 (Registration No. 333-157451)).
| |        |                                                                                                                                                                                                                             
| | 3.2    | By-Laws of PNBC
 (incorporated by reference from Exhibit 3.2 of the 2007 PNBC Annual Report on
 Form 10-K).                                                                                                                 
| |        |                                                                                                                                                                                                                             
| | 4.1    | Certificate of Designation
 of Series A Junior Participating Preferred Stock (incorporated by reference
 from Registration Statement on Form 8-A filed by PNBC on August 1, 2003 (File
 No. 000-20050)).                    
| |        |                                                                                                                                                                                                                             
| | 4.2    | Certificate of Designations
 of Series B Preferred Stock (incorporated by reference from Exhibit 3.1 to
 Form 8-K filed on January 27, 2009).                                                                               
| |        |                                                                                                                                                                                                                             
| | 4.3    | Trust Preferred Securities
 Indenture (incorporated by reference from Exhibit 4.1 from PNBC Quarterly
 Report on Form 10-Q for the quarter ended September 30, 2005).                                                       
| |        |                                                                                                                                                                                                                             
| | 4.4    | Warrant to purchase up to
 155,025 shares of Common Stock issued January 23, 2009 (incorporated by
 reference from Exhibit 4.1 to the Form 8-K filed on January 29, 2009).                                                  
| |        |                                                                                                                                                                                                                             
| | 10.1*  | Employment Agreement, dated
 as of January 25, 2010, between PNBC and Thomas D. Ogaard (incorporated by
 reference from the Form 8-K filed by PNBC on January 29, 2010).                                                    
| |        |                                                                                                                                                                                                                             
| | 10.2*  | Citizens First National
 Bank Profit Sharing Plan, as amended and restated January 1, 1989
 (incorporated by reference from Exhibit 10.4 to the S-1 Registration
 Statement (33-46362)).                                    
| |        |                                                                                                                                                                                                                             
| | 10.3*  | Citizens First National
 Bank Defined Contribution Plan and Trust, as amended and restated January 1,
 1989 (incorporated by reference from Exhibit 10.5 to the S-1 Registration
 Statement).                               
| |        |                                                                                                                                                                                                                             
| | 10.4*  | Princeton National Bancorp,
 Inc. Stock Option Plan (incorporated by reference from Schedule 14A filed by
 PNBC on March 6, 1998).                                                                                          
| |        |                                                                                                                                                                                                                             
| | 10.5*  | Princeton National Bancorp,
 Inc. Management Incentive Compensation Plan (incorporated by reference from
 Exhibit 10.7 of the 2001 PNBC Annual Report on Form 10-K).                                                        
| |        |                                                                                                                                                                                                                             
| | 10.6*  | Princeton National Bancorp,
 Inc. 2003 Stock Option Plan (incorporated by reference from Schedule 14A
 filed by PNBC on March 19, 2003).                                                                                    
| |        |                                                                                                                                                                                                                             
| | 10.7*  | Form of Stock Option
 Agreement (incorporated by reference from Exhibit 10.9 of the 2004 PNBC
 Annual Report on Form 10-K).                                                                                                 
| |        |                                                                                                                                                                                                                             
| | 10.8*  | Amendment to Stock Option
 Agreement (incorporated by reference from Exhibit 10.10 of the 2005 PNBC
 Annual Report on Form 10-K).                                                                                           
| |        |                                                                                                                                                                                                                             
| | 10.9   | Trust Preferred Securities
 Purchase Agreement (incorporated by reference from Exhibit 10.1 to PNBC
 Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).                                               
| |        |                                                                                                                                                                                                                             
| | 10.10  | Trust Preferred Securities
 Declaration of Trust (incorporated by reference from Exhibit 10.2 to PNBC
 Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).                                             
| |        |                                                                                                                                                                                                                             
| | 10.11  | Trust Preferred Securities
 Guarantee Agreement (incorporated by reference from Exhibit 10.3 to PNBC
 Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).                                              
| |        |                                                                                                                                                                                                                             
| | 10.12* | 2007 Stock Compensation
 Plan (incorporated by reference from Schedule 14A filed by PNBC on March 14,
 2007).                                                                                                               
| |        |                                                                                                                                                                                                                             
| | 10.13  | Letter Agreement with U.S.
 Treasury dated January 23, 2009 including Securities Purchase Agreement (incorporated by reference
 from Form 8-K filed on January 29, 2009).                                                   

22

---



| |       |                                                                                                                                          
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------
| | 10.14 | Form of Waiver of Senior
 Executive Officers (incorporated by reference from Exhibit 10.2 to Form 8-K
 filed on January 29, 2009).       
| |       |                                                                                                                                          
| | 10.15 | Form of Omnibus Amendment
 Agreement (incorporated by reference from Exhibit 10.3 to Form 8-K filed on
 January 29, 2009).               
| |       |                                                                                                                                          
| | 13    | Portions of 2010 Annual
 Report to Shareholders.                                                                                         
| |       |                                                                                                                                          
| | 14    | Code of Ethics
 (incorporated by reference from Exhibit 14 of the 2003 PNBC Annual Report on
 Form 10-K).                                
| |       |                                                                                                                                          
| | 21    | Subsidiaries of PNBC.                                                                                                                    
| |       |                                                                                                                                          
| | 23.1  | Consent of BKD, LLP.                                                                                                                     
| |       |                                                                                                                                          
| | 31.1  | Certification of Thomas D.
 Ogaard required by Rule 13a-14(a).                                                                           
| |       |                                                                                                                                          
| | 31.2  | Certification of Todd D.
 Fanning required by Rule 13a-14(a).                                                                            
| |       |                                                                                                                                          
| | 32.1  | Certification of Thomas D.
 Ogaard 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. 
| |       |                                                                                                                                          
| | 99.1  | Report of Management on
 Internal Control over Financial Reporting.                                                                      
| |       |                                                                                                                                          
| | 99.2  | 31 C.F.R. Section 30.15
 Certification of Thomas D. Ogaard.                                                                              
| |       |                                                                                                                                          
| | 99.3  | 31 C.F.R. Section 30.15
 Certification of Todd D. Fanning.                                                                               

*   Management contract or
compensatory plan.

23

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