10-Q 1 ef20012436_10q.htm 10-Q

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

FORM 10-Q
 
(Mark one)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2023
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________
 
Commission File Number 000-30707
 
First Northern Community Bancorp
(Exact name of registrant as specified in its charter)
 
California
 
68-0450397
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
 
195 N. First Street, Dixon, California
 
95620
(Address of principal executive offices)
 
(Zip Code)

707 -678-3041
(Registrant’s telephone number including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbols(s)
 
Name of each exchange on which registered
None
 
Not Applicable
 
Not Applicable

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or Section 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 
No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
 
Yes 
No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer 
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes
No  
 
The number of shares of Common Stock outstanding as of November 6, 2023 was 14,730,761.



FIRST NORTHERN COMMUNITY BANCORP

INDEX

 
Page
3
3
3
4
5
6
7
8
37
55
55
55
55
55
58
58
58
58
58
59

2

PART I – FINANCIAL INFORMATION
 
FIRST NORTHERN COMMUNITY BANCORP
 
ITEM I.    – FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(in thousands, except share amounts)
 
September 30, 2023
   
December 31, 2022
 
 
           
Assets
           
 
           
Cash and cash equivalents
 
$
197,105
   
$
187,417
 
Certificates of deposit
   
20,696
     
20,948
 
Investment securities – available-for-sale, at estimated fair value, net of allowance for credit losses of $0; amortized cost of $636,903 at September 30, 2023 and $683,784 at December 31, 2022
   
567,409
     
618,092
 
Loans, net of allowance for credit losses of $16,149 at September 30, 2023 and $14,792 at December 31, 2022
   
1,037,066
     
970,138
 
Loans held-for-sale
   
369
     
 
Stock in Federal Home Loan Bank and other equity securities, at cost
   
10,518
     
9,440
 
Premises and equipment, net
   
10,058
     
6,122
 
Core deposit intangible
    4,367        
Interest receivable and other assets
   
54,740
     
59,204
 
 
               
Total Assets
 
$
1,902,328
   
$
1,871,361
 
 
               
Liabilities and Stockholders’ Equity
               
 
               
Liabilities:
               
 
               
Demand deposits
 
$
770,620
   
$
775,173
 
Interest-bearing transaction deposits
   
405,980
     
448,039
 
Savings and MMDA’s
   
444,646
     
459,307
 
Time, $250,000 or less
   
106,241
     
35,115
 
Time, over $250,000
   
18,857
     
9,240
 
Total deposits
   
1,746,344
     
1,726,874
 
 
               
Interest payable and other liabilities
   
19,498
     
19,447
 
 
               
Total Liabilities
   
1,765,842
     
1,746,321
 
                 
Commitments and contingencies (Note 7)
           
                 
Stockholders’ Equity:
               
Common stock, no par value; 32,000,000 shares authorized at September 30, 2023, 16,000,000 shares authorized at December 31, 2022; 14,732,351 shares issued and outstanding at September 30, 2023 and 14,652,584 shares issued and outstanding at December 31, 2022
   
116,768
     
116,099
 
Additional paid-in capital
   
977
     
977
 
Retained earnings
   
67,945
     
54,492
 
Accumulated other comprehensive loss, net
   
(49,204
)
   
(46,528
)
Total Stockholders’ Equity
   
136,486
     
125,040
 
 
               
Total Liabilities and Stockholders’ Equity
 
$
1,902,328
   
$
1,871,361
 
 
See notes to unaudited condensed consolidated financial statements.

3

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
(in thousands, except per share amounts)
 
Three months
ended
September 30, 2023
   
Three months
ended
September 30, 2022
   
Nine months
ended
September 30, 2023
   
Nine months
ended
September 30, 2022
 
Interest and dividend income:
                       
Loans
 
$
13,098
   
$
10,857
   
$
38,197
   
$
30,979
 
Due from banks interest bearing accounts
   
2,064
     
1,118
     
6,967
     
1,793
 
Investment securities
                               
Taxable
   
2,685
     
2,122
     
8,041
     
5,783
 
Non-taxable
   
199
     
250
     
692
     
634
 
Other earning assets
   
214
     
137
     
557
     
361
 
Total interest and dividend income
   
18,260
     
14,484
     
54,454
     
39,550
 
Interest expense:
                               
Deposits
   
2,386
     
271
     
4,817
     
691
 
Total interest expense
   
2,386
     
271
     
4,817
     
691
 
Net interest income
   
15,874
     
14,213
     
49,637
     
38,859
 
Provision for credit losses
   
500
     
300
     
3,100
     
900
 
Net interest income after provision for credit losses
   
15,374
     
13,913
     
46,537
     
37,959
 
Non-interest income:
                               
Service charges on deposit accounts
   
436
     
414
     
1,259
     
1,308
 
Gains on sales of loans held-for-sale
   
62
     
27
     
93
     
145
 
Investment and brokerage services income
   
136
     
137
     
387
     
443
 
Mortgage brokerage income
   
11
     
10
     
21
     
21
 
Loan servicing income
   
79
     
78
     
209
     
569
 
Debit card income
   
713
     
635
     
2,094
     
1,915
 
Losses on sales/calls of available-for-sale securities
   
   
   
(64
)
   
(152
)
Gain on bargain purchase
                1,405        
Other income
   
339
     
769
     
751
     
1,231
 
Total non-interest income
   
1,776
     
2,070
     
6,155
     
5,480
 
Non-interest expenses:
                               
Salaries and employee benefits
   
6,377
     
6,164
     
19,653
     
17,578
 
Occupancy and equipment
   
1,064
     
896
     
3,138
     
2,645
 
Data processing
   
933
     
912
     
2,949
     
2,587
 
Stationery and supplies
   
103
     
75
     
272
     
203
 
Advertising
   
111
     
99
     
322
     
276
 
Directors’ fees
   
83
     
60
     
234
     
196
 
Amortization of core deposit intangible
    226             603        
Other expense
   
1,986
     
1,703
     
5,363
     
4,854
 
Total non-interest expenses
   
10,883
     
9,909
     
32,534
     
28,339
 
Income before provision for income taxes
   
6,267
     
6,074
     
20,158
     
15,100
 
Provision for income taxes
   
1,648
     
1,506
     
5,486
     
3,945
 
 
                               
Net income
 
$
4,619
   
$
4,568
   
$
14,672
   
$
11,155
 
 
                               
Basic earnings per common share
 
$
0.32
   
$
0.32
   
$
1.01
   
$
0.77
 
Diluted earnings per common share
 
$
0.32
   
$
0.31
   
$
1.01
   
$
0.77
 

See notes to unaudited condensed consolidated financial statements.

4

FIRST NORTHERN COMMUNITY BANCORP

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)
 
Three months
ended
September 30, 2023
   
Three months
ended
September 30, 2022
   
Nine months
ended
September 30, 2023
   
Nine months
ended
September 30, 2022
 
Net income
 
$
4,619
   
$
4,568
   
$
14,672
   
$
11,155
 
Other comprehensive loss, net of tax:
                               
Unrealized holding losses arising during the period, net of tax effect of $(2,097) and $(7,461) for the three months ended September 30, 2023 and September 30, 2022, respectively, and $(1,145) and $(19,850) for the nine months ended September 30, 2023 and September 30, 2022, respectively
   
(4,999
)
   
(18,492
)
   
(2,721
)
   
(49,204
)
Less: reclassification adjustment due to losses realized on sales of securities, net of tax effect of $0 for each of the three months ended September 30, 2023 and September 30, 2022, and $19 and $44 for the nine months ended September 30, 2023 and September 30, 2022, respectively
   
     
     
45
     
108
 
Other comprehensive loss, net of tax
 
$
(4,999
)
 
$
(18,492
)
 
$
(2,676
)
 
$
(49,096
)
 
                               
Comprehensive (loss) income
 
$
(380
)
 
$
(13,924
)
 
$
11,996
   
$
(37,941
)

See notes to unaudited condensed consolidated financial statements.

5

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share data)

 
 
Common Stock
   
Additional
Paid-in
   
Retained
   
Accumulated
Other
Comprehensive
       
 
 
Shares
   
Amounts
   
Capital
   
Earnings
   
Loss, net of tax
   
Total
 
 
                                   
Balance at December 31, 2021
   
13,848,904
   
$
109,793
   
$
977
   
$
44,338
   
$
(4,197
)
 
$
150,911
 
Net income
                           
3,041
             
3,041
 
Other comprehensive loss, net of taxes
                                   
(19,963
)
   
(19,963
)
Stock dividend adjustment
   
3,276
     
366
             
(366
)
           
 
Cash in lieu of fractional shares
   
(161
)
                   
(8
)
           
(8
)
Stock-based compensation
           
164
                             
164
 
Common shares issued related to restricted stock grants
   
67,596
     
                             
 
Stock options exercised, net
   
11,615
     
                             
 
Stock repurchase and retirement     (1,401 )     (15 )                             (15 )
Balance at March 31, 2022
   
13,929,829
   
$
110,308
   
$
977
   
$
47,005
   
$
(24,160
)
 
$
134,130
 
Net income
                           
3,546
             
3,546
 
Other comprehensive loss, net of taxes
                                   
(10,641
)
   
(10,641
)
Stock-based compensation
           
168
                             
168
 
Common shares issued related to restricted stock grants
    1,500                                      
Stock repurchase and retirement
    (7,280 )     (69 )                             (69 )
Balance at June 30, 2022
   
13,924,049
   
$
110,407
   
$
977
   
$
50,551
   
$
(34,801
)
 
$
127,134
 
Net income                             4,568               4,568  
Other comprehensive loss, net of taxes
                                    (18,492 )     (18,492 )
Stock-based compensation
            168                               168  
Stock repurchase and retirement
    (2,000 )     (18 )                             (18 )
Balance at September 30, 2022
    13,922,049     $
110,557     $
977     $
55,119     $
(53,293 )   $
113,360  
                                                 
Balance at December 31, 2022
   
14,652,584
   
$
116,099
   
$
977
   
$
54,492
   
$
(46,528
)
 
$
125,040
 
Cumulative change from adoption of ASU 2016-13 on January 1, 2023
                            (916 )             (916 )
Balance at January 1, 2023 (as adjusted for adoption of accounting standard)
    14,652,584       116,099       977       53,576       (46,528 )     124,124  
Net income
                           
5,489
             
5,489
 
Other comprehensive income, net of taxes
                                   
6,013
     
6,013
 
Stock dividend adjustment
   
3,525
     
296
             
(296
)
           
 
Cash in lieu of fractional shares
   
(164
)
                   
(7
)
           
(7
)
Stock-based compensation
           
192
                             
192
 
Common shares issued related to restricted stock grants
   
72,242
     
                             
 
Stock options exercised, net of swapped shares
   
11,000
     
                             
 
Stock repurchase and retirement
    (3,580 )     (26 )                             (26 )
Balance at March 31, 2023
   
14,735,607
   
$
116,561
   
$
977
   
$
58,762
   
$
(40,515
)
 
$
135,785
 
Net income
                           
4,564
             
4,564
 
Other comprehensive loss, net of taxes
                                   
(3,690
)
   
(3,690
)
Stock-based compensation
           
188
                             
188
 
Common shares issued related to restricted stock grants
   
1,500
                                     
 
Stock repurchase and retirement
   
(16,474
)
   
(117
)
                           
(117
)
Balance at June 30, 2023
   
14,720,633
   
$
116,632
   
$
977
   
$
63,326
   
$
(44,205
)
 
$
136,730
 
Net income                             4,619               4,619  
Other comprehensive loss, net of taxes
                                    (4,999 )     (4,999 )
Stock-based compensation
            136                               136  
Restricted stock cancelled, net of common shares issued related to restricted stock grants
    (10,209 )                                    
 
Stock options exercised, net
    21,927                                      
Balance at September 30, 2023
    14,732,351     $
116,768     $
977     $
67,945     $
(49,204 )   $
136,486  

See notes to unaudited condensed consolidated financial statements.

6

FIRST NORTHERN COMMUNITY BANCORP
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
(in thousands)
 
 
 
Nine months ended
 September 30, 2023
   
Nine months ended
 September 30, 2022
 
Cash Flows From Operating Activities
           
Net income
 
$
14,672
   
$
11,155
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
   
730
     
571
 
Accretion and amortization of investment securities premiums and discounts, net
   
1,591
     
3,545
 
Valuation adjustment on mortgage servicing rights
   
     
(276
)
Increase (decrease)  in deferred loan origination fees and costs, net
   
759
     
(2,259
)
       Amortization of core deposit intangible
    603        
Provision for credit losses
   
3,100
     
900
 
Stock-based compensation
   
516
     
500
 
Losses on sales/calls of available-for-sale securities
   
64
     
152
 
Amortization of operating lease right-of-use asset
   
806
     
835
 
Gains on sales of loans held-for-sale
   
(93
)
   
(145
)
Proceeds from sales of loans held-for-sale
   
5,277
     
10,206
 
Originations of loans held-for-sale
   
(5,553
)
   
(8,998
)
Gain on bargain purchase
    (1,405 )      
Changes in assets and liabilities:
               
Decrease (increase) in interest receivable and other assets
   
4,128
     
(2,167
)
Decrease in interest payable and other liabilities
   
(196
)
   
(995
)
Net cash provided by operating activities
   
24,999
     
13,024
 
 
               
Cash Flows From Investing Activities
               
Proceeds from calls or maturities of available-for-sale securities
   
30,766
     
11,090
 
Proceeds from sales of available-for-sale securities
   
16,987
     
6,349
 
Principal repayments on available-for-sale securities
   
54,864
     
77,635
 
Purchases of available-for-sale securities
   
(57,391
)
   
(143,445
)
Proceeds from maturities of certificates of deposit
   
3,687
     
4,416
 
Proceeds from sales of certificates of deposit
   
     
493
 
Purchases of certificates of deposit
    (3,435 )     (2,728 )
Net increase in loans
   
(66,781
)
   
(117,173
)
Purchases of Federal Home Loan Bank stock and other equity securities, at cost
    (1,078 )     (2,343 )
Purchases of premises and equipment
   
(1,045
)
   
(37
)
   Cash and cash equivalents acquired in acquisition
    103,425        
Net cash provided by (used in) investing activities
   
79,999
     
(165,743
)
 
               
Cash Flows From Financing Activities
               
Net (decrease) increase in deposits
   
(95,160
)
   
71,303
 
Cash dividends paid in lieu of fractional shares
   
(7
)
   
(8
)
Repurchases of common stock
   
(143
)
   
(102
)
Net cash (used in) provided by financing activities
   
(95,310
)
   
71,193
 
 
               
Net increase (decrease) in Cash and Cash Equivalents
   
9,688
     
(81,526
)
Cash and Cash Equivalents, beginning of period
   
187,417
     
345,929
 
Cash and Cash Equivalents, end of period
 
$
197,105
   
$
264,403
 
 
               
Supplemental Disclosures of Cash Flow Information:
               
Cash paid during the period for:
               
Interest
 
$
3,699
   
$
644
 
Income taxes
          3,810  
Supplemental disclosures of non-cash investing and financing activities:
               
Stock dividend distributed
   
5,652
     
6,992
 
Unrealized holding losses on available for sale securities, net of taxes
   
(2,676
)
   
(49,096
)
Market value of shares tendered in-lieu of cash to pay for exercise of options
    361       65  
Recognition of right-of-use assets obtained in exchange for operating lease liabilities
    245       869  
Non-cash assets acquired (liabilities assumed) in acquisition: