FIRST NORTHERN COMMUNITY BANCORP - Quarter Report: 2005 September (Form 10-Q)

FNCBancorp Form 10-Q Third Quarter 2005

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————————

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2005

Commission File Number 000-30707

First Northern Community Bancorp

(Exact name of registrant as specified in its charter)

California		68-0450397
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

195 N. First St., Dixon, CA

(Address of principal executive offices)

95620

(Zip Code)

707-678-3041

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]

No [ ]

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

Yes [ ]

No [X]

As of November 8, 2005, there were 7,565,604 shares of the registrant’s Common Stock, no par value, outstanding.

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FIRST NORTHERN COMMUNITY BANCORP

INDEX

			Page
PART I:	FINANCIAL INFORMATION

Item 1		Financial Statements

		Unaudited Condensed Consolidated Balance Sheets	3

		Unaudited Condensed Consolidated Statements of Income	4

		Unaudited Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Income	5

		Unaudited Condensed Consolidated Statements of Cash Flows	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3		Quantitative and Qualitative Disclosures About Market Risk	21

Item 4		Controls and Procedures	21

PART II:	OTHER INFORMATION

Item 2		Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 6		Exhibits	23

		Signatures	23

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PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	(UNAUDITED)
	September 30, 2005		December 31, 2004
ASSETS
Cash and due from banks	$	30,379	$	25,399
Federal funds sold		90,250		91,305
Investment securities - available for sale		46,802		55,154
Loans, net of allowance for loan losses of $7,948 at September 30, 2005 and $7,445 at December 31, 2004		445,600		428,872
Loans held-for-sale		7,087		3,719
Premises and equipment, net		8,539		7,435
Other real estate owned		1,851		—
Accrued interest receivable and other assets		19,160		16,789
TOTAL ASSETS	$	649,668	$	628,673

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Demand	$	189,705	$	169,266
Interest-bearing transaction deposits		83,221		65,008
Savings & MMDA's		185,204		193,658
Time, under $100,000		53,810		57,468
Time, $100,000 and over		62,137		71,786
Total deposits		574,077		557,186
FHLB advance and other borrowings		14,623		15,456
Accrued interest payable and other liabilities		5,901		4,130
TOTAL LIABILITIES		594,601		576,772


Stockholders' equity
Common stock, no par value; 16,000,000 shares authorized;
7,554,462 shares issued and outstanding at September 30, 2005 and 7,202,334 shares issued and outstanding at December 31, 2004		36,461		32,848
Additional paid-in capital		977		977
Retained earnings		17,350		17,091
Accumulated other comprehensive income		279		985
TOTAL STOCKHOLDERS' EQUITY		55,067		51,901

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	649,668	$	628,673

See notes to unaudited condensed consolidated financial statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

	Three months			Three months		Nine months		Nine months
	ended			ended		ended		ended
	September 30, 2005			September 30, 2004		September 30, 2005		September 30, 2004
Interest Income
Loans	$	9,331		$	7,260	$	26,248	$	20,312
Federal funds sold		671			236		1,602		541
Investment securities
Taxable		452			545		1,489		1,639
Non-taxable		136			153		427		464
Total interest income		10,590			8,194		29,766		22,956

Interest Expense
Deposits		1,445			759		3,556		2,201
Other borrowings		123			124		371		316

Total interest expense		1,568			883		3,927		2,517
Net interest income		9,022			7,311		25,839		20,439
(Credit) provision for loan losses		(69	)		—		—		207

Net interest income after (credit)
provision for loan losses		9,091			7,311		25,839		20,232

Other operating income
Service charges on deposit accounts		618			664		1,788		1,591
Gains on available for sale securities		15			3		15		3
Gains on other real estate owned		27			28		27		28
Gains on sales of loans		147			105		313		382
Investment and brokerage services income		45			63		210		250
ATM fees		80			79		195		220
Mortgage brokerage income		142			145		325		353
Loan servicing income		156			76		343		302
Other income		276			257		854		741
Total other operating income		1,506			1,420		4,070		3,870

Other operating expenses
Salaries and employee benefits		4,132			3,653		11,961		9,904
Occupancy and equipment		826			788		2,387		2,253
Data processing		308			297		892		816
Stationery and supplies		106			166		360		391
Advertising		198			108		491		285
Directors’ fees		31			30		88		87
Other real estate owned expense		21			—		21		—
Other expense		1,138			1,001		3,757		3,058
Total other operating expenses		6,760			6,043		19,957		16,794

Income before income tax expense		3,837			2,688		9,952		7,308
Provision for income tax expense		1,419			961		3,519		2,573

Net income	$	2,418		$	1,727	$	6,433	$	4,735

Basic Income per share	$	0.32		$	0.23	$	0.85	$	0.62
Diluted Income per share	$	0.31		$	0.22	$	0.81	$	0.60

See notes to unaudited condensed consolidated financial statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

(in thousands, except share amounts)


															Accumulated
	Common									Additional					Other
	Stock						Comprehensive			Paid-in		Retained			Comprehensive
Description	Shares			Amounts			Income			Capital		Earnings			Income			Total

Balance at December 31, 2004		7,202,334		$	32,848						977		17,091			985			51,901

Comprehensive income:
Net income							$	6,433					6,433						6,433
Other comprehensive loss:

Unrealized holding losses arising during the current period, net of tax effect of ($477)								(715	)

Reclassification adjustment due to gains realized, net of tax effect of $6								9


Total other comprehensive loss, net of tax effect of ($471)								(706	)							(706	)		(706	)


Comprehensive income							$	5,727

6% stock dividend		432,132			6,158								(6,158	)
Cash in lieu of fractional shares													(16	)					(16	)
Stock-based compensation and related tax benefits					307														307
Common shares issued		56,868			96														96
Stock repurchase and retirement		(136,872	)		(2,948	)													(2,948	)

Balance at September 30, 2005		7,554,462		$	36,461						977		17,350			279			55,067

See notes to unaudited condensed consolidated financial statements.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months Ended September 30, 2005			Nine months Ended September 30, 2004
Operating Activities
Net Income	$	6,433		$	4,735
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation		760			758
Provision for loan losses		—			207
Gain on available for sale securities		15			3
Gain on sale of loans		(313	)		(382	)
Gain on other real estate owned		27			28
Proceeds from sales of loans held-for-sale		43,848			45,314
Originations of loans held-for-sale		(46,903	)		(43,153	)
Increase in accrued interest receivable and other assets		(3,241	)		(1,292	)
Increase (decrease) in accrued interest payable and other liabilities		1,771			(54	)
Net cash provided by operating activities		2,397			6,164

Investing Activities
Net decrease (increase) in investment securities		8,808			(894	)
Net increase in loans		(19,954	)		(40,993	)
Net increase in OREO		1,348			(28	)
Purchases of premises and equipment, net		(1,864	)		(395	)
Net cash used in investing activities		(11,662	)		(42,310	)

Financing Activities
Net increase in deposits		16,891			30,620
Net (decrease) increase in FHLB advances		(833	)		5,918
Cash dividends paid		(16	)		(12	)
Stock options exercised		96			225
Repurchase of stock		(2,948	)		(1,414	)
Net cash provided by financing activities		13,190			35,337

Net increase (decrease) in cash and cash equivalents		3,925			(809	)
Cash and cash equivalents at beginning of period		116,704			104,759

Cash and cash equivalents at end of period	$	120,629		$	103,950

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	3,917		$	2,527
Income Taxes	$	4,846		$	2,987
Supplemental disclosures of non-cash investing and financing activities:
Transfer of loans held-to-maturity to OREO	$	3,226		$	—
Stock plan accruals	$	307		$	153
Tax benefit for stock options	$	—		$	145
Stock dividend distributed	$	6,158		$	5,537

See notes to unaudited condensed consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2005 and 2004 and December 31, 2004

1.	BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of First Northern Community Bancorp (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10-Q and Articles 9 and 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report to shareholders and Form 10-K for the year ended December 31, 2004. The preparation of financial statements in conformity with GAAP also requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. All material intercompany balances and transactions have been eliminated in consolidation.

(a) Reclassifications

Certain amounts previously reported in the 2004 financial statements have been reclassified to conform to the 2005 presentation. In the first quarter of 2005, the Company reclassified the reserve for unfunded commitments from the allowance for loan losses to other liabilities, and reclassified the provision for unfunded commitments from the provision for loan losses to other operating expenses. These reclassifications did not affect previously reported net income or total stockholders’ equity.

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2.	ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained at levels considered adequate by management to provide for loan losses that can be reasonably anticipated. The allowance is based on management's assessment of various factors affecting the loan portfolio, including problem loans, economic conditions and loan loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses during the nine-month periods ended September 30, 2005 and 2004 and for the year ended December 31, 2004 were as follows (in thousands):

	Nine months ended September 30,						Year ended December 31,
	2005			2004			2004
Balance, beginning of period	$	7,445		$	7,006		$	7,006
Provision for loan losses		—			207			207
Loan charge-offs		(201	)		(349	)		(382	)
Loan recoveries		704			611			614
Balance, end of period	$	7,948		$	7,475		$	7,445

3.	MORTGAGE OPERATIONS

Transfers and servicing of financial assets and extinguishments of liabilities are accounted for and reported based on consistent application of a financial-components approach that focuses on control. Transfers of financial assets that are sales are distinguished from transfers that are secured borrowings. Retained interests (mortgage servicing rights) in loans sold are measured by allocating the previous carrying amount of the transferred assets between the loans sold and retained interest, if any, based on their relative fair value at the date of transfer. Fair values are estimated using discounted cash flows based on a current market interest rate.

The Company recognizes a gain and a related asset for the fair value of the rights to service loans for others when loans are sold. The Company sold substantially all of its conforming long-term residential mortgage loans originated during the nine- months ended September 30, 2005 for cash proceeds equal to the fair value of the loans.

The recorded value of mortgage servicing rights is included in other assets, and is amortized in proportion to, and over the period of, estimated net servicing revenues. The Company assesses capitalized mortgage servicing rights for impairment based upon the fair value of those rights at each reporting date. For purposes of measuring impairment, the rights are stratified based upon the product type, term and interest rates. Fair value is determined by discounting estimated net future cash flows from mortgage servicing activities using discount rates that approximate current market rates and estimated prepayment rates, among other assumptions. The amount of impairment recognized, if any, is the amount by which the capitalized mortgage servicing rights for a stratum exceeds their fair value. Impairment, if any, is recognized through a valuation allowance for each individual stratum.

At September 30, 2005, the Company had $7,087,000 of mortgage loans held-for-sale. At September 30, 2005 and December 31, 2004, the Company serviced real estate mortgage loans for others of $113,916,000 and $105,183,000, respectively.

The following table summarizes the Company’s mortgage servicing rights assets as of September 30, 2005 and December 31, 2004.

(Dollars in thousands)		December 31, 2004			Additions			Reductions			September 30, 2005
Mortgage servicing rights		$	787		$	262		$	127		$	922

There was no valuation allowance recorded for mortgage servicing rights as of September 30, 2005 and December 31, 2004.

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4.	OUTSTANDING SHARES AND EARNINGS PER SHARE

On January 17, 2005, the Board of Directors of the Company declared a 6% stock dividend payable as of March 31, 2005 to shareholders of record as of February 28, 2005.

On April 21, 2005, the Board of Directors of the Company declared a two-for-one stock split. The stock split doubled the outstanding common stock recorded on the books of the Company as of the record date, May 10, 2005 and all share amounts were retroactively adjusted.

Earnings per share amounts have been adjusted to reflect the effects of the stock dividend and stock split.

Earnings Per Share (EPS)

Basic EPS includes no dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS includes all common stock equivalents (“in-the-money” stock options, warrants and rights, convertible bonds and preferred stock), which reflects the potential dilution of securities that could share in the earnings of an entity.

The following table presents basic and diluted EPS for the three-month and nine-month periods ended September 30, 2005 and 2004 (in thousands, except share and earnings per share amounts):

	Three months ended September 30,				Nine months ended September 30,
	2005		2004		2005		2004
Basic earnings per share:
Net income	$	2,418		1,727		6,433		4,735

Weighted average common
shares outstanding		7,563,987		7,636,040		7,611,961		7,661,132
Basic EPS	$	0.32		0.23		0.85		0.62

Diluted earnings per share:
Net income	$	2,418		1,727		6,433		4,735

Weighted average common
shares outstanding		7,563,987		7,636,040		7,611,961		7,661,132

Effect of dilutive options		362,140		188,034		316,097		189,342

		7,926,127		7,824,074		7,928,058		7,850,474
Diluted EPS	$	0.31		0.22		0.81		0.60

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5.	STOCK OPTION PLAN

Stock-based employee compensation recognized for all stock options granted after January 1, 2003 is based on the fair value recognition provisions of Statements of Financial Accounting Standards Nos. 123, as amended and 148.

Financial Accounting Standards Board (“FASB”) Statement No. 123 (revised 2004), “Share-Based Payment” (“Statement 123(R)”). Statement 123(R) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. Statement 123(R) requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees in the income statement. The revised Statement generally requires that an entity account for those transactions using the fair-value-based method, and eliminates an entity’s ability to account for share-based compensation transactions using the intrinsic value method of accounting in Accounting Principals Board Opinion No. 25, “Accounting for Stock Issued to Employee,” which was permitted under Statement 123, as originally issued. The Company does not anticipate the adoption of Statement 123(R) to have a significant impact on the consolidated financial statements; because the Company adopted the fair value recognition provisions of FASB Statement No. 148, “Accounting for Stock-Based Compensation,” an amendment of Statement No. 123, under the prospective method of adoption as of January 1, 2003.

For stock options issued prior to January 1, 2003, the Company is using the intrinsic value method, under which compensation expense is recorded on the date of grant only if the current market price of the underlying stock at such date exceeds the exercise price. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period (in thousands, except earnings per share amounts):

	Three months ended September 30,						Nine months ended September 30,
	2005			2004			2005			2004
Net income, as reported	$	2,418		$	1,727			6,433			4,735

Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		72			51			215			153

Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(90	)		(91	)		(268	)		(273	)


Pro forma net income	$	2,400		$	1,687		$	6,380		$	4,615

Earnings per share:
Basic-as reported	$	0.32		$	0.23		$	0.85		$	0.62
Basic-pro forma	$	0.32		$	0.22		$	0.84		$	0.60

Diluted-as reported	$	0.31		$	0.22		$	0.81		$	0.60
Diluted-pro forma	$	0.30		$	0.22		$	0.80		$	0.59

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6.	FIRST NORTHERN BANK - EXECUTIVE SALARY CONTINUATION PLAN

First Northern Bank (the “Bank”) has an unfunded non-contributory defined benefit pension plan ("Executive Salary Continuation Plan") for a select group of highly compensated employees. The Executive Salary Continuation Plan provides defined benefit levels between $50,000 and $125,000 depending on responsibilities at the Bank. The retirement benefits are paid for 10 years following retirement at age 65. Reduced retirement benefits are available after age 55 and 10 years of service.

	Three months ended September 30,
	2005		2004
Components of Net Periodic Benefit Cost:
Service Cost	$	40,049	$	38,971
Interest Cost		13,321		11,740
Amortization of prior service cost		3,257		3,257
Net periodic benefit cost	$	56,627	$	53,968

The Bank estimates that the net periodic benefit cost will be $226,506 at December 31, 2005. This compares to net periodic benefit costs of $215,873 at December 31, 2004.

Estimated Contributions for Fiscal 2005

For unfunded plans, contributions to the “Executive Salary Continuation Plan” are the benefit payments made to participants. At December 31, 2004 the Bank did not expect to make any benefit payments in connection with the “Executive Salary Continuation Plan” during fiscal 2005.

7.	FIRST NORTHERN BANK - DIRECTORS’ RETIREMENT PLAN

The Bank has an unfunded non-contributory defined benefit pension plan ("Directors’ Retirement Plan") for directors of the Bank. The plan provides a retirement benefit equal to $1,000 per year of service as a director, up to a maximum of $15,000. The retirement benefit is payable for 10 years following retirement at age of 65. Reduced retirement benefits are available after age 55 and 10 years of service.

	Three months ended September 30,
	2005		2004
Components of Net Periodic Benefit Cost:
Service Cost	$	18,218	$	17,683
Interest Cost		5,233		4,795
Amortization of net loss		1,295		752
Net periodic benefit cost	$	24,746	$	23,230

The Bank estimates that the net periodic benefit cost will be $98,984 at December 31, 2005. This compares to net periodic benefit costs of $92,919 at December 31, 2004.

Estimated Contributions for Fiscal 2005

For unfunded plans, contributions to the "Directors’ Retirement Plan" are the benefit payments made to participants. At December 31, 2004 the Bank expected to make cash contributions of $20,000 to the “Directors’ Retirement Plan” during fiscal 2005.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements also include statements in which words such as "expect," "anticipate," "intend," "plan," "believe," estimate," "consider" or similar expressions are used, and include assumptions concerning the Company's operations, future results and prospects. These forward-looking statements are based upon current expectations and are subject to risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Some factors that may cause actual results to differ from the forward-looking statements include the following: (i) the effect of changing regional and national economic conditions, including the continuing budgetary and fiscal difficulties of the State of California; (ii) uncertainty regarding the economic outlook resulting from the continuing hostilities in Iraq and the war on terrorism, as well as actions taken or to be taken by the United States or other governments as a result of further acts or threats of terrorism; (iii) significant changes in interest rates and prepayment speeds; (iv) credit risks of commercial, agricultural, real estate, consumer and other lending activities; (v) adverse effects of current and future federal and state banking or other laws and regulations or governmental fiscal or monetary policies; (vi) competition in the banking industry; (vii) changes in accounting standards; and (viii) other external developments which could materially impact the Company's operational and financial performance. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances arising after the date on which they are made. For additional information concerning risks and uncertainties related to the Company and its operations, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

The following is a discussion and analysis of the significant changes in the Company’s Unaudited Condensed Consolidated Balance Sheets and of the significant changes in income and expenses reported in the Company’s Unaudited Condensed Consolidated Statements of Income and Stockholders’ Equity and Comprehensive Income as of and for the three-month and nine-month periods ended September 30, 2005 and 2004 and should be read in conjunction with the Company's consolidated 2004 financial statements and the notes thereto contained in the Company’s Annual Report to Shareholders and Form 10-K for the year ended December 31, 2004, along with other financial information included in this report.

SUMMARY

The Company recorded net income of $6,433,000 for the nine-month period ended September 30, 2005, representing an increase of $1,698,000 or 35.9% from net income of $4,735,000 for the same period in 2004.

The increase in net income for the nine-month period ended September 30, 2005 as compared to the same period a year ago resulted primarily from an increase in net interest income and other operating income combined with a decrease in the provision for loan losses which was partially offset by an increase in other operating expenses.

The Company recorded net income of $2,418,000 for the three-month period ended September 30, 2005, representing an increase of $691,000 or 40% from net income of $1,727,000 for the same period in 2004.

The increase in net income for the three-month period ended September 30, 2005 as compared to the same period a year ago resulted primarily from increases in net interest income and other operating income, combined with a decrease in provision for loan losses, which was partially offset by an increase in other operating expenses.

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CHANGES IN FINANCIAL CONDITION

The assets of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets showed a $4,980,000 increase in cash and due from banks, a $1,055,000 decrease in federal funds sold, a $8,352,000 decrease in investment securities available-for-sale, a $16,728,000 increase in loans, a $3,368,000 increase in loans held-for-sale, a $1,104,000 increase in premises and equipment, a $1,851,000 increase in other real estate owned (“OREO”) and a $2,371,000 increase in accrued interest receivable and other assets from December 31, 2004 to September 30, 2005. The increase in cash and due from banks was due to an increase in items in process of collection which was partially offset by a decrease in cash. The decrease in federal funds sold was due to increases in due from banks, loans and OREO, which was partially offset by a decrease in investment securities - available-for-sale and an increase in deposits. The decrease in investment securities available-for-sale was due to sales or calls of securities of U.S. government agencies & corporations, obligations of state & political subdivisions and mortgage backed securities. The increase in loans was due to an increase in equipment, agriculture, real estate and real estate construction loans, equipment leases and home equity lines of credit, which was partially offset by a decrease in commercial, commercial real estate, and consumer loans. These fluctuations were due to changes in the demand for certain loan products by the Company’s borrowers. The increase in loans held-for-sale was in real estate mortgage loans and was due, for the most part, to an increase in the origination of loans compared to sales. The Company originated approximately $46,903,000 in residential mortgage loans during the first nine months of 2005, which was offset by approximately $43,848,000 in loan sales during this period. The increase in premises and equipment was due to an increase in computer hardware and furniture and equipment purchases and a purchase of a real estate lot for future bank premises use, which was partially offset by increased depreciation. The increase in OREO was due to an in-substance foreclosure of a commercial real estate property. The increase in accrued interest receivable and other assets was due to an increase in loan interest receivables, computer software, cash surrender value of bank-owned life insurance, mortgage servicing asset, and income taxes receivable, which was partially offset by decreases in securities interest receivables and prepaid expenses combined with an increase in housing tax credit amortization expense.

The liabilities of the Company set forth in the Unaudited Condensed Consolidated Balance Sheets showed an increase in total deposits of $16,891,000 at September 30, 2005 compared to December 31, 2004. The increase in deposits was due to higher demand and interest-bearing transaction deposit totals, combined with lower savings & money market and time deposit totals. These fluctuations were due to cyclical changes in deposit requirements of the Company’s depositors and the introduction of a new checking account product line. Federal Home Loan Bank advance (“FHLB advance”) and other borrowings decreased $833,000 for the nine months ended September 30, 2005 compared to the year ended December 31, 2004, due to payments on FHLB advances and a decrease in treasury tax and loan note payable. Other liabilities increased $1,771,000 from December 31, 2004 to September 30, 2005. The increase in other liabilities was due to increases in incentive compensation, accrued interest expense, accrued retirement expense, deferred compensation expense and accrued off-balance sheet loan losses expense, which was partially offset by decreases in taxes payable, and accrued profit sharing expenses.

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CHANGES IN RESULTS OF OPERATIONS

Interest Income

The increase in general market interest rates increased the Company’s yields on earning assets. The Federal Open Market Committee increased the federal funds rate by a total of 200 basis points during the twelve-month period ended September 30, 2005. These increases occurred on November 10, 2004, December 14, 2004, February 2, 2005, March 22, 2005, May 3, 2005, June 30, 2005, August 9, 2005 and September 20, 2005.

Interest income on loans for the nine-month period ended September 30, 2005 was up 29.2% from the same period in 2004, increasing from $20,312,000 to $26,248,000, and was up 28.5% for the three-month period ended September 30, 2005 over the same period in 2004, from $7,260,000 to $9,331,000. The increase in interest income on loans for the nine-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to an increase in average loans and a 66 basis point increase in loan yields. The increase for the three-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to an increase in average loans and an 104 basis point increase in loan yields.

Interest income on federal funds sold for the nine-month period ended September 30, 2005 was up 196.1% from the same period in 2004, increasing from $541,000 to $1,602,000, and was up 184.3% for the three-month period ended September 30, 2005 over the same period in 2004, from $236,000 to $671,000. The increase in federal funds income for the nine-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to an increase in average federal funds sold and a 182 basis point increase in federal funds rates. The increase for the three-month period ended September 30, 2005 as compared to the same period a year ago, was primarily due to an increase in average federal funds sold and a 207 basis point increase in federal funds rates. The changes in average federal funds sold were the result of the usual seasonality of transaction deposit accounts.

Interest income on investment securities for the nine-month period ended September 30, 2005 was down 8.9% from the same period in 2004, decreasing from $2,103,000 to $1,916,000 and was down 15.8% for the three-month period ended September 30, 2005 over the same period in 2004, from $698,000 to $588,000. The decrease from the nine-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to a decrease in average investment securities and a 46 basis point decrease in securities yields. The decrease from the three-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to a decrease in average investment securities and a 41 basis point decrease in investment securities yields.

Interest Expense

The increase in general market interest rates increased the Company’s cost of funds. As discussed above, the Federal Open Market Committee increased the federal funds rate by a total of 200 basis points during the twelve-month period ending September 30, 2005

Interest expense on deposits and other borrowings for the nine-month period ended September 30, 2005 was up 56.0% from the same period in 2004, increasing from $2,517,000 to $3,927,000, and was up 77.6% for the three-month period ended September 30, 2005 over the same period in 2004, from $883,000 to $1,568,000. The increase in interest expense from the nine-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to increased average interest bearing deposits and a 41 basis point increase in deposit rates. The increase in interest expense from the three-month period ended September 30, 2005 as compared to the same period a year ago was primarily due to increased average interest bearing deposits and a 68 basis point increase in deposit rates.

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Provision for Loan Losses

There was a provision for loan losses of $-0- for the nine-month period ended September 30, 2005 compared to a $207,000 provision for the same period in 2004. The decrease in the provision was due to the recoveries received against charged-off loans and the Company’s evaluation of the quality of the loan portfolio. The September 30, 2005 allowance for loan losses of approximately $7,948,000 was 1.8% of total loans (excluding loans held-for-sale) compared to $7,445,000 or 1.7% of total loans (excluding loans held-for-sale) at December 31, 2004. The allowance for loan losses is maintained at a level considered adequate by management to provide for possible loan losses.

There was a credit to the provision for loan losses of $69,000 for the nine-month period ended September 30, 2005 compared to a $-0- provision for the same period in 2004. The decrease in the provision was due to the recoveries received against charged-off loans and the Company’s evaluation of the quality of the loan portfolio.

Other Operating Income

Other operating income was up 5.2% for the nine-month period ended September 30, 2005 from the same period in 2004, increasing from $3,870,000 to $4,070,000.

This increase was primarily due to an increase in service charges on deposit accounts, loan servicing income, gain-on-available for sale securities, and other miscellaneous income, which was partially offset by a decrease in gains on sales of loans, mortgage brokerage income, ATM fees and investment & brokerage services income. The increase in service charges on deposit accounts was due to an increase in monthly service charges and other service charges. The increase in loan servicing income was due to an increase in the value of the mortgage servicing asset. The increase in gain on available for sale securities was due to calls on securities. Other miscellaneous income increased for the most part due to an increase in signature based transaction fees, safe deposit income, check sales income and stand-by letter of credit fees, which were offset by a decrease in interest income on bank-owned life insurance policies. Decreases in gains on sales of loans and mortgage brokerage income was due to a slowdown in demand for mortgage financing and refinancing activity compared to the same period in 2004. The Company sold approximately $43,848,000 in residential mortgage loans during the nine-month period ended September 30, 2005, as compared to $45,314,000 for the same period in 2004. The decrease in ATM fees was due to a decrease in interchange fees. The decrease in investment & brokerage services income was due to a decrease in demand for investment and brokerage services.

Other operating income was up 6.1% for the three-month period ended September 30, 2005 from the same period in 2004, increasing from $1,420,000 to $1,506,000.

This increase was primarily due to an increase in gain on sales of loans, loan servicing income, gain on available-for-sale securities, and other miscellaneous income, which was partially offset by a decrease in service charges on deposit accounts, and investment and brokerage services. Increases in gains on sales of loans and loan servicing income was due to an increase in demand for mortgage financing and refinancing activity compared to the same period in 2004. The Company sold approximately $16,954,000 in residential mortgage loans during the three-month period ended September 30, 2005, as compared to $12,260,000 for the same period in 2004. The increase in gain on available for sale securities was due to calls on securities. Other miscellaneous income increased for the most part due to an increase in signature based transaction fees, safe deposit income, check sales income, trust and stand-by letter of credit fees, which were partially offset by a decrease in interest income on bank-owned life insurance policies. The decrease in service charges on deposit accounts was due to a decrease in monthly service charges and other service charges associated with the conversion of existing deposit accounts to new checking account offerings. The decrease in investment & brokerage services income was due to a decrease in demand for investment and brokerage services.

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Other Operating Expenses

Total other operating expenses was up 18.83% for the nine-month period ended September 30, 2005 from the same period in 2004, increasing from $16,794,000 to $19,957,000.

The main reasons for the increase in other operating expenses in the nine-month period ended September 30, 2005 were the following: increases in salaries and benefits, occupancy & equipment expenses, data processing expenses, advertising costs, other real estate owned expenses and other miscellaneous operating expenses, which was partially offset by a decrease in stationery & supplies expense.

The increase in salaries and benefits was due to increases in the following: payroll taxes; retirement compensation expense; profit sharing and incentive compensation provisions due to increased profits; insurance expense; merit salary increases; commissions for real estate loans; stock compensation expense; welfare & recreation expense; and referrals & awards, which was partially offset by a decrease in worker’s compensation expense. The increase in occupancy and equipment expenses was due to increased rent expense, furniture & equipment depreciation, bank owned vehicle expense, and service contract expense, which was partially offset by decreases in computer hardware depreciation, equipment rental, building expense and equipment expense. The increase in data processing expenses was due to increased costs associated with maintaining and monitoring the Company’s data communications network and internet banking system. The increase in advertising costs was due to increased marketing efforts for a new branch and marketing new demand deposit products. The increase in other real estate owned expenses was due to an increase in foreclosure costs. The increase in other miscellaneous operating expenses was due to increases in the following: contributions; membership dues; examination fees; legal fees; consulting fees; postage; checks purchased; public relations; meals and entertainment; classified ads for job postings; signature based processing fees; loan collection expense; credit reports expense; accounting & audit fees; subscriptions; employee training expense; messenger & armored car expense; business travel; liability insurance expense and sundry losses, which was partially offset by decreases in miscellaneous loan & lease expense; correspondent bank fees; telephone expense; and amortization expense of the investment in unconsolidated subsidiary for the affordable housing tax credit investment. The decrease in stationery and supplies was due to a decrease in supply usage.

Total other operating expenses was up 11.86% for the three-month period ended September 30, 2005 from the same period in 2004, increasing from $6,043,000 to $6,760,000.

The main reasons for the increase in other operating expenses in the three-month period ended September 30, 2005 were the following: increases in salaries and benefits, occupancy & equipment expenses, data processing expenses, advertising costs, other real estate owned expenses and other miscellaneous operating expenses which was partially offset by a decrease in stationery & supplies expense.

The increase in salaries and benefits was due to increases in the following: payroll taxes; retirement compensation expense; profit sharing and incentive compensation provisions due to increased profits; insurance expense; merit salary increases; commissions for real estate loans; and stock compensation expense which was partially offset by a decrease in worker’s compensation expense. The increase in occupancy and equipment expenses was due to increased rent expense, furniture & equipment depreciation, utilities, property taxes, and bank owned vehicle expense, which was partially offset by decreases in service contract expense, computer hardware depreciation; equipment rental, building expense and equipment expense. The increase in data processing expenses was due to increased costs associated with maintaining and monitoring the Company’s data communications network and Internet banking system. The increase in advertising costs was due to increased marketing efforts for a new branch and marketing new demand deposit products. The increase in other real estate owned expenses was due to an increase in foreclosure costs. The increase in other miscellaneous operating expenses was due to increases in the following: membership dues; consulting fees; checks purchased; ATM processing fees; meals and entertainment; credit reports expense; accounting & audit fees; subscriptions; classified ads for job postings; employee training expense; business travel; liability insurance expense; and sundry losses, which was partially offset by decreases in contributions; examination fees; legal fees; signature based processing fees; loan collection expense; miscellaneous loan & lease expense; telephone expense; correspondent bank fees; and amortization expense of the investment in unconsolidated subsidiary for the affordable housing tax credit investment. The decrease in stationery and supplies was due to a decrease in supply usage.

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Provision for Unfunded Lending Commitment Losses

There was a provision for unfunded lending commitment losses of $81,000 for the nine-month period ended September 30, 2005 compared to a $98,000 provision for the same period in 2004. The provision for unfunded lending commitment losses is included in other operating expenses.

There was no provision for unfunded lending commitment losses for the three-month periods ended September 30, 2005 and September 30, 2004.

Income Taxes

The Company’s tax rate, the Company’s earnings before taxes and the amount of tax relief provided by non-taxable earnings primarily affect the Company’s provision for income taxes. In the nine months ended September 30, 2005, the Company’s provision for income taxes increased $946,000 from the same period last year, from $2,573,000 to $3,519,000. The Company’s effective tax rate for the nine months ended September 30, 2005 was 35.4%, compared to 35.2% for the same period in 2004.

In the three months ended September 30, 2005, the Company’s provision for income taxes increased $458,000 from the same period last year, from $961,000 to $1,419,000. The Company’s effective tax rate for the three months ended September 30, 2005 was 37.0%, compared to 35.8% for the same period in 2004.

The provision for income taxes for all periods presented is primarily attributable to the respective level of earnings and the incidence of allowable deductions, in particular non-taxable municipal bond income, tax credits generated from low-income housing investments, and for California franchise taxes, higher excludable interest income on loans within designated enterprise zones. In addition, the Company had a favorable tax adjustment from 2004.

Off-Balance Sheet Commitments

The following table shows the distribution of the Company’s undisbursed loan commitments and standby letters of credit at the dates indicated.

(Dollars in thousands)	September 30, 2005		December 31, 2004
Undisbursed loan commitments	$	208,739	$	173,205
Standby letters of credit		13,230		9,378
	$	221,969	$	182,583

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Asset Quality

The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and loan mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of current collateral values and to maintain an adequate allowance for loan losses at all times.

It is generally the Company's policy to discontinue interest accruals once a loan is past due for a period of ninety days as to interest or principal payments. When a loan is placed on non-accrual, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Payments received on non-accrual loans are applied against principal. A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection or all past due amounts have been collected.

Non-accrual loans amounted to $3,147,000 at September 30, 2005 and were comprised of three commercial loans totaling $1,693,000, two agricultural loans totaling $1,411,000 and one installment loan totaling $43,000. At December 31, 2004, non-accrual loans amounted to $4,907,000 and were comprised of six commercial loans totaling $4,007,000, three agricultural loans totaling $839,000 and one installment loan totaling $61,000. At September 30, 2004, non-accrual loans amounted to $871,000 and were comprised of three agricultural loans totaling $844,000 and two commercial loans totaling $27,000. The decrease in non-accrual loans at September 30, 2005 from the balance at December 31, 2004 was due to two commercial loans which the Company transferred to OREO, and four commercial loans and two agricultural loans that were paid off. In addition, the Company received payments on two agricultural loans and one commercial loan, one commercial loan was charged off. The remaining non-accrual loans, consisting of two commercial loans and one installment loan which are in the process of collection, can be attributed to relationships with two of the Company’s business customers. These loans did not require a significant increase in loan loss allowances because they were adequately collateralized. The Company’s management believes that nearly $2,746,000 of the non-accrual loans at September 30, 2005 were adequately collateralized or guaranteed by a governmental entity, and the remaining $401,000 may have some potential loss which management believes is sufficiently covered by the Company’s existing loan loss allowance. See “Allowance for Loan Losses” below for additional information. No assurance can be given that the existing or any additional collateral will be sufficient to secure full recovery of the obligations owed under these loans.

Loans 90 days past due and still accruing amounted to $69,000 at September 30, 2005. The Company had no such loans at September 30, 2004. Such loans amounted to $55,000 at December 31, 2004.

Other real estate owned is made up of property that the Company has acquired by deed in lieu of foreclosure or through normal foreclosure proceedings, and property that the Company does not hold title to but is in actual control of, known as in-substance foreclosure. The estimated fair value of the property is determined prior to transferring the balance to other real estate owned. The balance transferred to OREO is the lesser of the estimated fair market value of the property, or the book value of the loan, less estimated cost to sell. A write-down may be deemed necessary to bring the book value of the loan equal to the appraised value. Appraisals or loan officer evaluations are then done periodically thereafter charging any additional write-downs to the appropriate expense account.

OREO amounted to $1,851,000 at September 30, 2005 and was comprised of an in-substance foreclosure on an auto dealership property. The foreclosure sale on this property has been extended to November 18, 2005 from the original scheduled foreclosure sale of August 26, 2005.

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Allowance for Loan Losses

The Company’s Allowance for Loan Losses is maintained at a level believed by management to be adequate to provide for loan losses that can be reasonably anticipated. The allowance is increased by provisions charged to operating expense and reduced by net charge-offs. The Company makes credit reviews of the loan portfolio and considers current economic conditions, loan loss experience and other factors in determining the adequacy of the reserve balance. The allowance for loan losses is based on estimates and actual losses may vary from current estimates.

The following table summarizes the loan loss experience of the Company for the nine-month periods ended September 30, 2005 and 2004, and for the year ended December 31, 2004.

Analysis of the Allowance for Loan Losses

(in thousands except percentage amounts)

	Nine months ended						Year ended
	September 30,						December 31,
	2005			2004			2004
Balance at Beginning of Period	$	7,445		$	7,006		$	7,006
Provision for Loan Losses		—			207			207
Loans Charged-Off:
Commercial		(91	)		(121	)		(122	)
Agriculture		—			(214	)		(214	)
Real Estate Mortgage		—			—			—
Real Estate Construction		—			—			—
Installment Loans to Individuals		(110	)		(14	)		(46	)

Total Charged-Off		(201	)		(349	)		(382	)
Recoveries:
Commercial		—			199			199
Agriculture		663			398			399
Real Estate Mortgage		—			—			—
Real Estate Construction		—			—			—
Installment Loans to Individuals		41			14			16

Total Recoveries		704			611			614
Net Recoveries		503			262			232
Balance at End of Period	$	7,948		$	7,475		$	7,445
Ratio of Net Recoveries
To Average Loans Outstanding During the Period		0.11	%		0.07	%		0.06	%
Allowance for Loan Losses
To Total Loans (excluding Loans Held-for-Sale) at the end of the Period		1.75	%		1.79	%		1.71	%
To Non-performing Loans at the end of the Period		247.14	%		858.21	%		150.04	%

Non-performing loans totaled $3,216,000, $871,000 and $4,962,000 at September 30, 2005 and 2004 and December 31, 2004, respectively.

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Deposits

Deposits are one of the Company’s primary sources of funds. At September 30, 2005, the Company had the following deposit mix: 32.3% in savings and MMDA deposits, 20.2% in time deposits, 14.5% in interest-bearing transaction deposits and 33.0% in non-interest-bearing transaction deposits. Non-interest-bearing transaction deposits enhance the Company’s net interest income by lowering its costs of funds.

The Company obtains deposits primarily from the communities it serves. No material portion of its deposits has been obtained from or is dependent on any one person or industry. The Company accepts deposits in excess of $100,000 from customers. These deposits are priced to remain competitive.

Maturities of time certificates of deposits of $100,000 or more outstanding at September 30, 2005 and December 31, 2004 are summarized as follows:

(Dollars in thousands)	September 30, 2005		December 31, 2004
Three months or less	$	25,221	$	37,713
Over three thru twelve months		33,956		29,272
Over twelve months		2,960		4,801
Total	$	62,137	$	71,786

Liquidity and Capital Resources

In order to adequately serve our market area, the Company must maintain adequate liquidity and adequate capital. Liquidity is measured by various ratios, with the most common being the ratio of net loans to deposits (including loans held-for-sale). This ratio was 78.9% on September 30, 2005. In addition, on September 30, 2005, the Company had the following short-term investments: $90,250,000 in federal funds sold; $8,100,000 in securities due within one year; and $31,000,000 in securities due in one to five years.

To meet unanticipated funding requirements, the Company maintains short-term unsecured lines of credit with other banks totaling $20,700,000. Additionally, the Company has a line of credit with the Federal Home Loan Bank, the current borrowing capacity of which is $93,628,000.

The Company’s primary source of liquidity on a stand-alone basis is dividends from First Northern Bank (the “Bank”). Dividends from the Bank are subject to regulatory restrictions.

As of September 30, 2005, the Bank’s capital ratios exceeded applicable regulatory requirements. The following tables present the capital ratios for the Bank, compared to the standards for well-capitalized depository institutions, as of September 30, 2005 (in thousands except percentage amounts).

	Actual				Well Capitalized Ratio		Minimum
	Capital		Ratio		Requirement		Capital
Leverage	$	53,512	8.28	%	5.0	%	4.0	%
Tier 1 Risk-Based	$	53,512	10.26	%	6.0	%	4.0	%
Total Risk-Based	$	59,752	11.46	%	10.0	%	8.0	%

Return on Equity and Assets

	Nine months ended September 30, 2005		Nine months ended September 30, 2004		Year ended December 31, 2004
Annualized return on average assets	1.35	%	1.10	%	1.14	%

Annualized return on beginning core equity*	16.85	%	14.00	%	13.73	%

* Core equity consisted of $50,916,000 at December 31, 2004.

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Recent Accounting Pronouncements

Financial Accounting Standards Board (“FASB”) Statement No. 123 (revised 2004), “Share-Based Payment” (“Statement 123(R)”). Statement 123(R) addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. Statement 123(R) requires an entity to recognize the grant-date fair-value of stock options and other equity-based compensation issued to employees in the income statement. The revised Statement generally requires that an entity account for those transactions using the fair-value-based method, and eliminates an entity’s ability to account for share-based compensation transactions using the intrinsic value method of accounting in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” which was permitted under Statement 123, as originally issued.

Statement 123 (R) requires both public and non-public entities to disclose information needed about the nature of the share-based payment transactions and the effects of those transactions on the financial statements. The revised standard was to become effective for interim periods beginning after June 30, 2005 and be applied prospectively to stock options granted after the effective date and any unvested stock options at that date; however, the SEC superseded the FASB’s implementation timetable in April 2005, changing the effective date to the beginning of 2006 for calendar-year public companies. The Company does not anticipate the adoption of Statement 123(R) to have a significant impact on the consolidated financial statements; because the Company adopted the fair value recognition provisions of FASB Statement No. 148, “Accounting for Stock-Based Compensation,” an amendment of Statement No. 123, under the prospective method of adoption as of January 1, 2003.

SEC Staff Accounting Bulletin No. 107, Share-Based Payment (“SAB 107”) provides guidance that will assist issuers in their initial implementation of Statement 123(R). The SEC staff expressed its views regarding the interaction between Statement 123(R) and certain SEC rules and regulations. SAB 107 also provides the staff’s views on the valuation of share-based payment arrangements for public companies.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative disclosures about market risk as of September 30, 2005, from those presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

ITEM 4.

CONTROLS AND PROCEDURES

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2005. This conclusion is based on an evaluation conducted under the supervision and with the participation of management. Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with Securities and Exchange Commission rules and regulations.

During the quarter ended September 30, 2005, there were no changes in our internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Repurchases of Equity Securities

On April 16, 2004, the Company approved a stock repurchase program effective April 30, 2004 to replace the Company’s previous stock purchase plan that expired on April 30, 2004. The stock repurchase program, which will remain in effect until April 30, 2006, allows repurchases by the Company in an aggregate of up to 3% of the Company’s outstanding shares of common stock over each rolling twelve-month period. The Company repurchased 48,470 shares of the Company’s outstanding common stock during the quarter ended September 30, 2005. The following table details stock repurchase activity during this period:

Issuer Purchases of Equity Securities

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total Number of shares purchased as part of publicly announced plans or programs		(d) Maximum number of shares that may yet be purchased under the plans or programs
July 1 - July 31, 2005		38,190	$	23.26		38,190		57,968
August 1- August 31, 2005		400	$	23.75		400		68,694
September 1 - September 30, 2005		9,880	$	24.51		9,880		62,465
Total		48,470	$	23.52		48,470		62,465

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ITEM 6.

EXHIBITS

Exhibit
Number	Exhibits

3.1	Amended and Restated Bylaws of First Northern Community Bancorp (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 15, 2005)
31.1	Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

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

		FIRST NORTHERN COMMUNITY BANCORP


Date	November 9, 2005	by	/s/ Louise A. Walker

			Louise A. Walker, Sr. Executive Vice President / Chief Financial Officer
			(Principal Financial Officer and Duly Authorized Officer)

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FIRST NORTHERN COMMUNITY BANCORP - Quarter Report: 2005 September (Form 10-Q)

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