UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - -----------------------------------------------------------------------------
F O R M 1 0 - Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD SEPTEMBER 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-27982
FIRST NORTHERN CAPITAL CORP.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1830142
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 NORTH MONROE AVENUE
P.O. BOX 23100
GREEN BAY, WISCONSIN 54305-3100
(414) 437-7101
(Address, including Zip Code, and telephone number,
including area code, of registrant s principal executive offices)
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.
(1) YES X NO
(2) YES X NO
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK, $1.00 PAR VALUE
PER SHARE, WAS 4,381,147 AT OCTOBER 24, 1996.
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statements of Financial
Condition as of September 30, 1996
and December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations
for the Three Months Ended
September 30, 1996 and September 30, 1995. . . . . . . . . . . . . 4
Unaudited Consolidated Statements of Operations
for the Nine Months Ended
September 30, 1996 and September 30, 1995. . . . . . . . . . . . . 5
Unaudited Consolidated Statements of Cash
Flows for the Nine Months Ended
September 30, 1996 and September 30, 1995. . . . . . . . . . . . . 6
Notes to Unaudited Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . 7 -9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 10 - 22
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . .23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . .. . 24
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(In Thousands)
<S> <C> <C>
Assets
Cash $ 6,407 $ 1,192
Interest-earning deposits 148 82
-------- --------
CASH AND CASH EQUIVALENTS 6,555 1,274
Securities available-for-sale, at fair value
Investment securities 5,532 2,978
Mortgage-related securities 1,916 2,013
Securities held-to-maturity
Investment securities
(estimated fair value of $17,534 - 1996;
$19,531 - 1995) 17,581 19,364
Mortgage-related securities
(estimated fair value of $9,169 - 1996;
$4,020 - 1995) 9,402 4,024
Loans held for sale 1,113 2,989
Loans receivable 543,370 500,535
Accrued interest receivable on loans 2,796 2,702
Other accrued interest 408 372
Foreclosed properties and repossessed assets 206 136
Office properties and equipment 8,325 8,417
Federal Home Loan Bank stock 3,773 3,768
Prepaid expenses and other assets 7,000 4,895
-------- --------
$607,977 $553,467
======== ========
Liabilities
Deposits $456,124 $449,954
Securities sold under agreements to repurchase 1,000 1,000
Borrowings 64,104 20,000
Advance payments by borrowers for taxes
and insurance 10,488 6,550
Other liabilities 6,854 3,384
-------- --------
TOTAL LIABILITIES 538,570 480,888
Stockholders' Equity
Cumulative preferred stock, $1 par value;
10,000,000 shares authorized; none outstanding
Common stock, $1 par value; 30,000,000 shares
authorized; shares issued: 4,568,052 - 1996;
4,555,187 - 1995 shares outstanding:
4,381,147 - 1996; 4,555,187 - 1995 4,568 4,555
Additional paid-in capital 14,474 14,590
Unrealized gains on securities available-for-sale,
net of taxes 323 315
Treasury stock at cost (186,905 shares at
September 30, 1996) (2,949)
Retained earnings 52,991 53,119
-------- --------
TOTAL STOCKHOLDERS' EQUITY 69,407 72,579
-------- --------
$607,977 $553,467
======== ========
</TABLE>
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30
1996 1995
------- -------
(In Thousands, Except Per Share Amounts)
<S> <C> <C>
Interest income:
Mortgage loans $ 7,282 $ 6,806
Consumer loans 2,755 2,508
Investment securities 402 418
Interest-earning deposits 9 14
Mortgage-related securities 184 92
------- -------
TOTAL INTEREST INCOME 10,632 9,838
Interest expense:
Deposits 5,063 5,100
Borrowings 748 413
Advance payments by borrowers
for taxes and insurance 51 56
------- -------
TOTAL INTEREST EXPENSE 5,862 5,569
------- -------
NET INTEREST INCOME 4,770 4,269
Provision for loan losses 90 60
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,680 4,209
Non-interest income:
Fees on serviced loans 86 93
Loan fees and service charges 70 79
Deposit account service charges 251 211
Insurance commissions 60 57
Gains on sales of loans 37 41
Gains on sale of securities 3
Gain on sale of asset 10 1
Other 155 108
------- -------
TOTAL NON-INTEREST INCOME 669 593
Non-interest expense:
Compensation, payroll taxes and
other employee benefits 1,649 1,588
Federal insurance premiums 261 250
SAIF special assessment 2,856
Occupancy 208 209
Data processing 225 233
Furniture and equipment 182 180
Telephone and postage 105 97
Marketing 117 92
Reorganization costs 108
Other 470 445
------- -------
TOTAL NON-INTEREST EXPENSE 6,073 3,202
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (724) 1,600
Income taxes (333) 634
------- -------
NET INCOME (LOSS) $ (391) $ 966
======= =======
PRIMARY NET INCOME (LOSS) PER SHARE $(0.09) $0.21
====== =====
FULLY DILUTED NET INCOME (LOSS) PER SHARE $(0.09) $0.21
====== =====
CASH DIVIDENDS PAID PER SHARE $ 0.15 $0.14
====== =====
</TABLE>
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1996 1995
-------- --------
(In Thousands, Except Per Share Amounts)
Interest income:
<S> <C> <C>
Mortgage loans $21,329 $20,083
Consumer loans 7,791 7,394
Investment securities 1,174 1,208
Interest-earning deposits 54 50
Mortgage-related securities 491 282
------- -------
TOTAL INTEREST INCOME 30,839 29,017
Interest expense:
Deposits 15,200 14,411
Borrowings 1,774 1,919
Advance payments by borrowers
for taxes and insurance 96 115
------- -------
TOTAL INTEREST EXPENSE 17,070 16,445
------- -------
NET INTEREST INCOME 13,769 12,572
Provision for loan losses 210 180
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 13,559 12,392
Non-interest income:
Fees on serviced loans 266 276
Loan fees and service charges 175 173
Deposit account service charges 665 599
Insurance commissions 219 212
Gains on sales of loans 190 550
Gains on sale of securities 321
Gain on sale of asset 29 162
Other 389 281
------- -------
TOTAL NON-INTEREST INCOME 1,933 2,574
Non-interest expense:
Compensation, payroll taxes and
other employee benefits 5,017 4,769
Federal insurance premiums 781 739
SAIF special assessment 2,856
Occupancy 653 646
Data processing 693 681
Furniture and equipment 564 550
Telephone and postage 339 320
Marketing 274 242
Reorganization costs 108
Other 1,504 1,446
------- --------
TOTAL NON-INTEREST EXPENSE 12,681 9,501
------- --------
INCOME BEFORE INCOME TAXES 2,811 5,465
Income taxes 932 2,044
------- --------
NET INCOME $ 1,879 $ 3,421
======= ========
PRIMARY NET INCOME PER SHARE $0.41 $0.74
===== =====
FULLY DILUTED NET INCOME PER SHARE $0.41 $0.73
===== =====
CASH DIVIDENDS PAID PER SHARE $0.45 $0.42
===== =====
</TABLE>
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Operating Activities
Net income $ 1,879 $ 3,421
Adjustments to reconcile net income
to cash provided by operating activities:
Provision for losses on loans and real estate 210 180
Provision for depreciation and amortization 563 547
Gains on sales of loans (190) (550)
Gain on sale of securities (321)
Loans originated for sale (9,519) (7,612)
Proceeds from loan sales 11,395 15,906
(Increase) decrease in interest receivable (130) 124
Increase in interest payable 301 604
Other 1,636 414
------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,145 12,713
------- --------
Investing Activities
Proceeds from maturities of investment
securities and interest-earning deposits 9,150 5,730
Proceeds from sale of securities 156
Purchases of investment securities (9,761) (6,000)
Principal repayments of
mortgage-related securities 392 307
Purchase of mortgage-related securities (5,697)
Loan originations and purchases (135,715) (93,347)
Loan principal repayments 92,448 78,268
Purchases of office properties and equipment (471) (615)
Purchase of Federal Home Loan Bank stock (5) (278)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (49,659) (15,779)
-------- --------
Financing Activities
Net increase in deposits 5,869 21,543
Net increase (decrease) in
short-term borrowings 27,704 (34,290)
Proceeds from long term borrowings 29,400 32,000
Repayments of long term borrowings (13,000) (15,000)
Maturity of security sold under
agreement to repurchase (500)
Cash dividends (2,007) (1,897)
Purchase of treasury stock (3,614)
Retirement of common stock (66)
Proceeds from exercise of stock options 571 409
Net increase in advance payments by
borrowers for taxes and insurance 3,938 5,178
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 48,795 7,443
--------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 5,281 4,377
Cash and cash equivalents at beginning of period 1,274 2,644
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,555 $ 7,021
========= ========
Supplemental Information to the Statement of Cash Flows:
Interest credited and paid on deposits $14,987 $13,921
Interest paid on borrowings 2,106 1,982
Payments for federal and state income taxes 2,193 2,199
Loans transferred to foreclosed properties
and repossessed assets 359 357
Loans held for investment transferred
to held-for-sale 11,152
</TABLE>
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
(1) On December 20, 1995, First Northern Savings Bank, S.A., a Wisconsin
chartered capital stock association, reorganized into a unitary savings
and loan holding company structure (the "Reorganization") becoming a
wholly-owned subsidiary of First Northern Capital Corp. (the "Company"
or "First Northern"). At that date, each outstanding share of First
Northern Savings Bank's common stock was converted into one share of the
Company's common stock. Consequently, the former holders of all the
outstanding stock of First Northern Savings Bank, S.A. acquired the same
proportionate ownership interest in First Northern as they had held in
First Northern Savings Bank. The consolidated capitalization, assets,
liabilities, income and other financial data of First Northern immediately
following the Reorganization were substantially the same as those of
First Northern Savings Bank immediately prior to consummation of the
Reorganization.
The consolidated financial statements include the accounts of First
Northern and its wholly-owned subsidiary First Northern Savings Bank, S.A.
and its subsidiaries (collectively, the "Savings Bank"): Great Northern
Financial Services Corporation ("GNFSC"), First Northern Investments
Incorporated ("FNII"), Keystone Financial Services, Incorporated
("Keystone") and First Northern Financial Services, Incorporated.
All significant intercompany balances and transactions have been
eliminated according to generally accepted accounting principles. The
Savings Bank's ownership of Savings Financial Corporation ("SFC"),
a 50% owned subsidiary, is accounted for by the equity method. All data
presented in this report for dates and periods prior to December 20, 1995
relates to the Savings Bank. All references herein to First Northern for
any date or period prior to consummation of the Reorganization shall be
deemed to refer to the Savings Bank.
(2) The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information, Rule 10-01 of Regulation S-X and the instructions
to Form 10-Q. The financial statements do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial information. In the opinion of First
Northern, the accompanying Unaudited Consolidated Statements of Financial
Condition, Unaudited Consolidated Statements of Income and Unaudited
Consolidated Statements of Cash Flows contain all adjustments, which are
of a normal recurring nature, necessary to present fairly the consolidated
financial position of the Company and Subsidiary at September 30, 1996 and
December 31, 1995, the results of their operations for the three and nine
months ended September 30, 1996 and 1995 and their cash flows for the nine
months ended September 30, 1996 and 1995. The accompanying Unaudited
Consolidated Financial Statements and related notes should be read in
conjunction with First Northern's 1995 Annual Report to Stockholders.
(3) Effective January 1, 1996, First Northern adopted Statement of Financial
Accounting Standards ( SFAS ) No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 requires recognition of a separate asset for
servicing rights, relative to loans sold with servicing rights retained,
which increased the gain on the sale of loans $20,000 in the third quarter
of 1996 and $82,000 in the first nine months of 1996. Previously, costs
were fully allocated to the loan and servicing income was recognized as it
was received over the life of the loan. Based upon current fair values,
capitalized mortgage servicing rights are reviewed periodically for
impairment, which is recognized in the Statement of Income during the
period in which impairment occurs by establishing a corresponding
valuation allowance. No valuation allowances for originated mortgage
servicing rights were established as of or during the nine months in the
period ending September 30, 1996.
<PAGE>
(4) Securities Available-for-Sale
The amortized cost and estimated fair values of securities available-for
-sale are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- ------------
(In Thousands)
At September 30, 1996:
<S> <C> <C> <C> <C>
Asset Management Funds $ 469 $ 6 $ 463
Federal Home Loan Mortgage
Corporation stock 33 $553 26 586
U.S. government and
agency securities 4,494 15 4,483
------ ---- --- ------
4,996 568 32 5,532
Mortgage-related securities 1,914 3 1 1,916
------ ---- --- ------
$6,910 $571 $33 $7,448
====== ==== === ======
At December 31, 1995:
Asset Management Funds $ 449 $ 6 $ 455
Federal Home Loan Mortgage
Corporation stock 33 468 501
U.S. government and
agency securities 2,002 20 2,022
------ ---- ---- ------
2,484 494 2,978
Mortgage-related securities 1,987 26 2,013
------ ---- ---- ------
$4,471 $520 $ - $4,991
====== ==== ==== ======
</TABLE>
(5) Investment Securities Held-to-Maturity
The amortized cost and estimated fair values of investment securities
held-to-maturity, which consist of U.S. government and agency securities,
are as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
--------- ---------- ---------- -----------
(In Thousands)
At September 30, 1996 $17,581 $59 $106 $17,534
======= === ==== =======
At December 31, 1995 $19,364 $190 $23 $19,531
======= ==== === =======
At September 30, 1996, these investment securities have the following
maturities:
Amortized Estimated
Cost Fair Value
--------- -----------
(In Thousands)
Due in one year or less $ 5,800 $ 5,806
Due after one year through 5 years 11,781 11,728
------- -------
$17,581 $17,534
======= =======
(6) Mortgage-Related Securities Held-to-Maturity
The amortized cost and estimated fair values of mortgage-related securities
held-to-maturity are as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
-------- ---------- ---------- ---------
(In Thousands)
At September 30, 1996:
Federal Home Loan Mortgage
Corporation $5,674 $37 $161 $5,550
Federal National Mortgage
Association 3,728 1 110 3,619
------ --- ---- ------
$9,402 $38 $271 $9,169
====== === ==== ======
At December 31, 1995:
Federal Home Loan Mortgage
Corporation $3,019 $53 $25 $3,047
Federal National Mortgage
Association 998 32 966
Other 7 7
------ --- --- ------
$4,024 $53 $57 $4,020
====== === === ======
(7) Loans Receivable
Loans receivable consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
------------ -----------
(In Thousands)
First mortgage loans:
<S> <C> <C>
One to four family residential $369,380 $352,449
Five or more family residential 20,024 17,591
Commercial real estate 9,780 10,028
Construction-residential 20,247 10,782
Construction-commercial 2,502 1,225
Other 1,857 1,788
-------- --------
423,790 393,863
Consumer loans:
Consumer 19,118 20,307
Second mortgage 57,114 46,528
Automobile 57,697 49,504
-------- --------
133,929 116,339
-------- --------
557,719 510,202
Less:
Undisbursed loan proceeds 10,525 6,071
Allowance for losses 2,779 2,608
Unearned loan fees 1,045 988
-------- --------
14,349 9,667
-------- --------
$543,370 $500,535
======== ========
</TABLE>
(8) The weighted average number of shares outstanding, including common stock
equivalents, for the three months ended September 30, 1996 and 1995 were
4,496,000 and 4,651,000, respectively, and for the nine months ended
September 30, 1996 and 1995 were 4,587,000 and 4,625,000, respectively.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
BALANCE SHEET
CASH AND CASH EQUIVALENTS. Cash and cash equivalents were $5.3 million greater
at September 30, 1996 as compared to December 31, 1995, primarily as the result
of customer deposits made to demand deposit accounts. Any cash that is not
immediately needed to fund loans or operations is invested in overnight
interest-earning deposits.
SECURITIES AVAILABLE-FOR-SALE. Securities available-for-sale increased
approximately $2.5 million as of September 30, 1996 as compared to December 31,
1995, primarily as the result of purchases of U.S. Government and agency
securities.
SECURITIES HELD-TO-MATURITY. Investment securities held-to-maturity decreased
$1.8 million primarily as a result of investment maturities and the
reinvestment of those maturing investments in mortgage-related securities
held-to-maturity.
Mortgage-related securities held-to-maturity increased $5.4 million as a result
of the reinvestment of maturing investment securities and the investment of
borrowed money into mortgage-related securities. If the interest rate paid on
a borrowing is less than an interest rate received on an investment, First
Northern will borrow and reinvest those dollars in an investment, thereby
incrementally adding to the overall profitability of the Company.
LOANS HELD FOR SALE. At September 30, 1996, First Northern had $1.1 million of
fixed interest rate mortgage and education loans classified as loans held for
sale. At December 31, 1995, First Northern had $2.4 million of education loans
and $0.6 million of fixed interest rate mortgage loans classified as loans held
for sale.
LOANS RECEIVABLE. Loans receivable increased $42.8 million as a result of
increased one-to four-family and five or more residential mortgage loan
originations and SFC automobile loans. Loan originations are as follows.
LOAN ORIGINATIONS AND PURCHASES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
-------- -------- -------- --------
(In Thousands) (In Thousands)
Mortgage loans originated and purchased:
<S> <C> <C> <C> <C>
Construction $ 8,112 $ 5,390 $ 23,390 $ 11,156
Loans on existing property 15,571 9,306 36,789 30,628
Refinancing 5,639 5,393 28,209 9,046
Other loans 998 454 2,394 986
------- ------- -------- -------
Total mortgage loans originated
and purchased 30,320 20,543 90,782 51,816
------- ------- -------- --------
Consumer loans originated and purchased:
Consumer 1,720 2,390 6,408 7,696
Second mortgage 9,268 8,742 25,157 23,529
Automobile 17,242 4,977 33,953 20,928
Education 967 938 1,715 2,008
Total consumer loans originated ------- ------- -------- --------
and purchased 29,197 17,047 67,233 54,161
------- ------- -------- --------
Total loans originated and purchased $59,517 $37,590 $158,015 $105,977
======= ======= ======== ========
</TABLE>
<PAGE>
Mortgage loan originations for the third quarter of 1996 and the nine months
ended September 30, 1996, increased as compared to the same periods in 1995
primarily as the result of the favorable economy in First Northern's market
areas and favorable market interest rates. First Northern anticipates that the
dollar amount of mortgage loan originations will decrease in the fourth quarter
of 1996 as a result of normal decreased home buying as winter approaches.
First Northern sold $2.0 million of fixed interest rate mortgage loans in the
third quarter of 1996 and $8.3 million in the first nine months of 1996 as
compared to $3.0 million and $5.4 million for the same periods in 1995,
respectively. First Northern retains all interest rate adjustable mortgage
loan originations in its portfolio; whereas, most fixed interest rate mortgage
loan originations are sold in the secondary market. In addition, $3.1 million
of education loans were sold in the nine months ended September 30, 1996. In
1995, First Northern's management contractually committed to sell its existing
education loan portfolio and to sell its ongoing education loan originations.
Consumer loan originations and purchases increased in the third quarter of 1996
as compared to the third quarter of 1995 primarily as a result of an increase
in automobile loan originations in the Savings Bank's jointly owned subsidiary,
FC. SFC automobile loan originations increased as a result of developing new
business relationships with automobile dealers throughout the state of
Wisconsin. SFC has and is actively seeking new opportunities in Northeastern
Wisconsin to increase its loan production. Consumer loan originations and
purchases increased for the nine months ended September 30, 1996 as compared
to the same period in 1995 as a result of increased SFC loan originations and
second mortgage loan originations. First Northern has actively promoted second
mortgage loans by establishing a reduced introductory interest rate and
increasing its direct mail and newspaper advertising.
DEPOSITS. Deposits increased $6.2 million for the first nine months of 1996
as a result of offering competitive interest rates. Deposits were acquired to
fund the loan originations and overall operations.
BORROWINGS. Federal Home Loan Bank ("FHLB") borrowings increased $44.1 million
in the first nine months of 1996, primarily to fund the loan originations and
to purchase investment securities. First Northern will borrow monies if the
borrowing interest rate is a less costly form of funding for loans and
investments than acquiring deposits. At September 30, 1996, $36.4 million are
fixed interest rate borrowings and $27.7 million are overnight borrowings.
First Northern anticipates that it will continue to utilize borrowings
throughout 1996 if it incrementally adds to the overall profitability of the
Company.
ADVANCE PAYMENTS BY BORROWERS FOR TAXES AND INSURANCE. Advance payments by
borrowers for taxes and insurance ("escrow") increased $3.9 million at
September 30, 1996 as compared to December 31, 1995. The increase in escrow
dollars was the result of mortgage customers accumulating escrow dollars for
the payment of their real estate taxes and the increased number of mortgage
loans with escrow accounts. The increase is less than previous years increases
as a result of the new Housing and Urban Development ("HUD") ruling that
escrowed monies must be aggregated when analyzing the proper dollar amount of
escrow dollars required. This new HUD ruling effectively reduced the escrow
dollars needed by mortgage loan customers.
STOCKHOLDERS' EQUITY. First Northern paid a cash dividend of $0.15 per share
on August 15, 1996 to stockholders of record on August 1, 1996. This increase
of $0.01 per share represents a 7.1% increase over the third quarter of 1995
cash dividend of $0.14 per share.
On March 20, 1996, First Northern approved a stock repurchase program to
repurchase 228,467 shares (5% of total shares outstanding) through the open
market. These repurchased shares will be used to satisfy exercises of stock
options. At September 30, 1996, the entire 228,467 shares had been purchased
at an average price of $15.82 per share or a total of $3.6 million and 41,562
of such shares have been issued for exercised stock options.
On October 18, 1996, First Northern approved a second stock repurchase program
to purchase 219,057 shares (5% of total shares outstanding at October 18, 1996)
through the open market. The repurchased shares from the second stock
repurchase program will become treasury shares and are expected to be used for
general operations.
ASSET QUALITY
First Northern currently classifies any loan on which a payment is 90 days or
more past due as non-performing. The following table summarizes non-
performing loans and assets:
NON-PERFORMING LOANS AND ASSETS
<TABLE>
<CAPTION>
At September 30 At December 31
1996 1995
----------------- ----------------
(Dollars in Thousands)
<S> <C> <C>
Non-accrual mortgage loans $367 $266
Non-accrual consumer loans 147 152
---- ----
Total non-performing loans 514 418
Properties subject to foreclosure 191 113
Foreclosed properties and
repossessed assets 31 23
---- ----
Total non-performing assets $736 $554
==== ====
Non-performing loans as a percent
total loans .09% .08%
=== ===
Non-performing assets as a percent
of total assets .12% .10%
=== ===
</TABLE>
Total non-performing loans increased as of September 30, 1996 as compared to
December 31, 1995. Management believes non-performing loans and assets,
expressed as a percentage of total loans and assets, remain far below state and
national averages. There are no accruing material loans known to management at
September 30, 1996, that are expected to become non-performing or contain
potential losses.
In addition, management believes that the allowances for losses on loans are
adequate. While management uses available information to recognize losses on
loans and real estate owned, future additions to the allowances may be
necessary based on changes in economic conditions. Furthermore, various
regulatory agencies, as an integral part of their examination process,
periodically review First Northern's allowances for losses on loans and real
estate owned. Such agencies may require First Northern to recognize additions
to the allowances based on their judgments of information available to them
at the time of their examination.
<PAGE>
Summary of the allowance for losses is shown below.
<TABLE>
<CAPTION>
LOAN LOSS ALLOWANCES
At and for the At and for the
Nine Months Ended Year Ended
September 30, 1996 December 31, 1995
---------------------------------------
(Dollars in Thousands)
Mortgage Loans:
<S> <C> <C>
Balance at the beginning of the period $1,578 $1,499
Provisions for the period 10 79
Transfer of loss reserve (136)
------ ------
Balance at the end of the period 1,452 1,578
Consumer Loans:
Balance at the beginning of the period 1,030 901
Provisions for the period 200 161
Transfer of loss reserve 136
Charge-offs
Consumer (15) (30)
Automobile (42) (41)
Recoveries
Consumer 8 21
Automobile 10 18
------ ------
Balance at the end of the period 1,327 1,030
------ ------
Total loan loss allowances at the
end of the period $2,779 $2,608
====== ======
Allowance as a percent of total loans .51% .52%
=== ===
Allowance as a percent of non-performing loans 540.66% 623.92%
====== ======
Allowance as a percent of total assets .46% .47%
=== ===
Allowance as a percent of non-performing assets 377.58% 470.76%
====== ======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
AVERAGE BALANCE SHEET AND YIELD/RATE ANALYSIS
The following table presents, for the periods indicated, the total dollar
amount of interest income from average interest-earning assets, the resultant
yields, and the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates. No tax equivalent adjustments were made.
Average balances are derived from average daily balances. The yields and rates
are established by dividing income or expense dollars by the average balance of
the asset or liability. The yields and rates for the nine months ended
September 30, 1996 and 1995 have been annualized.
<TABLE>
<CAPTION>
Nine Months Ended September 30
1996 1995
-------------------------------------------------
Interest Interest
Average Earned/ Yield/ Average Earned/ Yield/
Balance Paid Rate Balance Paid Rate
-------- -------- ------ -------- ------- ------
(Dollars In Thousands)
Interest-earning assets (1):
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans $396,767 $21,329 7.17% $385,616 $20,083 6.94%
Consumer loans 122,042 7,791 8.51 117,653 7,394 8.38
Investment securities (2) 24,992 1,174 6.26 24,858 1,208 6.48
Interest-earning deposits 1,355 54 5.31 1,148 50 5.81
Mortgage-related
securities (2) 10,048 491 6.52 5,321 282 7.07
-------- ------- ---- ------- ------- ----
TOTAL 555,204 30,839 7.41 534,596 29,017 7.24
Interest-bearing liabilities:
Passbook accounts 58,696 988 2.24 61,057 1,152 2.52
NOW and variable rate
insured money
market accounts 101,443 1,768 2.32 82,026 1,320 2.15
Time deposits 292,462 12,444 5.67 291,594 11,939 5.46
Advance payments by
borrowers for taxes
and insurance 5,691 96 2.25 7,020 115 2.18
Borrowings 41,093 1,774 5.76 37,563 1,919 6.81
-------- ------- ---- -------- ------- ----
TOTAL 499,385 17,070 4.56 479,260 16,445 4.58
-------- ------- ---- -------- ------- ----
Net interest-earning assets
balance and interest
rate spread $ 55,819 2.85% $ 55,336 2.66%
======== ==== ======== ====
Average interest-earning
assets, net interest
income and net yield
on average interest-
earning assets $555,204 $13,769 3.31% $534,596 $12,572 3.14%
======== ======= ==== ======== ======= ====
Average interest-earning
assets
to interest-bearing
liabilities 111.2% 111.5%
===== =====
</TABLE>
(1) For the purpose of these computations, non-accruing loans are included in
the average loan amounts outstanding.
(2) For the purpose of these computations, the available-for-sale investment
securities and mortgage-related securities are presented and yields
calculated based upon the historical cost basis.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
1995
------------------------------
Interest
Average Earned/ Yield/
Balance Paid Rate
-------- -------- ------
(Dollars In Thousands)
Interest-earning assets (1):
<S> <C> <C> <C>
Mortgage loans $386,128 $26,982 6.99%
Consumer loans 117,899 9,948 8.44
Investment securities (2) 24,865 1,612 6.48
Interest-earning deposits 1,601 100 6.25
Mortgage-related securities (2) 5,428 383 7.06
-------- ------- ----
TOTAL 535,921 39,025 7.28
Interest-bearing liabilities:
Passbook accounts 60,367 1,498 2.48
NOW and variable rate insured
money market accounts 85,234 1,884 2.21
Time deposits 292,248 16,190 5.54
Advance payments by borrowers
for taxes and insurance 8,528 178 2.09
Borrowings 33,681 2,286 6.79
--------- -------- ----
TOTAL 480,058 22,036 4.59
--------- -------- ----
Net interest-earning assets
balance and interest
rate spread $ 55,863 2.69%
========= ====
Average interest-earning
assets, net interest income
and net yield on average
interest-earning assets $535,921 $16,989 3.17%
======== ======= ====
Average interest-earning assets
to interest-bearing liabilities 111.60%
======
</TABLE>
(1) For the purpose of these computations, non-accruing loans are included
in the average loan amounts outstanding.
(2) For the purpose of these computations, the available-for-sale investment
securities and mortgage-related securities are presented and yields
calculated based upon the historical cost basis.
<PAGE>
RATE VOLUME ANALYSIS OF NET INTEREST INCOME
The interaction of changes in volume and rates earned or paid with regard to
interest-earning assets and interest-bearing liabilities have a significant
impact on net income between periods. The volume of interest-earning dollars
in loans and investments compared to the volume of interest-bearing dollars in
deposits and borrowings combined with the interest rate spread produces the
changes in net interest income between periods.
The following table sets forth the relative contribution of changes in volume
and effective interest rates on changes in net interest income for the
periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended September 30
1996 vs 1995
Increase(decrease) due to:
-------------------------------------
(In Thousands)
Rate/
Rate Volume Volume Total
------ ------ ------ -----
Interest-earning assets:
<S> <C> <C> <C> <C>
Mortgage loans $647 $ 580 $ 19 $1,246
Consumer loans 115 278 4 397
Investment securities (41) 7 (34)
Interest-earning deposits (4) 9 (1) 4
Mortgage-related securities (22) 250 (19) 209
---- ------ ---- ------
TOTAL $695 $1,124 $ 3 1,822
==== ====== ==== ------
Interest-bearing liabilities:
Passbook accounts $(124) $(45) $ 5 (164)
NOW and variable rate
insured money market accounts 105 318 25 448
Time deposits 463 41 1 505
Advance payments by borrowers
for taxes and insurance 4 (22) (1) (19)
Borrowings (296) 179 (28) (145)
----- ---- ---- ------
TOTAL $ 152 $471 $ 2 625
===== ==== ==== ------
Net change in net interest
income $1,197
</TABLE>
======
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
1995 vs 1994
Increase(decrease) due to:
-------------------------------------
(In Thousands)
Rate/
Rate Volume Volume Total
------ -------- -------- -------
Interest-earning assets:
<S> <C> <C> <C> <C>
Mortgage loans $ 293 $ 1,379 $ 16 $ 1,688
Consumer loans 518 1,301 84 1,903
Investment securities 21 96 1 118
Interest-earning deposits 64 (80) (34) (50)
Mortgage-related securities 9 (51) (1) (43)
------ ------- ------ -------
TOTAL $ 905 $ 2,645 $ 66 3,616
====== ======= ====== -------
Interest-bearing liabilities:
Passbook accounts $ (21) $ (218) $ 3 (236)
NOW and variable rate
insured money market accounts 371 96 26 493
Time deposits 2,353 998 186 3,537
Advance payments by borrowers
for taxes and insurance (15) 7 (1) (9)
Borrowings 286 841 270 1,397
------ ------ ------ -------
TOTAL $2,974 $1,724 $ 484 5,182
====== ====== ====== -------
Net change in net interest
income $ (1,566)
========
</TABLE>
<PAGE>
STATEMENTS OF INCOME
GENERAL. The net loss for the third quarter of 1996 was the result of a one-
time special Savings Association Insurance Fund ("SAIF") assessment of
$1,733,000 after-tax ($2,856,000 pre-tax) or $.39 per share. 1996 third
quarter net income, excluding the SAIF special assessment, would have been
$1,342,000 or $.30 per share.
INTEREST INCOME. Interest income on mortgage loans increased $476,000 in the
third quarter of 1996 and $1,246,000 in the first nine months of 1996 as
compared to the same periods in 1995 as a result of the increased dollar amount
of mortgage loans outstanding and the increased yield on the mortgage loan
portfolio.
Interest income on consumer loans increased $247,000 for the three months ended
September 30, 1996 and $397,000 for the nine months ended September 30, 1996 as
compared to the same periods in 1995 as a result of increased dollar amount
of consumer loans outstanding and the increased yield on the consumer loan
portfolio (See Balance Sheet -- Loans Receivable).
Interest income on investment securities decreased $16,000 in the third quarter
of 1996 and $34,000 for the nine months ended September 30, 1996 as compared
to the same periods of 1995 as a result of a decrease in the yield earned on
investments. As investment securities matured they were reinvested in
investment securities at reduced interest rates.
Interest income on mortgage-related securities increased $92,000 in the third
quarter of 1996 as compared to the third quarter of 1995 and $209,000 for the
nine months ended September 30, 1996 as compared to the same period in 1995.
The increase for the third quarter and first nine months of 1996 was the result
of additional dollars invested in mortgage-related securities. Historically,
mortgage-related securities have higher rates of return than like term U.S.
Government and Agency securities.
INTEREST EXPENSE. Interest expense on deposits decreased $37,000 in the third
quarter of 1996 and increased $789,000 for the first nine months of 1996 as
compared to the same periods in 1995. The third quarter decrease was the
result of a decrease in the cost of deposits (4.42% at June 30, 1996 versus
4.35% at September 30, 1996). The increase for the nine months ended
September 30, 1996 was the result of the $10.2 million growth in the deposit
portfolio. To capture new deposits and aid in controlling the increases in the
cost of deposits, First Northern continues to utilize non-traditional terms on
certificates of deposits (i.e., 10 month, 14 month) and the Daily Advantage
account. The Daily Advantage account s interest rate is determined weekly and
consumers are allowed to make daily deposits and withdrawals.
Interest expense on borrowings increased $335,000 in the third quarter of 1996
and decreased $145,000 for the first nine months of 1996 as compared to the
same periods in 1995. The third quarter of 1996 borrowing expense increased
as a result of the increased dollar amount of borrowings outstanding (See
Balance Sheet -- Borrowings). Borrowing interest expense decreased for the
nine months as a result of the reduced cost of borrowing. In the third
quarter of 1996, borrowing increased $21.5 million primarily as the result of
the $26.5 million increase in the loan portfolio versus the $.7 million
increase in the deposit portfolio. First Northern anticipates it will
continue to borrow in the fourth quarter of 1996 to fund anticipated loan
demand.
PROVISION FOR LOAN LOSSES. First Northern increased its provision for loan
losses in the third quarter of 1996 and the first nine months of 1996 as a
result of the growth in the loan portfolio. The loan loss allowance as of
September 30, 1996 was $2,779,000 or .51% of total loans and 540.66% of non-
performing loans.
Management believes that the current loan loss allowance is adequate; however,
the adequacy of the loan loss allowance is reviewed as historical loan loss
experience changes, the size and composition of the loan portfolio changes,
changes occur in the general economy and as may otherwise be deemed necessary.
NON-INTEREST INCOME. Fees on serviced loans decreased in the third quarter
of 1996 and the nine months ended September 30, 1996 as a result of reduced
servicing fee percentage earned on loans sold. Servicing fees on loans sold,
prior to 1995, ranges primarily between .25% to .375% however, after 1995 the
servicing fees have been .25%. Therefore as the .375% servicing fee loans are
replaced by loans with the .25% servicing fees, servicing fees may continue
to decrease. In addition, servicing fees will be reduced by the amortization
of originated mortgage servicing rights.
Deposit account service charges increased $40,000 and $66,000 in the third
quarter of 1996 and for the nine months ended September 30, 1996, respectively.
The increases for both periods are primarily the result of increased NOW
(checking) accounts outstanding and their related fees. The Company continues
to aggressively market and price checking accounts as it believes it is the
product to further develop banking relationships with customers.
During the third quarter of 1996 and the nine months ended September 30, 1996,
gains on the sale of loans were positively impacted by the adoption of SFAS
No. 122 "Accounting for Mortgage Servicing Rights" which contributed $20,000
and $82,000, respectively, to the gains on the sale of loans.
(See Notes to Unaudited Financial Statements). First Northern sold $2.0
million and $8.3 million of mortgage loans in the third quarter of 1996 and
the first nine months of 1996, respectively.
In 1995, the gain on the sale of loans was primarily the result of $10.5
million of student loans sold which produced a gain of $459,000. (See Balance
Sheet--Loans Receivable)
In the second quarter of 1995, First Northern sold 5,296 shares of Federal
Home Loan Mortgage Corporation ("Freddie Mac") stock resulting in a gain on
the sale of securities of $318,000.
First Northern sold a branch office building in the first quarter of 1995,
whose operations were combined with another First Northern branch office in
1994, for a gain on the office building sale of $149,000. The offices were
combined in 1994 as a result of the Prime Federal acquisition.
Other non-interest income increased $47,000 for three months ended September
30, 1996 and $108,000 for the nine months ended September 30, 1996, as
compared to the same periods in 1995 primarily as a result of brokerage income
from GNFSC and interest income on life insurance policies owned by First
Northern.
NON-INTEREST EXPENSE. Compensation expense increased $61,000 in the third
quarter of 1996 and $248,000 for the nine months ended September 30, 1996 as
a result of salary increases, additional training and accruals associated with
a management incentive plan. First Northern has continued its emphasis on
employee education, which will assist in improving customer service. The
management incentive plan accruals are increased over 1995 as a result of
improved earning performance and are dependent upon annual pre-determined
core earnings goals.
On September 30, 1996, an omnibus appropriations bill was signed into law.
Title II of the act, know as the Economic Growth and Regulatory Paperwork
Reduction Act of 1996, provided for the recapitalization of the Savings
Association Insurance Fund ("SAIF") through a one time special assessment of
65.7 basis points per $100 of assessable deposits on all SAIF insured
institutions, including First Northern. First Northern's special assessment
is $2,856,000, on a pre-tax basis and $1,733,000 or $.39 per share after giving
effect to the tax deductibility of the assessment. Although the special
assessment is to be paid by First Northern on November 27, 1996, the
assessment is treated, in accordance with the provisions of the law, as a third
quarter 1996 expense. Because of the recapitalization of SAIF through the one
time special assessment, it is expected that the fourth quarter 1996 SAIF
insurance premiums will be reduced from 1995 and the first three quarters of
1996 levels. First Northern estimates that a reduction will result in a
savings of approximately $54,000 in the fourth quarter of 1996, as compared
to the deposit insurance premium paid by it in the fourth quarter of 1995.
First Northern estimates that SAIF premiums will be further reduced in 1997
resulting in approximately a $450,000 after-tax ($.10 per share) reduction in
the insurance premiums as compared to the premiums paid by it in 1996.
(See -- Recent Federal Legislation).
Data processing expense decreased $8,000 in the third quarter of 1996 and
increased $12,000 for the nine months ended September 30, 1996 as compared to
the same period in 1995. The decrease in the third quarter of 1996 was the
result of the initial expenses in 1995 that were associated with the
implementation of a Wide Area Network ("WAN"). The increase, for the nine
months ended September 30, 1996, was the result of continued expenses
associated with the WAN. The WAN was installed to accommodate a new personal
computer ("PC") based teller system, which will begin to be installed in the
fourth quarter of 1996.
Furniture and equipment expense increased $2,000 and $14,000 for the three
and nine months ended September 30, 1996, respectively, as a result of
purchasing additional PC s, WAN equipment and other office equipment.
Marketing expense increased $25,000 in the third quarter of 1996 and $32,000
for the nine months ended September 30, 1996, as compared to the same periods
in 1995 as a result of increased emphasis by management to advertise and
market First Northern's products.
Reorganization costs in the third quarter of 1995 amounted to $108,000, a
majority of which is non-tax deductible. The one-time costs were incurred in
connection with First Northern s December 20, 1995, formation of a holding
company (First Northern Capital Corp.).
Other expenses increased for the three and nine months ended September 30,
1996, as compared to the same periods in 1995 primarily as a result of costs
associated with NOW accounts, SFC operating expenses, loan promotions and
electronic fund transfer usage.
INCOME TAXES. The effective income tax rate for the first nine months of
1996 was 33.2% as compared to 37.4% for the same period in 1995. The 1996
effective income tax rate was lower than 1995 primarily as a result of the
SAIF assessment.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Federal regulations historically have required First Northern Savings Bank,
S.A. to maintain minimum levels of liquid assets. The required percentage
has varied from time to time based upon economic conditions and savings flows,
and is currently 5% of net withdrawable deposits and borrowings payable on
demand or in one year or less during the preceding calendar month. Liquid
assets for purposes of this ratio include cash, certain time deposits, U.S.
Government and agency securities and other obligations generally having
remaining maturities of less than five years. First Northern Savings Bank,
S.A. has historically maintained its liquidity ratio at a level in excess of
that required by the OTS. First Northern Savings Bank, S.A. monthly average
short-term liquidity and total liquidity ratio at September 30, 1996 was 3.00%
and 6.07%, respectively, as compared to 4.62% and 6.90%, respectively, at
December 31, 1995. The September 30, 1996 liquidity ratios decreased as
compared to the ratios at December 31, 1995 as a result of the purchase of
mortgage-related securities, which are not a part of the liquidity percentage
calculation and the funding of the loan portfolio. First Northern Savings
Bank, S.A. believes that its maintenance of excess liquidity, above the 5%
federally required total liquidity ratio, is an appropriate strategy to aid in
proper asset and liability management.
Liquidity management is both a daily and long-term responsibility of
management. First Northern Savings Bank, S.A. adjusts its investments in
liquid assets based upon managements' assessment of: (i)expected loan demand;
(ii) expected deposit flows; (iii) yields available on interest-earning
deposits; and (iv) the objectives of its asset and liability management
program. Excess liquidity is invested generally in interest-earning overnight
deposits and other short-term government and agency obligations. When First
Northern Savings Bank, S.A. requires funds beyond its ability to generate them
internally, it can borrow funds from the FHLB of Chicago or other sources.
CAPITAL RESOURCES AND REGULATORY INFORMATION
First Northern's net worth to total assets ratio at September 30, 1996 for
State of Wisconsin regulatory requirements was 11.87% or almost two times the
Wisconsin minimum legal requirement of 6.00% of total assets established by
the Division of Savings Institutions of the Department of Financial
Institutions, which regulates First Northern. The OTS adopted capital
regulations for savings institutions effective December 7, 1989. The capital
rules require savings associations to meet three separate capital standards:
(i)Tangible capital equal to 1.5% of adjusted total assets; (ii) Core capital
equal to 3% of adjusted total assets; and (iii) Risk-based capital equal to
8.0% of the value of risk weighted assets.
The following table illustrates the federal and state requirements and the
excess regulatory capital that the Savings Bank and First Northern (as to
Wisconsin capital) has over regulatory requirements.
TABLE OF CAPITAL (NET WORTH) REQUIREMENTS
(Dollars in thousands)
At September 30, 1996
<TABLE>
<CAPTION>
TANGIBLE CORE RISK-BASED WISCONSIN
CAPITAL CAPITAL CAPITAL CAPITAL
-------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Savings Bank's regulatory capital $67,230 $67,230 $70,009 $72,186
Required regulatory capital 9,083 18,166 29,867 36,479
------- ------- ------- -------
Excess capital $58,147 $49,064 $40,142 $35,707
======= ======= ======= =======
Savings Bank's regulatory ratios 11.11% 11.11% 18.75% 11.87%
Required regulatory ratios 1.50 3.00 8.00 6.00
----- ----- ----- -----
Excess capital ratios 9.61% 8.11% 10.75% 5.87%
===== ===== ===== =====
</TABLE>
<PAGE>
RECENT FEDERAL LEGISLATION
In August 1996, the Small Business Job Protection Act of 1996 was signed into
law which contained a bad debt relief provision. This provision eliminates the
use of Internal Revenue Code ("IRC") Section 593 reserve method of accounting
for bad debts by Savings Institutions and recaptures post-1987 bad debt
reserves ratably over a six-year period beginning with the 1996 taxable year.
The recapture of post-1987 reserves can be delayed by a maximum of two years
if an institution meets certain residential loan origination requirements.
First Northern believes it meets the requirements to delay its capture of
post-1987 reserves which amount to $687,000.
On September 30, 1996, the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 was signed into law. Some of the major provisions of the law are
as follows:
* A one-time special assessment of 65.7 basis points per $100 of SAIF
assessable deposits was imposed on such deposits held by SAIF insured
institutions as of March 31, 1995. The assessment will increase the SAIF
reserve ratio to the statutorily required 1.25% of insured deposits. Upon
obtaining the statutorily required reserve ratio, it is anticipated that
the future SAIF deposit insurance premium rates will be reduced. The
special assessment to be paid by First Northern is $2,856,000 on a pre-tax
basis. (See -- Non-Interest Expense)
* Repayment of Financing Corporation ("FICO") bond obligations will, starting
in 1997, be shared by Bank Insurance Fund ("BIF"), as well as SAIF, insured
institutions. From 1997 through 1999, the SAIF fund will bear a greater
share of FICO bond repayments but by January 1, 2000, BIF insured
institutions will share the repayment obligations on an equal basis with SAIF
insured institutions. This will reduce the FICO obligations that would have
otherwise been borne by SAIF insured institutions such as First Northern.
* The SAIF and BIF insurance funds will be merged on January 1, 1999, if no
insured depository institution is a savings association on that date.
* The Treasury Department is required to make a recommendation to Congress on
a common charter for banks and savings associations by March 31, 1997.
* The law also contained other miscellaneous regulatory relief provisions for
financial institutions, none of which is expected to have a material impact
on the operations of First Northern.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
See Exhibit Index following the signature page of this report,
which is incorporated herein by reference.
(b) Reports on Form 8-K:
No Form 8-K was filed during the quarter for which this report
is filed.
<PAGE>
SIGNATURE
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 Capital Corp.
--------------------------------------------
(Registrant)
Date: November 12, 1996 /S/RICK B. COLBERG
------------------------- -------------------------------------------
Rick B. Colberg
Vice President and Chief Financial Officer
(Mr. Colberg is also duly authorized to
sign on behalf of registrant)
<PAGE>
FIRST NORTHERN CAPITAL CORP.
* * * * *
EXHIBIT INDEX
TO
THIRD QUARTER 1996 REPORT ON FORM 10-Q
Exhibit Filed Sequential
Number Description Herewith Page Number
- - --------------------------------------------------------------------------------
11.1 Statement regarding computation
of per share earnings X
27.1 Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission
for information only and not filed.
<PAGE>
EXHIBIT 11.1
FIRST NORTHERN CAPITAL CORP.
COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
1996 1995 1996 1995
-------- -------- -------- ---------
PRIMARY:
Weighted average common shares
outstanding during each period 4,403,625 4,539,452 4,481,639 4,514,167
Incremental shares relating to:
Dilutive stock options
outstanding at end of
each period (1) 92,408 111,439 104,870 110,874
--------- --------- -------- ---------
4,496,033 4,650,891 4,586,509 4,625,041
FULLY DILUTED:
Weighted average common shares
outstanding during each period 4,403,625 4,539,452 4,481,639 4,514,167
Incremental shares relating to:
Dilutive stock options
outstanding at end of
each period (2) 104,968 116,478 137,644 150,438
--------- --------- --------- ---------
4,508,593 4,655,930 4,619,283 4,664,605
========= ========= ========= =========
NET INCOME (LOSS) FOR
EACH PERIOD $(390,742) $ 966,260 $1,879,198 $3,420,883
========== ========= ========== ==========
PER COMMON SHARE AMOUNTS:
Primary, as presented in
the Statement of Operations $(0.09) $0.21 $0.41 $0.74
====== ===== ===== =====
Fully diluted $(0.09) $0.21 $0.41 $0.73
====== ===== ===== =====
Notes:
(1) Based on treasury stock method using average market price.
(2) Based on treasury stock method using period end market price, if
higher than average market price.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS OF FIRST NORTHERN CAPITAL CORP. FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QULAIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,407
<INT-BEARING-DEPOSITS> 148
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,448
<INVESTMENTS-CARRYING> 26,983
<INVESTMENTS-MARKET> 26,703
<LOANS> 547,262<F1>
<ALLOWANCE> 2,779
<TOTAL-ASSETS> 607,977
<DEPOSITS> 456,124
<SHORT-TERM> 23,020
<LIABILITIES-OTHER> 6,854
<LONG-TERM> 47,600
0
0
<COMMON> 4,568
<OTHER-SE> 64,839
<TOTAL-LIABILITIES-AND-EQUITY> 607,977
<INTEREST-LOAN> 29,120
<INTEREST-INVEST> 1,719
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 30,839
<INTEREST-DEPOSIT> 15,200
<INTEREST-EXPENSE> 17,070
<INTEREST-INCOME-NET> 13,769
<LOAN-LOSSES> 210
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 12,681
<INCOME-PRETAX> 2,811
<INCOME-PRE-EXTRAORDINARY> 2,811
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,879
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
<YIELD-ACTUAL> 3.31
<LOANS-NON> 514
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 22
<ALLOWANCE-OPEN> 150
<CHARGE-OFFS> 57
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 2,779
<ALLOWANCE-DOMESTIC> 2,779
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>See financial statements and notes thereto in Form 10-Q.
</FN>
</TABLE>
