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 ENDED SEPTEMBER 30, 1997
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.
Yes X No
THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S COMMON STOCK, $1.00
PAR VALUE PER SHARE, WAS 8,845,676, AT OCTOBER 30, 1997.
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Statements of Financial
Condition as of September 30, 1997
and December 31, 1996. . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations
for the Three Months Ended
September 30, 1997 and September 30, 1996. . . . . . 4
Unaudited Consolidated Statements of Income
for the Nine Months Ended
September 30, 1997 and September 30, 1996. . . . . . 5
Unaudited Consolidated Statements of Cash
Flows for the Nine Months Ended
September 30, 1997 and September 30, 1996. . . . . . 6
Notes to Unaudited Consolidated
Financial Statements . . . . . . . . . . . . . . 7 - 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. . . . . . . . . . . . . . . . . 10 - 23
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK. . . . . . . . . . . . . . . . . .24
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . .24
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 25
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
(In Thousands)
ASSETS
<S> <C> <C>
Cash $ 5,768 $ 1,965
Interest-earning deposits 399 1,598
---------- -----------
CASH AND CASH EQUIVALENTS 6,167 3,563
Securities available-for-sale, at fair value
Investment securities 7,624 5,635
Mortgage-related securities 1,224 1,837
Securities held-to-maturity
Investment securities
(estimated fair value of
$19,537 - 1997; $16,633 - 1996) 19,491 16,583
Mortgage-related securities
(estimated fair value of
$10,940 - 1997; $9,247 - 1996) 10,954 9,325
Loans held for sale 3,351 2,532
Loans receivable 584,347 553,995
Accrued interest receivable 3,508 3,295
Foreclosed properties and repossessed assets 39 189
Office properties and equipment 8,111 8,350
Federal Home Loan Bank stock 4,523 3,773
Prepaid expenses and other assets 7,406 6,426
-------- --------
$656,745 $615,503
======== ========
LIABILITIES
Deposits $478,346 $458,323
Borrowings 91,022 77,272
Advance payments by borrowers for
taxes and insurance 9,718 5,447
Other liabilities 4,858 4,237
-------- --------
TOTAL LIABILITIES 583,944 545,279
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: 9,136,104 - 1997 and 1996
shares outstanding: 8,840,200 - 1997;
8,774,858 - 1996 9,136 9,136
Additional paid-in capital 9,455 9,821
Unrealized gains on securities
available-for-sale, net of taxes 517 385
Treasury stock at cost (295,904 shares - 1997;
361,246 shares - 1996) (2,353) (2,853)
Retained earnings 56,046 53,735
-------- --------
TOTAL STOCKHOLDERS' EQUITY 72,801 70,224
-------- --------
$656,745 $615,503
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30
1997 1996
------ ------
(In Thousands,
Except Per Share Amounts)
Interest income:
<S> <C> <C>
Mortgage loans $7,923 $7,282
Consumer loans 3,248 2,755
Investment securities 478 402
Interest-earning deposits 11 9
Mortgage-related securities 197 184
------- -------
TOTAL INTEREST INCOME 11,857 10,632
Interest expense:
Deposits 5,500 5,063
Borrowings 1,256 748
Advance payments by borrowers
for taxes and insurance 46 51
------- -------
TOTAL INTEREST EXPENSE 6,802 5,862
------- -------
NET INTEREST INCOME 5,055 4,770
Provision for loan losses 90 90
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,965 4,680
Non-interest income:
Fees on serviced loans 76 86
Loan fees and service charges 63 70
Deposit account service charges 308 251
Insurance commissions 79 60
Gains on sales of loans 76 37
Gain on sale of assets 65 10
Other 185 155
------- -------
TOTAL NON-INTEREST INCOME 852 669
Non-interest expense:
Compensation, payroll taxes and
other employee benefits 1,764 1,649
Federal insurance premiums 74 261
SAIF special assessment 2,856
Occupancy 201 208
Data processing 349 283
Furniture and equipment 122 124
Telephone and postage 112 105
Marketing 103 117
Other 545 470
------- ------
TOTAL NON-INTEREST EXPENSE 3,270 6,073
------- ------
INCOME BEFORE INCOME (LOSS)TAXES 2,547 (724)
Income taxes (benefit) 961 (333)
------- ------
NET INCOME (LOSS) $ 1,586 $ (391)
======= ======
PRIMARY NET INCOME (LOSS) PER SHARE $0.17 $(0.04)
===== ======
CASH DIVIDENDS PAID PER SHARE $0.08 $0.075
===== ======
See Notes to Unaudited Consolidated Financial Statements
</TABLE>
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
------- -------
(In Thousands,
Except Per Share Amounts)
Interest income:
<S> <C> <C>
Mortgage loans $23,272 $21,329
Consumer loans 9,159 7,791
Investment securities 1,355 1,174
Interest-earning deposits 33 54
Mortgage-related securities 547 491
------- -------
TOTAL INTEREST INCOME 34,366 30,839
Interest expense:
Deposits 15,834 15,200
Borrowings 3,555 1,774
Advance payments by borrowers for
taxes and insurance 88 96
------- -------
TOTAL INTEREST EXPENSE 19,477 17,070
------- -------
NET INTEREST INCOME 14,889 13,769
Provision for loan losses 230 210
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 14,659 13,559
Non-interest income:
Fees on serviced loans 243 266
Loan fees and service charges 200 175
Deposit account service charges 902 665
Insurance commissions 248 219
Gains on sales of loans 199 190
Gain on sale of assets 87 29
Other 493 389
------- -------
TOTAL NON-INTEREST INCOME 2,372 1,933
Non-interest expense:
Compensation, payroll taxes and
other employee benefits 5,329 5,017
Federal insurance premiums 208 781
SAIF special assessment 2,856
Occupancy 661 653
Data processing 1,050 868
Furniture and equipment 371 389
Telephone and postage 359 339
Marketing 282 274
Other 1,641 1,504
------- -------
TOTAL NON-INTEREST EXPENSE 9,901 12,681
------- -------
INCOME BEFORE INCOME TAXES 7,130 2,811
Income taxes 2,700 932
------- -------
NET INCOME $ 4,430 $ 1,879
======= =======
PRIMARY NET INCOME PER SHARE $0.49 $0.20
===== =====
CASH DIVIDENDS PAID PER SHARE $0.24 $0.225
===== ======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1997 1996
--------- ---------
(In Thousands)
Operating Activities
<S> <C> <C>
Net income $ 4,430 $ 1,879
Adjustments to reconcile net
income to cash provided
by operating activities:
Provision for losses on loans
and real estate 230 210
Provision for depreciation
and amortization 656 563
Gains on sales of loans (199) (190)
Loans originated for sale (12,850) (9,519)
Proceeds from loan sales 12,030 11,395
Increase in interest receivable (213) (130)
Increase in interest payable 207 301
Other (32) 1,636
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,259 6,145
--------- --------
Investing Activities
Proceeds from maturities of investment
securities and
interest-earning deposits 4,800 9,150
Purchases of investment securities (9,474) (9,761)
Principal repayments of
mortgage-related securities 955 392
Purchase of mortgage-related securities (1,977) (5,697)
Loan originations and purchases (134,594) (135,715)
Loan principal repayments 104,047 92,448
Purchases of office properties
and equipment (417) (471)
Purchase of Federal Home Loan Bank stock (750) (5)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (37,410) (49,659)
Financing Activities
Net increase in deposits 19,816 5,869
Net increase in short-term borrowings 7,475 27,704
Proceeds from long term borrowings 38,275 29,400
Repayments of long term borrowings (31,400) (13,000)
Proceeds from securities sold
under agreement to repurchase 1,400
Maturity of security sold under
agreement to repurchase (2,000)
Cash dividends paid (2,119) (2,007)
Purchase of treasury stock (441) (3,614)
Retirement of common stock (66)
Proceeds from exercise of stock options 478 571
Net increase in advance payments by borrowers
for taxes and insurance 4,271 3,938
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 35,755 48,795
INCREASE IN CASH AND CASH EQUIVALENTS 2,604 5,281
Cash and cash equivalents at
beginning of period 3,563 1,274
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,167 $ 6,555
======== ========
Supplemental Information to the Statement of Cash Flows:
Interest credited and paid on deposits $15,627 $14,987
Interest paid on borrowings 3,462 2,106
Payments for federal and state
income taxes 2,272 2,193
Loans transferred to foreclosed properties
and repossessed assets 220 359
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
FIRST NORTHERN CAPITAL CORP.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GENERAL
(1) The consolidated financial statements include the accounts of First
Northern Capital Corp. ("First Northern" or the "Company") 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.
(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 Operations and 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 subsidiaries
at September 30, 1997 and December 31, 1996, the results of their
operations for the three and nine months ended September 30, 1997 and 1996,
and their cash flows for the nine months ended September 30, 1997 and 1996.
The accompanying Unaudited Consolidated Financial Statements and related
notes should be read in conjunction with First Northern's 1996 Annual
Report to Stockholders.
(3) Where applicable, the historical financial information has been adjusted
for the August 18, 1997 two-for-one stock split in the form of a 100%
stock dividend.
(4) In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which is effective for interim and
annual periods ending after December 15, 1997. At that time, First
Northern will be required to change the method currently used to compute
earnings per share and to restate all prior periods.
Under the new requirements, primary earnings per share will be replaced by
basic earnings per share and the dilutive effect of stock options will be
excluded. Statement No. 128 will increase primary earnings per share $0.01
for the three months ended September 30, 1997, and will have no impact on
primary earnings per share for the three months ended September 30, 1996.
Statement No. 128 will increase primary earnings per share $0.01 for the
nine months ended September 30, 1997 and 1996. The impact of Statement
No. 128 on the calculation of fully diluted earnings per share for these
quarters is not material.
<PAGE>
(5) 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)
<S> <C> <C> <C> <C>
At September 30, 1997:
Asset Management Funds $ 497 $ (5) $ 492
Federal Home Loan Mortgage
Corporation stock 33 $813 846
U.S. government and
agency securities 6,239 52 (5) 6,286
------ ---- ---- -------
6,769 865 (10) 7,624
Mortgage-related
securities 1,221 3 1,224
------ ---- ---- -------
$7,990 $868 $(10) $8,848
====== ==== ==== ======
At December 31, 1996:
Asset Management Funds $ 476 $( 5) $ 471
Federal Home Loan Mortgage
Corporation stock 33 $629 662
U.S. government and
agency securities 4,495 22 (15) 4,502
------ ---- ---- ------
5,004 651 (20) 5,635
Mortgage-related
securities 1,828 9 1,837
------ ---- ---- ------
$6,832 $660 $(20) $7,472
====== ==== ==== ======
</TABLE>
(6) 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, 1997 $19,491 $80 $(34) $19,537
======= === ==== =======
At December 31, 1996 $16,583 $86 $(36) $16,633
======= === ==== =======
At September 30, 1997, these investment securities have the following
maturities:
Amortized Estimated
Cost Fair Value
--------- ----------
(In Thousands)
Due in one year or less $ 6,502 $ 6,524
Due after one year through 5 years 12,989 13,013
------- -------
$19,491 $19,537
======= =======
<PAGE>
The amortized cost and estimated fair values of mortgage-related
securities held-to-maturity are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Fair Value
(In Thousands)
At September 30, 1997:
<S> <C> <C> <C> <C>
Federal Home Loan
Mortgage Corporation $ 7,229 $53 $(57) $ 7,225
Federal National Mortgage
Association 3,725 22 (32) 3,715
------- --- ---- ------
$10,954 $75 $(89) $10,940
======= === ==== =======
At December 31, 1996:
Federal Home Loan
Mortgage Corporation $5,595 $50 $ (89) $5,556
Federal National Mortgage
Association 3,730 17 (56) 3,691
------ --- ----- ------
$9,325 $67 $(145) $9,247
====== === ===== ======
</TABLE>
(7) Loans Receivable
Loans receivable consist of the following:
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
---------- ---------
(In Thousands)
First mortgage loans:
<S> <C> <C>
One to four family
residential $387,147 $376,189
Five or more family
residential 22,190 20,154
Commercial real estate 8,224 9,975
Construction-residential 25,127 16,306
Construction-commercial 2,088 1,701
Other 2,380 1,900
-------- --------
447,156 426,225
Consumer loans:
Consumer 18,585 18,179
Second mortgage 66,950 59,148
Automobile 69,483 60,339
-------- --------
155,018 137,666
-------- --------
602,174 563,891
Less:
Undisbursed loan proceeds 13,685 5,942
Allowance for losses 3,110 2,937
Unearned loan fees 1,032 1,017
-------- --------
17,827 9,896
-------- --------
$584,347 $553,995
======== ========
</TABLE>
(8) The weighted average number of shares outstanding, including common stock
equivalents, for the three months ended September 30, 1997 and 1996, were
9,118,053 and 8,985,666, respectively and for the nine months ended
September 30, 1997 and 1996, were 9,040,384 and 9,170,872, respectively.
(9) Certain amounts in 1996 financial statements have been reclassified to
conform to the 1997 presentations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY FACTORS
This 10-Q contains various forward-looking statements concerning the Company's
prospects that are based on the current expectations and beliefs of management.
Forward-looking statements may also be made by the Company from time to time
in other reports and documents as well as oral presentations. When used in
written documents or oral statements, the words "anticipate," "believe,"
"estimate," "expect," "objective" and similar expressions are intended to
identify forward-looking statements. The statements contained herein and such
future statements involve or may involve certain assumptions, risks and
uncertainties, many of which are beyond the Company's control, that could
cause the Company's actual results and performance to differ materially from
what is expected. In addition to the assumptions and other factors referenced
specifically in connection with such statements, the following factors could
impact the business and financial prospects of the Company: general economic
conditions; legislative and regulatory initiatives; monetary and fiscal
policies of the federal government; deposit flows;disintermediation; the cost
of funds; general market rates of interest; interest rates or investment
returns on competing investments; demand for loan products; demand for financial
services; changes in accounting policies or guidelines; and changes in the
quality or composition of the Savings Bank's loan and investment portfolios
and the investment portfolio of FNII.
FINANCIAL CONDITION
BALANCE SHEET
CASH AND CASH EQUIVALENTS. Cash and cash equivalents were $2.6 million greater
at September 30, 1997, as compared to December 31, 1996, primarily as the
result of regular month end customer deposits made to demand deposit accounts
on September 30, 1997. These funds are not available to be used until the
following day. Any cash that is not immediately needed to fund loans or
operations is invested in overnight interest-earning deposits or short-term
borrowings are repaid.
SECURITIES AVAILABLE-FOR-SALE. Investment securities available-for-sale
increased approximately $2.0 million as of September 30, 1997, as compared
to December 31, 1996, primarily as the result of purchases of U.S. Government
and Agency securities and increases in the market value of some investment
securities.
Mortgage-related securities available-for-sale decreased $0.6 million at
September 30, 1997, as compared to December 31, 1996, as a result of
prepayments and repayments of the underlying mortgage loans.
SECURITIES HELD-TO-MATURITY. Investment securities held-to-maturity increased
$2.9 million primarily as a result of purchases of U.S. Government and agency
securities.
Mortgage-related securities held-to-maturity increased $1.6 million as a result
of purchases of mortgage-related securities.
LOANS HELD FOR SALE. At September 30, 1997, First Northern had $3.3 million of
fixed interest rate mortgage and education loans classified as loans held for
sale. First Northern originates and sells most of its thirty (30) year fixed
interest rate mortgage loans and all of its education loans. Fifteen (15) year
fixed interest rate mortgage loan originations are retained in First Northern's
loan portfolio and in the third quarter of 1997, First Northern began to retain
its twenty (20) year fixed interest rate mortgage loan originations. The
retention of the twenty year fixed interest rate mortgage was in response to
First Northern's overall asset/liability position.
LOANS RECEIVABLE. Loans receivable increased $30.4 million at
September 30, 1997, as compared to December 31, 1996, as a result of mortgage
loan originations and purchases. Loan originations and purchases are as
follows:
LOAN ORIGINATIONS AND PURCHASES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
(In Thousands)
Mortgage loans originated
and purchased:
<S> <C> <C> <C> <C>
Construction $12,088 $ 8,112 $ 22,002 $ 23,390
Loans on existing property 13,840 15,571 38,491 36,789
Refinancing 11,536 5,639 27,760 28,209
Other loans 1,008 998 1,985 2,394
------- ------- -------- --------
Total mortgage loans originated
and purchased 38,472 30,320 90,238 90,782
Consumer loans originated
and purchased:
Consumer 2,171 1,720 7,263 6,408
Second mortgage 9,944 9,268 28,738 25,157
Automobile 15,989 17,242 38,183 33,953
Education 935 967 1,987 1,715
------- ------- -------- --------
Total consumer loans originated
and purchased 29,039 29,197 76,171 67,233
------- ------- -------- --------
Total loans originated
and purchased $67,511 $59,517 $166,409 $158,015
======= ======= ======== ========
</TABLE>
Mortgage loan originations and purchases for the third quarter of 1997
increased as compared to the same period in 1996 primarily as the result of
increased single-family and multi-family originations within First Northern's
market area. These increased originations are the result of stable mortgage
loan interest rates and overall increased home buying and building in the third
quarter of 1997.
Mortgage loan originations for the nine months ended September 30, 1997, as
compared to the same period in 1996 have decreased slightly, primarily as a
result of a slight increase in mortgage loan origination interest rates early
in 1997.
First Northern sold $4.3 million of fixed interest rate mortgage loans in the
third quarter of 1997 as compared to $2.0 million for the same period in 1996
and $9.6 million in the first nine months of 1997 as compared to $8.3 million
for the same period in 1996. First Northern retains all adjustable interest
rate mortgage loan originations in its portfolio; whereas, most 30 year fixed
interest rate mortgage loan originations are sold in the secondary market.
In addition, $2.4 million of education loans were sold in the nine months
ended September 30, 1997, as compared to $3.2 million for the same period in
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 decreased slightly in the third
quarter of 1997 as compared to the third quarter of 1996 primarily as a result
of decreased automobile loan originations in the Savings Bank's jointly owned
subsidiary, SFC. SFC automobile loan originations decreased in comparison to
the third quarter of 1996 originations because third quarter 1996
originations were abnormally high on a historical basis as a result of new
business relationships with additional automobile dealers throughout the
state of Wisconsin.
Consumer loan originations and purchases for the nine months ended
September 30, 1997, as compared to the same period in 1996 increased as a
result of the overall emphasis by management placed on consumer loan
originations and the favorable economic climate within our markets.
DEPOSITS. Deposits increased $20.0 million for the first nine months of 1997
as a result of offering competitive interest rates, the acquisition of "jumbo"
(Certificates of Deposit in excess of $100,000) deposits and increased demand
deposits. At times, jumbo deposits are a cheaper source of funds than retail
deposits or borrowing. First Northern's jumbo deposits have increased $13.4
million in the first nine months of 1997.
BORROWINGS. Federal Home Loan Bank ("FHLB") borrowings increased $13.8
million in the first nine months of 1997, primarily as the result of increased
loan originations over 1996 and management's decision to increase the
investment portfolio. 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, 1997, $65.9 million are fixed interest
rate borrowings and $25.1 million are overnight borrowings. First Northern
anticipates that it will continue to utilize borrowings in the fourth quarter
of 1997 if borrowings incrementally add 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 $4.3 million at September
30, 1997, as compared to December 31, 1996. The increase in escrow dollars was
the result of increased size of the mortgage loan portfolio and the mortgage
loan customers accumulating escrow dollars for payment of their real estate
taxes.
STOCKHOLDERS' EQUITY. First Northern paid a cash dividend of $0.08 per share
on August 15, 1997, to stockholders of record on August 1, 1997. The increase
of $0.005 per share represents a 6.7% increase over the second quarter of 1996
cash dividend of $0.075 per share.
On October 19, 1996, First Northern approved a second stock repurchase program
to repurchase 438,114 shares (5% of total shares outstanding) through the open
market. On April 18, 1997, the second stock repurchase program was extended
to October 17, 1997. These repurchased shares will be used to satisfy
exercises of stock options. At September 30, 1997, 60,800 shares had been
purchased at an average price of $8.62 per share or a total of $0.5 million.
Subsequent to the end of the third quarter, the second stock repurchase program
expired with 60,800 shares repurchased. Management may consider establishing
a third stock repurchase plan in the future.
First Northern's Board of Directors declared a two-for-one stock split in the
form of a 100% stock dividend distributed on August 18, 1997 to stockholders'
of record on August 1, 1997.
<PAGE>
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:
<TABLE>
<CAPTION>
NON-PERFORMING LOANS AND ASSETS
At September 30 At December 31
1997 1996
--------------- --------------
(Dollars in Thousands)
<S> <C> <C>
Non-accrual mortgage loans $473 $509
Non-accrual consumer loans 45 235
---- ----
Total non-performing loans 518 744
Properties subject to foreclosure 2 157
Foreclosed properties and
repossessed assets 21 32
---- ----
Total non-performing assets $541 $933
==== ====
Non-performing loans as a percent
total loans .09% .13%
=== ===
Non-performing assets as a percent
of total assets .08% .15%
=== ===
</TABLE>
Total non-performing loans decreased $392,000 as of September 30, 1997, as
compared to December 31, 1996, primarily as a result of the favorable economy
in First Northern's market areas which assisted non-performing loan customers
to bring their loans current. Management believes non-performing loans and
assets, expressed as a percentage of total loans and assets, are far below
state and national averages. There are no accruing, material loans which, at
September 30, 1997, management has reason to believe will become non-performing
or result in potential losses.
In addition, management believes that the Savings Bank's allowances for loan
losses 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 the agency's judgment of information available to
them at the time of their examination.
<PAGE>
All of First Northern's loans are domestic. A 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, 1997 December 31, 1996
------------------ -----------------
(Dollars in Thousands)
Mortgage Loans:
<S> <C> <C>
Balance at the beginning
of the period $1,453 $1,578
Provisions for the period 130 10
Recoveries
Commercial real estate 1 1
Transfer of loss reserve (136)
------ ------
Balance at the end of
the period 1,584 1,453
Consumer Loans:
Balance at the beginning
of the period 1,484 1,030
Provisions for the period 100 360
Charge-offs
Consumer (31) (23)
Automobile (40) (43)
Recoveries
Consumer 9 11
Automobile 4 13
Transfer of loss reserve 136
------ ------
Balance at the end of the period 1,526 1,484
------ ------
Total loan loss allowances at the
end of the period $3,110 $2,937
====== ======
Allowance as a percent of total loans .53% .53%
=== ===
Allowance as a percent of
non-performing loans 600.39% 394.76%
====== ======
Allowance as a percent of total assets .47% .48%
=== ===
Allowance as a percent of
non-performing assets 574.86% 314.79%
====== ======
</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, 1997 and 1996 have been annualized.
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------------------------
1997 1996
---------------------- ------------------------
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 $422,892 $23,272 7.34% $396,767 $21,329 7.17%
Consumer loans 145,407 9,159 8.40 122,042 7,791 8.51
Investment securities (2) 28,628 1,355 6.31 24,992 1,174 6.26
Interest-earning deposits 740 33 5.95 1,355 54 5.31
Mortgage-related
securities (2) 11,428 547 6.38 10,048 491 6.52
-------- ------- ---- -------- ------- ----
TOTAL 609,095 34,366 7.52 555,204 30,839 7.41
Interest-bearing liabilities:
Passbook accounts 59,904 981 2.18 58,696 988 2.24
NOW and variable rate
insured money
market accounts 103,711 1,872 2.41 101,443 1,768 2.32
Time deposits 305,439 12,981 5.67 292,462 12,444 5.67
Advance payments by
borrowers for taxes
and insurance 5,279 88 2.22 5,691 96 2.25
Borrowings 80,181 3,555 5.91 41,093 1,774 5.76
-------- ------- ---- -------- ------- ----
TOTAL 554,514 19,477 4.68 499,385 17,070 4.56
-------- ------- ---- -------- ------- ----
Net interest-earning assets
balance and interest
rate spread $ 54,581 2.84% $ 55,819 2.85%
======== ==== ======== ====
Average interest-earning
assets, net interest income
and net yield on average
interest-earning assets $609,095 $14,889 3.26% $555,204 $13,769 3.31%
======== ======= ==== ======== ======= ====
Average interest-earning
assets to interest-bearing
liabilities 109.8% 111.2%
===== =====
</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
---------------------------
1996
---------------------------
Interest
Average Earned/ Yield/
Balance Paid Rate
--------- ------- ------
(Dollars In Thousands)
Interest-earning assets (1):
<S> <C> <C> <C>
Mortgage loans $401,652 $28,831 7.18%
Consumer loans 126,177 10,725 8.50
Investment securities (2) 25,215 1,582 6.27
Interest-earning deposits 1,220 66 5.41
Mortgage-related securities (2) 10,344 672 6.50
-------- ------- ----
TOTAL 564,608 41,876 7.42
Interest-bearing liabilities:
Passbook accounts 58,744 1,313 2.24
NOW and variable rate insured
money market accounts 102,338 2,388 2.33
Time deposits 292,477 16,543 5.66
Advance payments by borrowers
for taxes and insurance 7,142 162 2.27
Borrowings 48,393 2,797 5.78
-------- ------- ----
TOTAL 509,094 23,203 4.56
-------- ------- ----
Net interest-earning assets balance
and interest rate spread $ 55,514 2.86%
======== ====
Average interest-earning
assets, net interest income
and net yield on average
interest-earning assets $564,608 $ 18,673 3.31%
======== ======== ====
Average interest-earning assets
to interest-bearing liabilities 110.9%
=====
</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 has 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
-------------------------------
1997 vs 1996
-------------------------------
Increase(decrease) due to:
-------------------------------
(In Thousands)
Rate/
Rate Volume Volume Total
------ ------ ------ -------
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $506 $1,404 $ 33 $1,943
Consumer loans (101) 1,488 (19) 1,368
Investment securities 9 171 1 181
Interest-earning deposits 7 (25) (3) (21)
Mortgage-related securities (11) 68 (1) 56
---- ------ ---- ------
TOTAL $410 $3,106 $ 11 3,527
==== ====== ==== ------
Interest-bearing liabilities:
Passbook accounts $(26) $ 20 $ (1) (7)
NOW and variable rate
insured money market accounts 63 39 2 104
Time deposits 537 537
Advance payments by borrowers
for taxes and insurance (1) (7) (8)
Borrowings 46 1,691 44 1,781
---- ------ ---- ------
TOTAL $ 82 $2,280 $ 45 2,407
==== ====== ==== ------
Net change in net interest
income $1,120
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1996 vs 1995
-------------------------------
Increase(decrease) due to:
-------------------------------
(In Thousands)
Rate/
Rate Volume Volume Total
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $734 $1,086 $ 29 $1,849
Consumer loans 71 701 5 777
Investment securities (52) 23 (1) (30)
Interest-earning deposits (13) (24) 3 (34)
Mortgage-related securities (30) 347 (28) 289
----- ------ ---- ------
TOTAL $710 $2,133 $ 8 2,851
==== ====== === ------
Interest-bearing liabilities:
Passbook accounts $(149) $ (40) $ 4 (185)
NOW and variable rate
insured money market accounts 102 381 21 504
Time deposits 340 13 353
Advance payments by borrowers
for taxes and insurance 15 (29) (2) (16)
Borrowings (340) 1,000 (149) 511
----- ------ ----- -----
TOTAL $ (32) $1,325 $(126) 1,167
===== ====== ===== ------
Net change in net interest
income $1,684
======
</TABLE>
<PAGE>
STATEMENTS OF OPERATIONS AND INCOME
GENERAL. Net income for the third quarter and the first nine months of 1997 as
compared to the third quarter and the first nine months of 1996 increased
substantially. The increase was primarily the result of the Savings
Association Insurance Fund ("SAIF") special assessment which resulted in a net
loss in the third quarter of 1996, increased average interest-earning assets,
an increase in non-interest income and a reduction in SAIF deposit insurance
premiums.
INTEREST INCOME. Interest income on mortgage loans increased $641,000 in the
third quarter of 1997 and $1,943,000 for the nine months ended
September 30, 1997, as compared to the same periods in 1996 as a result of the
increased dollar amount of mortgage loans outstanding and the increased average
yield on the mortgage portfolio. The average mortgage loans outstanding for
the nine months ended September 30, 1997, increased 6.6% as compared to the
average mortgage loans outstanding for the same period in 1996. The mortgage
loan portfolio growth is a result of a stable interest rate environment,
competitive pricing of adjustable interest rate mortgage loans and increased
marketing of mortgage loans. The increased yield on the mortgage loan
portfolio is primarily the result of interest rate adjustments on existing
adjustable interest rate mortgage loans in the portfolio.
Interest income on consumer loans increased $493,000 and $1,368,000 for the
three months and nine months ended September 30, 1997, as compared to the same
periods in 1996, as a result of increased consumer loans outstanding. Average
consumer loans outstanding for the nine months ended September 30, 1997, were
$23.3 million more than average consumer loans outstanding for the nine months
ended September 30, 1996. This increase in average consumer loans is primarily
the result of increased marketing of second mortgage loans, increased purchases
of indirect automobile loans from SFC, and the use of a lower introductory
interest rate which remains constant for an initial period of one year.
After the initial fixed interest rate period, the interest rate is adjusted
to Midwest Prime Interest Rate, as published in the central edition of The
Wall Street Journal, plus a margin of 2%.
Average investment securities outstanding for the first nine months of 1997 as
compared to the same period in 1996 increased $3,636,000 which resulted in an
increase in investment securities income of $76,000 for the third quarter of
1997 and $181,000 for the nine months ended September 30, 1997. First Northern
purchases investment securities to aid in its asset and liability management
and when the rate of return on an investment is attractive in comparison
with loans or other types of investments.
Interest income on mortgage-related securities in the third quarter of 1997 and
the first nine months of 1997, as compared to the same periods in 1996,
increased as a result of additional mortgage-related securities outstanding.
INTEREST EXPENSE. Interest expense on deposits increased $437,000 in the third
quarter of 1997 and $634,000 for the nine months ended September 30, 1997, as
compared to the same periods in 1996, primarily as a result of increased dollar
amount of deposits. Average deposits increased $16,453,000 for the nine months
ended September 30, 1997, as compared to the nine months ended
September 30, 1996. First Northern has utilized non-traditional time deposit
terms as well as "special" interest rates on those non-traditional time deposit
terms to attract new deposits. In addition, the Savings Bank has acquired
jumbo deposits to aid in its deposit growth. (See Financial Condition --
Balance Sheet -- Deposits)
Interest expense on borrowings increased substantially in the third quarter of
1997 and the first nine months of 1997, as compared to the same periods in 1996,
as a result of increased average borrowings outstanding. First Northern
anticipates it will continue to borrow in the fourth quarter of 1997 to fund
anticipated loan demand.
PROVISION FOR LOAN LOSSES. First Northern increased its provision for loan
losses in the third quarter of 1997, and the first nine months of 1997, as a
result of growth in the loan portfolio. The loan loss allowance as of
September 30, 1997, was $3,110,000 or .53% of total loans and 600.4% 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 for the third quarter of 1997 and
for the nine months ended September 30, 1997, decreased primarily as a result
of the amortization of mortgage servicing assets. As the principle of a
mortgage loan which was sold, repays or prepays, the mortgage servicing asset
is reduced and netted from fees on serviced loans, thereby reducing the
income on the serviced loans.
Loan fees and service charges decreased $7,000 for the three months ended
September 30, 1997, and increased $25,000 for the nine months ended
September 30, 1997, as compared to the same periods in 1996. The decrease in
the third quarter was primarily the result of decreased late charges on
mortgage loans. The increase for the nine months ended September 30, 1997 was
the result of a pre-payment fee collected on a large mortgage loan payoff,
increased charges collected for late payments on loans and fees collected and
accrued for the overdraft protection feature on checking accounts.
Deposit account service charges increased substantially in the third quarter of
1997 and in the nine months ended September 30, 1997, primarily as a result of
increased NOW (checking) accounts and their related fees and debit card fee
income. Each time a Savings Bank debit card is used, a fee, which varies with
each merchant, is paid to the Savings Bank by the debit card company. The
Savings Bank promotes the use of its debit card by direct mail.
Insurance commissions increased $19,000 in the third quarter of 1997 and
$29,000 for the nine months ended September 30, 1997, as compared to the same
periods in 1996, primarily as a result of bonuses earned from insurance
carriers. Insurance bonuses can be earned if First Northern obtains a
predetermined threshold of insurance sales and insurance losses are at or
below another threshold.
Gains on the sale of loans increased $39,000 in the third quarter of 1997 and
$9,000 for the nine months ended September 30, 1997, as compared to the same
periods in 1996 as a result of increased loan sales. For the three months
ended September 30, 1997, $4.3 million of fixed interest rate mortgage loans
were sold as compared to $2.0 million in the third quarter of 1996 and for
the nine months ended September 30, 1997, $9.6 million of fixed interest
mortgage loans were sold as compared to $8.3 million for the nine months ended
September 30, 1996. In addition, $0.1 million and $2.4 million of education
loans were sold in the third quarter of 1997 and for the nine months ended
September 30, 1997, respectively, as compared to $0.1 million and $3.2 million
for the three and nine months ended September 30, 1996, respectively.
The sale of the Seymour Branch Office in the third quarter of 1997 resulted in
a one-time gain of $65,000. The Seymour Branch Office was sold to another
financial institution as a result of management's analysis of the limited
growth potential in the Seymour market area and the cost of continuing to
operate the branch.
Other income increased $30,000 in the third quarter of 1997 and $104,000 for
the nine months ended September 30, 1997, as compared to the same period in
1996 primarily as a result of increased fees earned on brokerage commissions.
GNFSC offers full brokerage service to the public, which includes but is not
limited to, mutual fund sales, tax-deferred annuity sales and the sale of stock.
NON-INTEREST EXPENSE. Compensation expense increased $115,000 in the third
quarter of 1997 and $312,000 for the first nine months of 1997 as a result of
salary increases and related expenses and education costs. First Northern has
continued its emphasis on employee education, especially with the introduction
of a new teller system in the first quarter of 1997.
Federal insurance premiums decreased $187,000 in the third quarter of 1997 and
$573,000 for the nine months ended September 30, 1997, as a result of reduced
SAIF deposit insurance premiums and a $15,000 refund of deposit insurance
premiums from prior periods. In 1997, First Northern, like other SAIF insured
financial institutions, had its SAIF insurance premium reduced to $0.065 per
one hundred dollars of assessable deposits as compared to $0.23 per one
hundred dollars of assessable deposits in 1996. This premium reduction was
the result of the special SAIF assessment charged to each SAIF insured
institution in the third quarter of 1996 to recapitalize the SAIF insurance
fund. First Northern's special assessment, which was paid in the third
quarter of 1996, was $2,856,000.
Data processing expense increased $66,000 in the third quarter of 1997 and
$182,000 for the nine months ended September 30, 1997, primarily as the result
of the installation of a new PC based teller system. First Northern completed
its installation of a new PC based teller system in the first quarter of 1997
to further automate and improve the delivery of information and customer
service.
Marketing expense decreased $14,000 for the three months ended September 30,
1997, and increased $8,000 for the nine months ended September 30, 1997, as
compared to the same periods in 1996. The decrease in the third quarter of
1997 is primarily the result of differences in the timing of the payment of
marketing expense in 1997 and 1996. Marketing expense increased for the nine
months ended September 30, 1997, as a result of increased marketing of deposit
and loan products. Competition in First Northern's market is such that growth
in lending and deposit volumes necessitates increased marketing.
Other expenses increased for the three and nine months ended September 30,
1997, as compared to the same period in 1996 primarily as the result of costs
associated with SFC operating costs, bad check charge-offs and costs associated
with the debit card.
INCOME TAXES. The effective income tax rate for the third quarter of 1997
was 37.7%. First Northern received an income tax benefit in the third
quarter of 1996 as a result of the special SAIF assessment.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
Federal regulations historically have required the Savings Bank 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. The Savings Bank has historically maintained its liquidity
ratio at a level in excess of that required by the OTS (as defined below).
The Savings Bank's monthly average short-term liquidity and total liquidity
ratio at September 30, 1997, was 2.79% and 6.21%, respectively, as compared
to 3.04% and 5.97%, respectively, at December 31, 1996. The short-term
liquidity ratio decreased slightly as compared to the short-term liquidity at
December 31, 1996, as a result of maturing investments being reinvested into
securities with maturities greater than one year. The September 30, 1997,
total liquidity ratio increased slightly as compared to the total liquidity
ratio at December 31, 1996, as a result of the purchase of investment
securities. The Savings Bank 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. The Savings Bank 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 the Savings Bank
requires funds beyond its ability to generate them internally, it can borrow
funds from the FHLB of Chicago or other sources. The FHLB of Chicago limits
advances to member institutions to an aggregate amount not to exceed 35% of the
member institution's total assets. Wisconsin law permits First Northern to
borrow, without the prior written approval of the Wisconsin Department of
Financial Institutions --- Division of Savings Institutions, to borrow in the
aggregate amount not to exceed 50% of its total assets.
CAPITAL RESOURCES AND REGULATORY INFORMATION
First Northern's net worth to total assets ratio at September 30, 1997, for
State of Wisconsin regulatory requirements was 10.8% 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 Office of Thrift Supervision
("OTS") adopted capital regulations for savings institutions effective
December 7, 1989. The OTS 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.
As of September 30, 1997, the most recent notification from the OTS categorized
the Savings Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized the Savings Bank
must maintain minimum tangible, core and risk based ratios as set forth in the
table. As a state-chartered savings institution, the Savings Bank is also
subject to a minimum capital requirement of the State of Wisconsin. Management
believes, as of September 30, 1997, that the Savings Bank exceeds all capital
adequacy requirements to which it is subject. There are no conditions or
events since that notification that management believes have changed the
Savings Bank's categorization as well capitalized.
<PAGE>
The Savings Bank's required and actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
Excess
Required Actual Capital
Regulatory Over Required
Actual Capital Regulatory Capital
------------- ------------- --------------
Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997
Tangible Capital $67,248 10.3% $ 9,827 1.5% $57,421 8.8%
(to Tangible Assets)
Core Capital 67,248 10.3% 19,654 3.0% 47,594 7.4%
(to Tangible Assets)
Risk-Based Capital 70,358 16.8% 33,566 8.0% 36,792 8.8%
(to Risk-Weighted Assets)
State of Wisconsin Capital 71,246 10.8% 39,404 6.0% 31,842 4.8%
(to Total Assets)
As of December 31, 1996:
Tangible Capital $64,489 10.5% $ 9,204 1.5% $55,285 9.0%
(to Tangible Assets)
Core Capital 64,489 10.5% 18,409 3.0% 46,080 7.5%
(to Tangible Assets)
Risk-Based Capital 67,426 17.8% 30,295 8.0% 37,131 9.8%
(to Risk-Weighted Assets)
State of Wisconsin Capital 68,754 11.2% 36,915 6.0% 31,839 5.2%
(to Total Assets)
</TABLE>
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not applicable
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 13, 1997 /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.
(THE "REGISTRANT")
COMMISSION FILE NO. 0-27982
* * * * *
EXHIBIT INDEX
TO
THIRD QUARTER 1997 REPORT ON FORM 10-Q
Exhibit Incorporated Herein Filed or Submitted
Number Description By Reference To Herewith
- - ------------------------------------------------------------------------------
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. X
<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
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
PRIMARY:
Weighted average common shares
outstanding during each period 8,838,294 8,800,850 8,810,516 8,961,132
Incremental shares relating to:
Dilutive stock options outstanding
at end of each period (1) 279,759 184,816 229,868 209,740
--------- --------- --------- ---------
9,118,053 8,985,666 9,040,384 9,170,872
========= ========= ========= =========
FULLY DILUTED:
Weighted average common shares
outstanding during each period 8,838,294 8,800,850 8,810,516 8,961,132
Incremental shares relating to:
Dilutive stock options outstanding
at end of each period (2) 297,995 209,936 312,683 275,288
--------- --------- --------- ---------
9,136,289 9,010,786 9,123,199 9,236,420
========= ========= ========= =========
NET INCOME (LOSS) FOR
EACH PERIOD $1,585,879 $ (390,742)$4,430,065 $1,879,198
========== ========== ========== ==========
PER COMMON SHARE AMOUNTS:
Primary, as presented in
the Statement of Operations $0.17 $(0.04) $0.49 $0.20
===== ====== ===== =====
Fully diluted $0.17 $(0.04) $0.49 $0.20
===== ====== ===== =====
<PAGE>
- - -------------------------
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.
