-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KxUWjCWVc3Agi8SVWzOfb+6Vy4+wgMokzmMtYZVne7YISHeMvVMTIgYPbHT0BbTH 5OxstoERcgb8i6DOu8BwBQ== 0000898430-02-001889.txt : 20020513 0000898430-02-001889.hdr.sgml : 20020513 ACCESSION NUMBER: 0000898430-02-001889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST NORTHERN COMMUNITY BANCORP CENTRAL INDEX KEY: 0001114927 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 680450397 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30707 FILM NUMBER: 02644328 BUSINESS ADDRESS: STREET 1: 195 N FIRST STREET CITY: DIXON STATE: CA ZIP: 95620 BUSINESS PHONE: 7076784422 MAIL ADDRESS: STREET 1: 195 N FIRST STREET CITY: DIXON STATE: CA ZIP: 95620 10-Q 1 d10q.htm QUARTERLY REPORT FOR PERIOD ENDING MARCH 31, 2002 Prepared by R.R. Donnelley Financial -- Quarterly Report For Period Ending March 31, 2002
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the Quarter Ended March 31, 2002
 
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 St., Dixon, CA
  
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:
 
None
 
Securities registered pursuant to Section 12(g) of the Act:
 
Common Stock, no par value
(Title of Class)
 
 
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 periods as 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 aggregate market value of Common Stock held by non-affiliates (based upon the last reported trade on the OTC Bulletin Board on May 9, 2002) was approximately $85,680,764. As of May 9, 2002, there were 3,295,414 shares of Common Stock, no par value, outstanding.
 

 
PART I—FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
    
March 31, 2002
   
December 31, 2001
ASSETS
              
Cash and due from banks
   
$
22,832
   
$
16,900
Federal funds sold
   
 
28,205
   
 
37,420
Investment securities—available for sale
   
 
88,979
   
 
96,797
Loans, net of allowance for loan losses of
              
$6,925 at March 31, 2002 and
              
$6,926 at December 31, 2001
   
 
256,353
   
 
244,277
Loans held for sale
   
 
20,758
   
 
25,074
Premises and equipment, net
   
 
6,855
   
 
6,709
Accrued Interest receivable and other assets
   
 
12,301
   
 
12,656
    
  
TOTAL ASSETS
   
$
436,283
   
$
439,833
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Deposits
              
Demand
   
$
105,757
   
$
104,944
Interest-bearing transaction deposits
   
 
43,890
   
 
44,083
Savings & MMDA’s
   
 
120,462
   
 
119,477
Time, under $100,000
   
 
65,988
   
 
67,697
Time, $100,000 and over
   
 
53,944
   
 
55,614
    
  
Total deposits
   
 
390,041
   
 
391,815
Accrued interest payable and other liabilities
   
 
6,312
   
 
6,462
    
  
TOTAL LIABILITIES
   
 
396,353
   
 
398,277
    
  
Stockholders’ equity
              
Common stock, no par value; 4,000,000 shares authorized; 3,308,501 shares issued and outstanding in 2001 and 3,191,464 shares issued and outstanding in 2001
   
 
26,983
   
 
24,136
Additional paid in capital
   
 
977
   
 
977
Retained earnings
   
 
10,123
   
 
14,232
Accumulated other comprehensive income
   
 
1,847
   
 
2,211
    
  
TOTAL STOCKHOLDERS’ EQUITY
   
 
39,930
   
 
41,556
    
  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   
$
436,283
   
$
439,833
    
  
 
See notes to unaudited condensed consolidated financial statements.

2

 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
 
      
Three months ended
March 31, 2002
       
Three months ended
March 31, 2001
  
Interest Income
                      
Loans
     
$
5,283
 
     
$
5,417
 
Federal funds sold
     
 
130
 
     
 
58
 
Investment securities
                      
Taxable
     
 
1,041
 
     
 
1,731
 
Non-taxable
     
 
270
 
     
 
280
 
      
    
Total interest income
     
 
6,724
 
     
 
7,486
 
Interest Expense
                      
Deposits
     
 
1,163
 
     
 
2,293
 
Other borrowings
     
 
50
 
     
 
31
 
      
    
Total interest expense
     
 
1,213
 
     
 
2,324
 
      
    
Net interest income
     
 
5,511
 
     
 
5,162
 
Recovery of loan losses
     
 
—  
 
     
 
(308
)
      
    
Net interest income after recovery of loan losses
     
 
5,511
 
     
 
5,470
 
      
    
Other operating income
                      
Service charges on deposit accounts
     
 
376
 
     
 
370
 
Gains on available for sale securities transactions
     
 
25
 
     
 
—  
 
Gains on sales of loans
     
 
210
 
     
 
96
 
Alternative investment income
     
 
106
 
     
 
65
 
ATM fees
     
 
52
 
     
 
54
 
Mortgage brokerage income
     
 
37
 
     
 
39
 
Loan servicing Income
     
 
70
 
     
 
41
 
Other income
     
 
144
 
     
 
144
 
      
    
Total other operating income
     
 
1,020
 
     
 
809
 
      
    
Other operating expenses
                      
Salaries and employee benefits
     
 
2,924
 
     
 
2,405
 
Occupancy and equipment
     
 
673
 
     
 
579
 
Data processing
     
 
124
 
     
 
188
 
Stationery and supplies
     
 
166
 
     
 
118
 
Advertising
     
 
55
 
     
 
51
 
Losses on available for sale securities
     
 
—  
 
     
 
352
 
Other
     
 
706
 
     
 
632
 
      
    
Total other operating expense
     
 
4,648
 
     
 
4,325
 
      
    
Income before income tax expense
     
 
1,883
 
     
 
1,954
 
Provision for income tax expense
     
 
623
 
     
 
680
 
      
    
Net income
     
$
1,260
 
     
$
1,274
 
Other Comprehensive Income:
                      
Unrealized (loss) gain on available for sale securities, net of tax effect
     
 
(364
)
     
 
1,358
 
      
    
Total Comprehensive Income
     
$
896
 
     
$
2,632
 
      
    
Basic Income per share
     
$
0.37
 
     
$
0.37
 
      
    
Diluted Income per share
     
$
0.36
 
     
$
0.36
 
      
    
 
See notes to unaudited condensed consolidated financial statements.

3

 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
      
Three months ended March 31, 2002
     
Three Months ended March 31, 2001
  
Operating Activities
                    
Net Income
     
$
1,260
 
   
$
1,274
 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                    
Depreciation
     
 
271
 
   
 
222
 
Recovery of loan losses
     
 
—  
 
   
 
(308
)
Gain (loss) on available for sale securities
     
 
(25
)
   
 
352
 
Net increase in loans held for sale
     
 
(2,092
)
   
 
(4,571
)
Gain on sale of loans
     
 
(210
)
   
 
(96
)
Decrease in accrued interest receivable and other assets
     
 
355
 
   
 
1,318
 
(Decrease) increase in accrued interest payable and other liabilities
     
 
(150
)
   
 
1,721
 
      
  
Net cash used in operating activities
     
 
(591
)
   
 
(88
)
Investing Activities
                    
Net decrease in investment securities
     
 
7,479
 
   
 
1,404
 
Net increase in loans
     
 
(5,458
)
   
 
(10,322
)
Purchases of premises and equipment, net
     
 
(417
)
   
 
(207
)
      
  
Net cash provide by (used in) investing activities
     
 
1,604
 
   
 
(9,125
)
Financing Activities
                    
Net decrease in deposits
     
 
(1,774
)
   
 
(3,208
)
Cash dividends paid
     
 
(13
)
   
 
(7
)
Stock Options Exercised
     
 
207
 
   
 
59
 
Repurchase of stock
     
 
(2,716
)
   
 
(443
)
      
  
Net cash used in financing activities
     
 
(4,296
)
   
 
(3,599
)
      
  
Net change in cash and cash equivalents
     
 
(3,283
)
   
 
(12,812
)
Cash and cash equivalents at beginning of period
     
 
54,320
 
   
 
34,660
 
      
  
Cash and cash equivalents at end of period
     
$
51,037
 
   
$
21,848
 
      
  
Supplemental disclosures of cash flow information:
                    
Cash paid during the period for:
                    
Interest
     
$
1,303
 
   
$
2,340
 
Income Taxes
     
$
—  
 
   
$
440
 
Supplemental disclosures of noncash investing and financing activities:
                    
Stock dividend distributed
     
$
5,356
 
   
$
3,126
 
 
See notes to unaudited condensed consolidated financial statements.

4

 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002 and December 31, 2001
 
1.    BASIS OF PRESENTATION
 
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the First Northern Community Bancorp’s Annual Report to shareholders and Form 10-K for the year ended December 31, 2001. All material intercompany accounts have been eliminated in consolidation.
 
2.    RECLASSIFICATIONS
 
Certain reclassifications have been made to the 2001 financial statements to conform with the 2002 presentation.
 
3.    LOANS
 
Effective March 29, 2002, the Bank transferred $6,618,000 from their loans held for sale portfolio to their loans held to maturity portfolio.
 
4.    OUTSTANDING SHARES AND EARNINGS PER SHARE
 
On February 4, 2002, the Board of Directors of the First Northern Community Bancorp declared a 6% stock dividend payable as of March 31, 2002. All income per share amounts have been adjusted to give retroactive effect to the stock dividend.
 
Earnings Per Share (EPS)
 
Basic and diluted earnings per share for the three-month periods ending March 31, 2002 and March 31, 2001 were computed as follows (in thousands, except share amounts and earnings per share):
 
    
Three months ended March 31,
    
2002
   
2001
Basic earnings per share:
              
Net income
   
$
1,260
   
$
1,274
    
  
Denominator:
              
Weighted average common shares outstanding
   
 
3,375,529
   
 
3,446,435
    
  
Basic EPS
   
$
0.37
   
$
0.37
    
  
Diluted earnings per share:
              
Net income
   
$
1,260
   
$
1,274
    
  
Denominator:
              
Weighted average common shares outstanding
   
 
3,375,529
   
 
3,446,435
Incremental shares due to dilutive stock options
   
 
149,081
   
 
77,949
    
  
    
 
3,524,610
   
 
3,524,384
    
  
Diluted EPS
   
$
0.36
   
$
0.36
    
  

5

 
4.    ALLOWANCE FOR LOAN LOSSES
 
The allowance for loan losses is maintained at levels considered adequate by management to provide for possible loan losses. The allowance is based on management’s assessment of various factors affecting the loan portfolio, including problem loans, business conditions and loss experience, and an overall evaluation of the quality of the underlying collateral. Changes in the allowance for loan losses during the three-months ended March 31, 2002 and 2001 and for the year ended December 31, 2001 were as follows (in thousands):
 
    
Three months ended March 31,
     
Year ended December 31,
2001
  
    
2002
     
2001
     
Balance, beginning of period
   
$
6,926
 
   
$
7,228
 
   
$
7,228
 
Recovery of loan losses
   
 
—  
 
   
 
(308
)
   
 
(308
)
Loan charge-offs
   
 
(33
)
   
 
(49
)
   
 
(154
)
Loan recoveries
   
 
32
 
   
 
17
 
   
 
160
 
    
  
  
Balance, end of period
   
$
6,925
 
   
$
6,888
 
   
$
6,926
 
    
  
  
 
5.    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
 
The Company adopted the provisions of Statement 141 in fiscal year 2001 and Statement 142 effective January 1, 2002. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 continued to be amortized prior to the adoption of Statement 142. The Company does not have any goodwill and intangible assets acquired in business combinations. The adoption of Statements No. 141 and 142 did not have a material impact on the financial condition or operating results of the Company.
 
6.    ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
 
The Financial Accounting Standards Board (FASB) recently issued Statement No. 143, Accounting for Asset Retirement Obligations in August 2001. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.
 
As a result, FASB Statement No. 143 applies to all entities that have legal obligations associated with the retirement of long-lived tangible assets that result from the acquisition, construction, development or normal use of the asset. As used in this Statement, a legal obligation results from existing law, statute, ordinance, written or oral contract, or by legal construction of a contract under the doctrine of promissory estoppels.

6

 
Statement No. 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of a tangible long-lived asset. Since the requirement is to recognize the obligation when incurred, approaches that have been used in the past to accrue the asset retirement obligation over the life of the asset are no longer acceptable. Statement No. 143 also requires the enterprise to record the contra to the initial obligation as an increase to the carrying amount of the related long-lived asset (i.e., the associated asset retirement costs) and to depreciate that cost over the remaining useful life of the asset. The liability is changed at the end of each period to reflect the passage of time (i.e., accretion expense) and changes in the estimated future cash flows underlying the initial fair value measurement. Enterprises are required to adopt Statement No. 143 for fiscal years beginning after June 15, 2002. Early adoption is encouraged. The Company does not expect adoption of Statement No. 143 to have a material impact on the financial condition or operating results of the Company.
 
8.    ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
 
On October 3, 2001, the Financial Accounting Standards Board issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While Statement No. 144 supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, it retains many of the fundamental provisions of that Statement.
 
Statement No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. However, it retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. By broadening the presentation of discontinued operations to include more disposal transactions, the FASB has enhanced management’s ability to provide information that helps financial statement users to assess the effects of a disposal transaction on the ongoing operations of an entity. The Company adopted the provisions of Statement 144 on January 1, 2002. The adoption of Statement No. 144 did not have a material impact on the financial condition or operating results of the Company.
 
9.    SUPPLEMENTAL COMPENSATION PLANS
 
Key Executive Elective Deferred Compensation Plan—2001 Executive Deferral Plan
 
Under the plan, eligible executives may elect to defer a portion of their current compensation. Deferred amounts earn interest at an annual rate determined by the Bank’s Board, currently 7.85%. Deferred compensation and interest earned will be paid out to the participating executive at or following his or her retirement. Under the Plan, beginning January 1, 2002, Mr. Onsum and Ms. Louise Walker elected to defer a portion of their compensation. If the executive dies before retirement age, the Bank will receive the death benefits of an insurance policy purchased by the Bank on the executive’s life. In December 2001, the Bank purchased single-premium life insurance policies on the lives of Mr. Onsum and Ms. Walker in connection with the Executive Deferral Plan, with a single premium of $1.125 million for the policy on Mr. Onsum’s life and a premium of $425,000 for the policy on Ms. Walker’s life. The Bank is the beneficiary and owner of the policies.
 
Director Elective Deferral Fee Plan
 
The Bank has implemented an elective deferred director fee plan, a nonqualified plan providing unfunded deferred benefits for participating directors. Under the Plan, beginning January 1, 2002, Director Aldrete has elected to defer a portion of her director fees. Her deferred director fees earn interest at a rate determined annually by the Bank, currently 7.85%. Deferred fees and interest earned will be paid out to Director Aldrete at her retirement. If she dies before her retirement age, her beneficiaries will receive the deferred fees and interest earned. The Bank is entitled to any insurance policy death benefits from an insurance policy purchased by the Bank with a lump-sum premium payment of $75,000.

7

 
Item 2.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RELULTS OF OPERATIONS
 
The following is a discussion and analysis of the significant changes in the Unaudited Condensed Consolidated Balance Sheets and of the significant changes in income and expenses reported in the Unaudited Condensed Consolidated Statements of Income and Comprehensive Income as of and for the three-month ended March 31, 2002 and 2001.
 
SUMMARY
 
The Company recorded net income of $1,260,000 for the three-month period ended March 31, 2002, representing a decrease of $14,000 or 1.1% over $1,274,000 for the same period in 2001.
 
The decrease in net income over the three-month period ended March 31, 2002 as compared to the same period a year ago, resulted primarily from a decrease in recovery of loan losses and increases in other operating expenses which was partially offset by increases in net interest income and other operating income and a decrease in the provision for income taxes expense.
 
On February 4, 2002, the Board of Directors of the First Northern Community Bancorp declared a 6% stock dividend payable as of March 31, 2002. All income per share amounts have been adjusted to give retroactive effect to the stock dividend.
 
CHANGES IN FINANCIAL CONDITION
 
The asset side of the Unaudited Condensed Consolidated Balance Sheet showed a $5,932,000 increase in cash and due from banks, a $9,215,000 decrease in fed funds sold, a $7,818,000 decrease in investment securities, a $12,076,000 increase in loans, a $4,316,000 decrease in loans held for sale, and a $355,000 decrease in accrued interest receivable and other assets from December 31, 2001 to March 31, 2002. The reason for the increase in cash and due from banks was due to an increase in items in process of collection. The decrease in fed funds sold was due to increased loans and items in the process of collection. The decrease in investment securities was due to proceeds from sales, maturities and calls. The proceeds were used to fund new loans. The increase in loans was in real estate loans, which was due to the significant demand for mortgage and construction financing during the current low interest environment. The decrease in loans held for sale was in real estate loans, this category of loans fluctuates up and down depending on the timing of the boarding of a loan and it’s subsequent sale. The decrease in accrued interest receivable and other assets was due to decreased securities interest receivables.
 
The liability side of the Unaudited Condensed Consolidated Balance Sheet showed a decrease in total deposits of $1,774,000 compared to year-end 2001 deposit totals. The decrease in deposits was due to lower time and interest-bearing transaction deposit totals combined with higher demand, savings and money market deposit totals. The fluctuations were due to cyclical changes in deposit requirements of the Bank’s depositors. Other liabilities decreased $150,000 from December 31, 2001 to March 31, 2002. The decrease in other liabilities was due decreased accrued profit sharing and incentive compensation expenses, which was partially offset by increased treasury tax and loan notes payable.
 
CHANGES IN RESULTS OF OPERATIONS
 
Interest Income
 
The reduction in general market rates reduced the yields on earning assets. The Federal Open Market Committee lowered the federal funds rate by more than 300 basis points during the past twelve months.
 
Interest income on loans for the three-month period ended March 31, 2002 is down 2.5% over the same period for 2001, from $5,417,000 to $5,283,000. The decrease over the three-month period ended March 31, 2002 as compared to the same period a year ago, was due to a 179 basis point decrease in loan yields which was partially offset by an increase in average loans.
 
Interest income on securities for the three-month period ended March 31, 2002 is down 34.8% over the same period for 2001, from $2,011,000 to $1,311,000. The decrease over the three-month period ended March 31, 2002 as compared to the same period a year ago, is due to a 80 basis point decrease in securities yields combined with a decrease in average securities.

8

 
Interest income on fed funds sold for the three-month period ended March 31, 2002 is up 124.1% over the same period for 2001 from $58,000 to $130,000. The increase in fed funds income over the three-month period ended March 31, 2002 was due to an increase in average fed funds sold which was partially offset by a decrease in fed funds rates.
 
Interest Expense
 
The reduction in general market rates reduced the cost of funds. The Federal Open Market Committee lowered the federal funds rate by more than 300 basis points during the past twelve months.
 
Interest expense on deposits and other borrowings was down 47.8% for the three-month period ending March 31, 2002 over the same period in 2001 from $2,324,000 to $1,213,000. The decreased interest expense over the three-month period ended March 31, 2002 was due to lower deposit rates, which was partially offset by increased average deposits.
 
Provision for Loan Losses
 
There was no provision for loan losses for the three-month period ending March 31, 2002 compared to a recovery of $308,000 for the same period in 2001. The zero provision and recovery for those periods were due to continued favorable market conditions and loan quality in the Company’s loan portfolio. The March 31, 2002 allowance for loan losses of approximately $6,925,000 is 2.6% of total loans compared to $6,926,000 or 2.7% of total loans at December 31, 2001.
 
Other Operating Income
 
Other operating income was up 26.1% for the three-month period ended March 31, 2002 over the same period in 2001 from $809,000 to $1,020,000. This increase was primarily due to gains on sales of loans; loan servicing income; gains on available for sale securities and alternative investment fees. Gains on sales of loans accounted for most of the increase in other operating income and this increase was due to the significant increase in mortgage financing and refinancing activity over the same period in 2001. The bank sold approximately $17,000,000 in residential mortgage loans during the first quarter of 2002. The increase in other miscellaneous income was due, for the most part, to the timing of the receipt of visa check/debit card fees.
 
Other Operating Expense
 
Total other operating expense was up 7.5% for the three-month period ending March 31, 2002 over the same period in 2001 from $4,325,000 to $4,648,000.
 
The main reasons for the increase in the three-month period ending March 31, 2002 was a combination of: increases in salaries; occupancy and equipment; and stationery and supplies combined with decreases in data processing and other miscellaneous expense. The increase in salaries was due to increases in the number of employees and merit increases combined with increases in commissions for real estate loans. The decrease in data processing was due to decreased usage as compared to the same period in 2001. The increase in occupancy and equipment was due to increased rent expense, furniture and equipment depreciation, computer hardware depreciation and utilities. The increase in other miscellaneous expense was due to: increased postage and computer software depreciation which were partially offset by decreased miscellaneous loan and lease expense; computer software and hardware service contracts; and sundry losses.
 
Asset Quality
 
The Company manages asset quality and credit risk by maintaining diversification in its loan portfolio and through review processes that include analysis of credit requests and ongoing examination of outstanding loans and delinquencies, with particular attention to portfolio dynamics and mix. The Company strives to identify loans experiencing difficulty early enough to correct the problems, to record charge-offs promptly based on realistic assessments of current collateral values, and to maintain an adequate allowance for loan losses at all times.
 
It is generally the Company’s policy to discontinue interest accruals once a loan is past due as to interest or principal payments for a period of ninety days. When a loan is placed on non-accrual, interest accruals cease and uncollected accrued interest is reversed and charged against current income. Payments received on non-accrual loans are applied against principal. A loan may only be restored to an accruing basis when it again becomes well secured and in the process of collection or all past due amounts have been collected.

9

 
Non-accrual loans amounted to $956,000 at March 31, 2002, and were comprised of ten commercial loans and one installment loan. At December 31, 2001, non-accrual loans amounted to $530,000 and were comprised of nine commercial loans and one installment loan. At March 31, 2001, non-accrual loans amounted to $614,000 and were comprised of six commercial loans and two agricultural loans. The increase in non-accrual loans at March 31, 2002 over the balance at December 31, 2001 was due to one significant agricultural loan being added to this category.
 
At March 31, 2002, the Company had loans 90 days past due and still accruing totaling $66,000. Such loans amounted to $54,000 at December 31, 2001 and $82,000 at March 31, 2001.
 
Liquidity and Capital Resources
 
To be able to serve our market area, the Company must maintain proper liquidity and adequate capital. Liquidity is measured by various ratios, with the most common being the ratio of loans to deposits. This ratio was 71.0% on March 31, 2002. In addition, on March 31, 2002, the Company had the following short term investments: $28,205,000 in fed funds sold; $4,500,000 in securities due within one year; and $21,700,000 in securities due in one to five years.
 
To meet unanticipated funding requirements, the Company maintains short-term lines of credit with other banks totaling $20,700,000.
 
Capital adequacy is generally measured by comparing the total of equity capital and reserve for loan losses to total assets. On March 31, 2002 this ratio was 10.7% and on December 31, 2001 it was 11.0%. These figures are well above the levels currently considered adequate by bank regulators.
 
The Company’s primary source of liquidity on a stand-alone basis is dividends from the Bank. Dividends from the Bank are subject to regulatory restrictions.
 
Item 3.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
There have been no material changes in the quantitative and qualitative disclosures about market risks as of March 31, 2002, from that presented in the First Northern Community Bancorp’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

10

 
PART II—OTHER INFORMATION AND SIGNATURES
 
Item 1.    Legal Proceedings
 
Not Applicable.
 
Item 2.    Changes in Securities
 
Not Applicable.
 
Item 3.    Defaults upon Senior Securities
 
Not Applicable.
 
Item 4.    Submission of Matters to a Vote of Security Holders
 
Not Applicable.
 
Item 5.    Other Information
 
Not Applicable.
 
Item 6.    Exhibits and Reports on Form 8-K.
 
(a)  An index of exhibits follows the signature page.
 
(b)  There were no Reports on Form 8-K.
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized to sign on behalf of the registrant.
 
Date: May 13, 2002
  
FIRST NORTHERN COMMUNITY BANCORP
   
BY:
  
/s/    LOUISE A. WALKER        
           
Louise A. Walker
Sr. Vice President / Chief Financial Officer

11

EXHIBIT INDEX
 
EXHIBIT NO.
   
DESCRIPTION
    10.13
   
Form of 2001 Executive Deferral Plan of First Northern Bank, including Executive Deferral Plan forms “Plan agreement”, “Beneficiary Designation Form”, “Election Form” and Form of “Benefit Payment” between Owen J. Onsum and Louise A. Walker beginning on January 1, 2002.
    10.14
   
Form of First Northern Bank Director Deferred Fee Agreement between Lori J. Aldrete beginning on January 1, 2002.
EX-10.13 3 dex1013.txt FORM OF 2001 EXECUTIVE DEFERRAL PLAN Exhibit 10.13 EXECUTIVE DEFERRAL PLAN OF FIRST NORTHERN BANK Purpose The purpose of this plan is to provide specified benefits to a select group of management and highly compensated employees who contribute materially to the continued growth, development and future business success of First Northern Bank and its subsidiaries. Article 1 Definitions For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "Account Balance" shall mean the sum of (i) the Deferral Amount and (ii) interest credited in accordance with all the applicable interest crediting provisions of this Plan, reduced by all distributions made in accordance with the Plan. 1.2 "Total Cash Compensation" shall mean the annual Base Salary and Annual Bonus compensation that is to be paid to a Participant for each Plan Year for employment services rendered to any Employer, determined as of the first day of the Plan Year, excluding commissions, overtime and nonmonetary awards, before reduction for compensation deferred pursuant to all nonqualified deferred compensation plans of any Employer. 1.3 "Base Rate" shall be 125% of the Moody's Rate. The Moody's Rate shall mean the interest rate determined by the Committee at any time before the commencement of each Plan Year. The Moody's Rate for the Plan Year shall be the most current monthly "Seasoned Corporate Bond" rate published by Moody's Investors Services, Inc., or any successor to that service, available prior to the announcement by the Committee. The Seasoned Corporate Bond rate is an economic indicator, based on an arithmetic average of the yield of representative bonds, including industrial, public utilities, Aaa, A, and Baa bonds, and is calculated as a monthly average of the composite yield. 1.4 "Beneficiary" shall mean the person or persons, trusts, estates, or other entities designated in accordance with Article 9, who is entitled to receive benefits under this Plan upon the death of a Participant. 1.5 "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries. 1.6 "Board" shall mean the Board of Directors of the Company. 1.7 "Change in Control" shall have the meaning set forth in Section 13.3. 1.8 "Claimant" shall have the meaning set forth in Section 17.1. 1.9 "Committee" shall mean the administrative committee appointed to manage and administer the Plan in accordance with the provisions of Article 16. 1.10 "Company" shall mean First Northern Bank. 1.11.1 "Deferral Amount" shall be the sum of all of a Participant's Base Annual Salary and/or Annual Bonus deferrals and Rollover Amount, if any. 1.12 "Deferral Commitment Period" shall mean the period described in Section 3.4 of this Plan. 1.13 "Disability" shall mean a period of disability during which a Participant qualifies for benefits under the Participant's Employer's long-term disability plan. 1.14 "Disability Benefit" shall mean the benefit set forth in Section 8.2. 1.15 "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. 1.16 "Employer" shall mean the Company and/or any subsidiaries of the Company that have been selected by the Board to participate in the Plan. 1.17 "Participant" shall mean any employee of an Employer (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are returned to and accepted by the Committee and (v) whose Plan Agreement has not terminated. 1.18 "Participation Year" shall mean with respect to any Participant, any Plan Year in which a Participant is at any time during such year a Participant. 1.19 "Plan" shall mean the Executive Deferral Plan of an Employer which shall be evidenced by this instrument and by each Plan Agreement. 1.20 "Plan Agreement" shall mean a written agreement, as amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant shall provide for the entire benefit to which such Participant is entitled to under the Plan, and the Plan Agreement bearing the latest date of acceptance by the Committee shall govern such entitlement. 1.21 The "Plan Year" shall begin on January 1 and continue through December 31 of the same year. 1.22 Projected Benefit shall mean the Participant's Account Balance as of the first day of the month during which the Participant would have attained the age of sixty-five (65) years assuming all annual Deferral Amounts had been made and interest credited thereon at the Base Rate. The Base Rate used for the calculation of the projected Age 65 Account Balance shall be the most recent Base Rate in effect as of the date of the Participant's death. The Projected Benefit with respect to each Participant shall be based solely upon the Company's determination thereof. The Company at its sole discretion, may from time to time, modify the amount of each Participant's Projected Benefit. 1.23 "Retirement Benefit" shall mean the retirement benefit provided for in Article 5. 1.24 "Retirement" and "Retires" shall mean severance from employment with all Employers for any reason other than a leave of absence, death or a Disability that is not determined to be a permanent disability, on or after the earlier of (i) age fifty-five; or (ii) the determination that the Participant is permanently disabled under the Employer's long-term disability plan. 1.25 "Rollover Amount" shall mean the balance related to a Participant, if any, from the Employer's previous nonqualified deferred compensation plan(s). 1.26 "Survivor's Benefit" shall mean the benefit provided for in Article 6. 1.27 "Termination Benefit" shall mean the benefit provided for in Article 7. 1.28 "Termination of Employment" shall mean the cessation of employment, voluntarily or involuntarily, and, except as provided in Article 8 and Article 10, shall exclude cessation as a result of an authorized leave of absence, retirement, Disability or death. 1.29.1 "Unforeseeable Financial Emergency" shall mean an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence, all as determined in the sole discretion of the Committee. Article 2 Eligibility 2.1 Selection by Committee. The Committee, in its sole discretion, shall ---------------------- establish eligibility qualifications for participation in the Plan. Participation shall be limited to a select group of management and highly compensated employees of the Employer. All selected employees shall be entitled to participate in the Plan for the Plan Year in which they are selected, provided they deliver to the Committee and the Committee accepts, within 30 days of selection, all documents required by the Committee for acceptance into the Plan. Any selected employee who does not meet this 30-day time period shall become a Participant in the Plan commencing with the first day of the Plan Year following the delivery to and acceptance by the Committee of the required documents. 2.2 Enrollment Requirements. As a condition of participation, each Participant ----------------------- so selected shall complete, sign and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, and shall comply with all further conditions that may be established by the Committee. Article 3 Deferral Commitments/Interest Crediting 3.1 Minimum Deferral. A Participant must defer during each Plan Year of the ---------------- Deferral Commitment Period at least $2,000 of his or her Base Annual Salary or Annual Bonus. If a Participant first becomes a Participant after the first day of a Plan Year, or in the case of the first Plan Year of the Plan itself, and if he so elects on the Election Form, the minimum deferral shall be an amount equal to $2,000, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12. 3.2 Maximum Deferral. For each Plan Year of the Deferral Commitment Period, a ---------------- Participant may defer up to 50% of Base Annual Salary and/or 100% of Annual Bonus. The Board, at its sole discretion, may increase the maximum deferral amount prior to any Plan Year. 3.3 Fixed Deferral Amount. In no event shall an annual deferral amount be --------------------- decreased during the Deferral Commitment Period. An annual deferral amount may only be increased (i) prior to the commencement of the Plan Year to which such annual deferral amount relates and (ii) with the approval of the Committee. 3.4 Deferral Commitment Period. The "Deferral Commitment Period" for each ---------------------------- Participant shall be one Plan Year commencing with the Plan Year designated in the election form accepted by the Committee. 3.5 Withholding of Deferral Amounts. The portion of the Base Annual Salary ------------------------------- elected to be deferred annually shall be withheld in equal amounts over the Plan Year. The portion of the Annual Bonus elected to be deferred annually shall be withheld in one lump sum. 3.6 FICA/Medicare Taxes. For each Plan Year of the Deferral Commitment Period, ------------------- the Employer shall ratably withhold from that portion of the Participant's Base Annual Salary and/or Annual Bonus that is not being deferred, the Participant's share of FICA and Medicare taxes based on an amount equal to the Base Annual Salary and/or Annual Bonus before reduction by the amount deferred. If necessary, the Committee shall reduce the amount deferred in order to comply with this Section 3.6. 3.7 Interest Crediting Prior to Distribution. Prior to any distribution of ---------------------------------------- benefits, interest shall be credited and compounded annually on a Participant's Account Balance at the Base Rate. For purposes of this crediting and compounding, all amounts deferred during a Plan Year shall be treated as having been deferred as of the beginning of the Plan Year. In the event of Retirement, Disability, death or a Termination of Employment prior to the end of a Plan Year, the basis for that year's interest crediting will be a fraction of the full year's interest, based on the number of full months that the Participant was employed with the Employer during the Plan Year prior to the occurrence of such event. 3.8.1 Interest Crediting for Installment Distributions. In the event a benefit ------------------------------------------------ is paid in installments under Articles 5, 6, 7 or 8, interest shall be credited on the undistributed portion of the Participant's Account Balance commencing on the first day of the month in which the Participant terminates employment using a fixed interest rate that is determined by averaging the Base Rates for the Plan Year in which installment payments commence and the three (3) preceding Plan Years. If a Participant has completed fewer than four (4) Plan Years, this average shall be determined using the Base Rates for the Plan Years during which the Participant participated in the Plan. Article 4 Unforeseeable Financial Emergencies 4.1 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies. If --------------------------------------------------------------------- the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant and/or (ii) receive a partial or full payout from the Plan. (The payout shall not exceed the Participant's Account Balance, calculated as if such Participant were receiving a Termination Benefit.) If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. Article 5 Retirement Benefit 5.1 Eligibility for Retirement Benefit. A Participant who Retires shall receive ---------------------------------- as a Retirement Benefit, in accordance with this Article, his Account Balance. 5.2 Retirement Benefit - Method of Payment. The Company shall pay the -------------------------------------- Retirement Benefit to the Participant in the form elected by the Participant on the Election Form. The Company shall credit interest as described under Section 3.7 and 3.8. 5.3 Death Prior to Completion of Retirement Benefit. If the Participant dies ----------------------------------------------- after Retirement and prior to the completion of the Retirement Benefit payments, the retired Participant's designated Beneficiary will receive any unpaid Retirement Benefit payments due the Participant, either at the times they were to be received by the Participant, or a present value equivalent, discounted using the rate described in Section 3.8 calculated as of the date of death, in a lump sum, as determined by the Committee in its sole discretion. Article 6 Survivor Benefit 6.1 Eligibility for Survivor's Benefit. Except as provided in Section 6.4 ---------------------------------- below, if a Participant dies prior to (i) Retirement; (ii) Termination of Employment; or (iii) is determined to be permanently disabled pursuant to Article 8, the Participant's Beneficiary shall receive a Survivor's Benefit. 6.2 Survivor's Benefit - Amount. In the event of a Participant's death prior to --------------------------- a Termination of Employment and prior to the termination of the Plan, the amount of the benefit payable hereunder to such Participant's Beneficiary shall be the Participant's Account balance as of the date of his death. 6.3 Survivor's Benefit - Method of Payment. The Survivor's Benefit may be paid -------------------------------------- in a lump sum, or in installments over a period of 60, 120, or 180 months at the sole discretion of the Committee. The lump sum payment shall be made, or installment payments shall commence within sixty (60) days of the date the Committee receives proof of the Participant's death, in such form as is acceptable by the Committee. Article 7 Termination Benefit 7.1 Eligibility for Termination Benefit. If a Participant experiences a ----------------------------------- Termination of Employment prior to Retirement or Death, the Participant shall receive the Termination Benefit described in this Article. 7.2 Termination Benefit - Amount. The Company shall pay the Termination Benefit ---------------------------- to the Participant in the form elected by the Participant on the Election Form. The Company shall credit interest as described under Section 3.7 and 3.8. 7.3.1 Termination Benefit - Method of Payment. The Termination Benefit shall be --------------------------------------- paid over 60 months beginning within ninety (90) days following the Termination of Employment with interest credited on the unpaid balance in the manner provided in Section 3.8. Article 8 Disability Waiver and Benefit 8.1 Disability Waiver. ----------------- (a) Eligibility. By participating in the Plan, all Participants are ----------- eligible for this waiver. (b) Waiver of Deferral: Credit. A Participant who is determined by the -------------------------- Committee to be suffering from a Disability shall be excused from fulfilling that portion of the Base Annual Salary deferral commitment that would otherwise have been withheld from a Participant's Base Annual Salary for the period during which the Participant suffers a Disability. In addition, the Participant's Account Balance shall be credited with any deficit in the Base Annual Salary deferral actually withheld for the Plan Year in which the Participant began suffering a Disability and the Base Annual Salary deferral for every Plan Year thereafter until the Disability ceases and the Participant returns to work, dies or is paid the Disability Benefit provided for in Section 8.2. The last Election Form received and accepted by the Committee prior to the Disability shall determine the Base Annual Salary deferral for purposes of this Section 8.1 (b) . (c) Termination of Disability and Return to Employment. If the -------------------------------------------------- Participant's Disability ceases prior to the completion of a Plan Year, the Participant shall only be credited with the Base Annual Salary deferral for that Plan Year that he would have been credited with if he had not been Disabled and had had compensation withheld through to the date the Disability ceases. If the Participant returns to employment with an Employer, the Participant shall be obligated to complete the remaining portion of the Base Annual Salary deferral commitment, commencing with the month he or she returns to work. 8.2 Disability Benefit. A Participant suffering a Disability shall continue to ------------------ be considered to be employed and shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right, in its sole and absolute discretion, to declare a Termination of Employment, or in the case of a Participant who is fifty-five or older at the time of the Committee's action, a Retirement, at any time after such Participant is determined to be permanently disabled under the Participant's Employer's long-term disability plan. 8.3 Article 9 Beneficiary 9.1 Beneficiary. Each Participant shall have the right, at any time, to ----------- designate any person or persons as his or her Beneficiary or Beneficiaries (both primary as well as contingent) to receive any benefits payable under the Plan to a Beneficiary upon the death of a Participant. 9.1.1 Beneficiary Designation: Change: Spousal Consent. A Participant shall ------------------------------------------------ designate his or her Beneficiary or Beneficiaries by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee's rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant's spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death. 9.3 Acknowledgment. No designation or change in designation of a Beneficiary -------------- shall be effective until received, accepted and acknowledged in writing by the Committee. 9.4 No Beneficiary Designation. If a Participant fails to designate a -------------------------- Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the Participant's estate. 9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper ----------------------- Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right to withhold such payments until this matter is resolved to the Committee's satisfaction. 9.6 Discharge of Obligations. The payment of benefits under the Plan to a ------------------------ Beneficiary shall fully and completely discharge the Employer from all further obligations under this Plan with respect to the deceased Participant and all of his or her Beneficiaries. Article 10 Leave of Absence 10.1 Paid Leave of Absence. If a Participant is authorized by the Participant's --------------------- Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Deferral Amount shall continue to be withheld during such paid leave of absence. 10.2 Unpaid Leave of Absence. If a Participant is authorized by the ----------------------- Participant's Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Article 11 Employer/Participant Liability 11.1 General Assets. Amounts payable to a Participant shall be paid from the -------------- general assets of the Participant's Employer exclusively. 11.2 Employer's Liability. The Participant's Employer's liability for the -------------------- payment of benefits shall be defined only by this Plan, as entered into between the Participant's Employer and a Participant. 11.3.1 Limitation of Obligation. The Participant's Employer shall have no ------------------------ obligation to a Participant under the Plan, except as expressly provided for in the Plan. 11.4 Participant Cooperation. The Participant must cooperate with any Employer ----------------------- and the Committee in furnishing all information requested by such Employer and/or Committee in order to facilitate the payment of benefits, and the administration and operations of this Plan. Such information may include taking a physical examination, or other actions, and such cooperation shall extend beyond the termination of the Plan Agreement and the Participant Employee's participation in the Plan. 11.5.1 Unsecured General Creditor. Participants, their Beneficiaries and their -------------------------- permitted heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of any Employer. Any and all of an Employer's assets shall be, and remain, the general, unpledged unrestricted assets of such Employer. The Participant's Employer's obligations under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. Article 12 No Guarantee of Employment 12.1 No Guarantee of Employment. Nothing in this Agreement shall be construed as -------------------------- creating a contract of employment or altering in any manner the employment relationship with a Participant which is hereby acknowledged to be an "at will" employment relationship that can be terminated at any time for any reason, with or without cause, unless otherwise expressly provided in a written employment agreement. All terms and conditions of a Participant's current employment shall remain the same. Nothing in this Plan creates, or is meant to create, any obligation on the part of the Participant's Employer to keep a Participant employed by the Participant's Employer or not to terminate a Participant at any time and for any reason. Article 13 Termination, Amendment or Modification 13.1 Termination. Any Employer reserves the right to terminate the Plan at any ----------- time with respect to Participants employed by that Employer. Upon the termination of the Plan, all Plan Agreements shall terminate and a Participant's Account Balance shall be paid out in accordance with the benefits that the Participant would have received if the Participant had experienced a Termination of Employment on the date of Plan termination or, if Plan termination occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired on the date of Plan termination. Prior to a Change in Control, the Employer shall have the right, at its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or in monthly installments for up to 15 years, with interest credited as provided in Section 3.7 or 3.8 as applicable. After a Change in Control, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments by paying the present value equivalent of such payments, using the Base Rate for the Plan Year in which the termination occurs as the discount rate, in a lump sum or pursuant to a different payment schedule. 13.2 Amendment. Any Employer may, at any time, amend or modify the Plan in whole --------- or in part with respect to that Employer, provided, however, that no amendment or modification shall be effective to decrease or restrict the present value equivalent, using the Base Rate for the Plan Year of the amendment or modification as the discount rate, of a Participant's Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification, or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided however, that the Employer shall have the right to accelerate installment payments by paying the present value equivalent of such payments, using the Base Rate for the Plan Year of the amendment or modification as the discount rate, in a lump sum or pursuant to a different payment schedule. 13.3 Change in Control. A "Change in Control" shall be deemed to occur if: ----------------- (a) any "person" (as that term is used in Section 13 and 14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act")) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of 20% or more of the Company's capital stock entitled to vote in the election of directors; (b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least three-quarters of the directors still in office who were directors at the beginning of the period; (c) the Company is liquidated or consummates a merger or consolidation in which it is not the survivor; (d) substantially all of the assets of the Company and its subsidiaries, in the aggregate, are sold or otherwise transferred to parties that are not within a "controlled group of corporations" (as defined in the Section 1563 of the Internal Revenue Code of 1986, as amended), in which the Company is a member. 13.4 Legal Fees to Enforce Rights After Change in Control. The Company is aware ---------------------------------------------------- that upon the occurrence of a Change in Control, the Board (which might then be composed of new members) or a shareholder of any Employer, or of any successor corporation might then cause or attempt to cause an Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause an Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company or the Participant's Employer has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, the Participant's Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant's Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participant's Employer to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company or the Participant's Employer, or any director, officer, shareholder or other person affiliated with the Company, the Participant's Employer or any successor thereto in any jurisdiction. 13.5 Effect of Payment. The full payment of the applicable benefit under ----------------- Articles 5, 6, 7 or 8.2 of the Plan shall completely discharge all obligations to a Participant under this Plan and the Participant's Plan Agreement shall terminate. Article 14 Other Benefits and Agreements 14.1 Coordination with Other Benefits. The benefits provided for a Participant -------------------------------- and Participant's Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant's Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided. Article 15 Restrictions on Alienation of Benefits 15.1 Nonassignability. Neither a Participant nor any other person shall have any ---------------- right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt, the amounts if any, payable hereunder, or any part thereof. No part of the amounts payable shall, prior to actual payment, be subject to any claims of creditors and, in particular, they shall not be subject to attachment, garnishment, seizure or sequestration by any creditor for the payment of any debts, judgments, obligations, alimony or separate maintenance owed by a Participant or any other person nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency. Article 16 Administration of the Plan 16.1.1 Committee Administration. The general administration of this Plan, as ------------------------ well as construction and interpretation thereof, shall be the responsibility of the Committee, the number of members of which shall be designated and appointed from time to time by, and shall serve at the pleasure of the Board. 16.2 Committee Authority. Subject to the Plan, the Committee shall from time to ------------------- time establish rules, forms and procedures for the administration of the Plan. Except as otherwise expressly provided, the Committee shall have the exclusive right to interpret the Plan and to decide any and all matters arising thereunder. The Committee's decisions shall be conclusive and binding upon all persons having or claiming to have any right or interest under the Plan. 16.3 Committee Indemnity. No member of the Committee shall be liable for any act ------------------- or omission of any other member of the Committee, nor for any act or omission on his own part, excepting his or her own willful misconduct. The Employer shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his or her membership on the Committee, with the exception of expenses and liabilities arising out of his or her own willful misconduct. 16.4 Employer's Obligations to the Committee. To enable the Committee to perform --------------------------------------- its functions, each Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Participants, their retirement, death, Disability or Termination of Employment, and such other pertinent facts as the Committee may require. 16.5 Agents. In the administration of this Plan, the Committee may, from time to ------ time, employ agents and delegate to them such administrative duties as it sees fit and may, from time to time, consult with counsel who may be counsel to any Employer. Article 17 Claims Procedures 17.1 Presentation of Claim. Any Participant or Beneficiary of a deceased --------------------- Participant (such Participant or Beneficiary being referred to below as a "Claimant") may deliver to the Committee a written claim for a determination with respect to the amounts (i) credited to (or deducted from) such Claimant's Participant's Account Balance, or (ii) distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. The claim must state with particularity the determination desired by the Claimant. 17.2 Notification of Decision. The Committee shall consider a Claimant's claim ------------------------ within a reasonable time, and shall notify the Claimant in writing: (a) that the Claimant's requested determination has been made, and that the claim has been allowed in full; or (b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant's requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant: (i) the specific reason(s) for the denial of the claim, or any part of it; (ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and (iv) an explanation of the claim review procedure set forth in Section 17.3. 17.3 Review of a Denied Claim. Within sixty (60) days after receiving a notice ------------------------ from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant's duly authorized representative) may file with the Committee a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after the review procedure began, the Claimant (or the Claimant's duly authorized representative): (a) may review pertinent documents; (b) may submit written comments or other documents; and/or (c) may request a hearing, which the Committee, in its sole discretion, may grant. 17.4 Decision on Review. The Committee shall render its decision on review ------------------ promptly, and not later than sixty (60) days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee's decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: (a) specific reasons for the decision; (b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and (c) such other matters as the Committee deems relevant. Article 18 Miscellaneous 18.1 Notice. Any notice or filing required or permitted to be given to the ------ Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail to: First Northern Bank Attn: Barbara Carter 195 North First Street Dixon, California 95620 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 18.2 Insurance. The Company may acquire an insurance policy on the life of the --------- Participant. The Company will be the owner and beneficiary of the policy. The Director will have no interest in or right to the policy. 18.3 Tax Consequences. The Company does not insure or guarantee the tax ---------------- consequences of payments provided hereunder for matters beyond its control, and the Participant certifies that his decision to reduce and defer to receive his compensation is not due to any reliance upon financial, tax or legal advice given by the Company, and of its employees, agents, accountants or legal advisors. 18.4 Successors. The Plan shall be binding upon, and inure to the benefit of, ---------- the Participant's Employer and its respective successors or assigns, and upon a Participant, the Participant's Beneficiaries and the Participant's permitted successors, assigns, heirs, executors and administrators. 18.5 Spouse's Interest. The interest in the benefits hereunder of a spouse of a ----------------- Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 18.6 Guardian. If a benefit under this Plan is to be paid to a minor, a person -------- declared incompetent or to a person incapable of handling the disposition of that person's property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person appropriate indemnification of the Participant's Employer (or former Employer) and the Committee. The Committee may require proof of minority, incompetency, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. 18.7 Governing Law. The Plan and Plan Agreement shall be governed by and ------------- construed under the laws of the State of California as in effect at the time of their adoptions and executions, respectively. 18.8 Pronouns. Masculine pronouns wherever used shall include feminine pronouns -------- and the singular shall include the plural. 18.9 Headings. The headings of the articles, sections and paragraphs of this -------- Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 18.10 Validity. In the event any provision of this Plan shall be illegal or -------- invalid for any reason, the illegality or invalidity of that provision shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. IN WITNESS WHEREOF has signed this ----------------------------------------------- Plan document this day of , 2002. ----------- ----------------------------- First Northern Bank By: --------------------------------------- Title: ------------------------------------ (Officer of the Company) First Northern Bank 2001 Executive Deferral Plan (EDP) Plan Agreement THIS PLAN AGREEMENT (this "Agreement"), is entered into as of , ------------ 2001 between First Northern Bank (the "Employer") and -------------------------- (the "Participant"). Recitals A. The Participant is a key employee of the Employer, and the Employer desires to have the continued services and counsel of the Participant. B. The Employer has adopted, effective June 21, 2001, the Plan, and the Participant has been selected to participate in the Plan. C. The Participant desires to participate in the Plan. Agreement NOW THEREFORE, it is mutually agreed that: 1. Definitions. Unless otherwise provided in this Agreement, the ----------- capitalized terms in this Agreement shall have the same meaning as under the Plan's master plan document, as amended (the "Plan Document"). 2. Integrated Agreement; Parties Bound. The Plan Document a copy of which ----------------------------------- has been delivered to Participant, the Election Form and the Beneficiary Designation Form are hereby incorporated into and made a part of this Agreement as though set forth in full in this Agreement. The parties to this Agreement agree to and shall be bound by, and have the benefit of, each and every provision of the Plan as set forth in the Plan Document. This Agreement, the Election Form and the Beneficiary Designation Form, collectively, shall be considered one complete contract between the parties. 3. Acknowledgment. The Participant hereby acknowledges that he or she has -------------- read and understands this Agreement, the Plan Document, the Election Form and the Beneficiary Designation Form. 4. Election and Beneficiary Designation Forms. As conditions to ------------------------------------------ participation in the Plan, or to continue participation in the Plan (if the Participant is permitted to make additional deferrals), the Participant must complete, sign, date and return to the Committee (i) an Election Form, in which the Participant irrevocably elects to participate, or to continue to participate, in the Plan and elects one or more deferral amounts, (ii) a Beneficiary Designation Form, in which the Participant designates his or her beneficiaries, and (iii) two original copies of this Agreement (one of which shall be returned to the Participant). 5. Authorization. The Participant hereby authorized the Employer to ------------- withhold and deduct from his or her Base Annual Salary and/or Annual Bonus the amounts specified in the Election Form, which amounts shall be withheld, deducted and credited in accordance with the provisions of the Plan. 6. Successors and Assigns. This Agreement shall inure to the benefit of, ----------------------- and be binding upon, the Employer, its successors and assigns, and the Participant and his or her Beneficiaries. 7. Governing Law. This Agreement shall be governed by and construed under ------------- the laws of the State of California, as in effect at the time of the execution of this Agreement. IN WITNESS WHEREOF, the Participant has signed and the Employer has accepted this Plan Agreement as of the date first written above. "PARTICIPANT" Date: ---------------------- ---------------------------------------------- (Signature of Participant) ------------------------------- (Type or Print Name) AGREED AND ACCEPTED: "EMPLOYER" First Northern Bank, a California Corporation By: --------------------------------------------- Its: --------------------------------------------- First Northern Bank 2001 Executive Deferral Plan (EDP) Beneficiary Designation Form The designation of a Beneficiary(ies) may have significant estate and gift tax consequences. It is advisable to seek the advice of your professional advisor familiar with the estate and gift tax consequences of nonqualified retirement plans before designating your Beneficiary(ies). The undersigned, a Participant in the above-captioned plan (the "Plan"), hereby designates as Primary Beneficiary(ies) and Contingent Beneficiary(ies) under that Plan the following persons: (Please attach additional sheets if necessary.)
=========================================================================================== Social Security Name Relationship Date of Birth Number - ------------------------------------------------------------------------------------------- Primary Beneficiary (ies) - ------------------------------------------------------------------------------------------- 1) - ------------------------------------------------------------------------------------------- 2) - ------------------------------------------------------------------------------------------- 3) - ------------------------------------------------------------------------------------------- 4) =========================================================================================== Contingent Beneficiary (ies) - ------------------------------------------------------------------------------------------- 1) - ------------------------------------------------------------------------------------------- 2) - ------------------------------------------------------------------------------------------- 3) - ------------------------------------------------------------------------------------------- 4) ===========================================================================================
The Beneficiary Designation is effective until the Participant files another such designation with the Committee and that Beneficiary Designation is acknowledged and accepted by the Committee. Upon acknowledgement and acceptance ----------------------------------- by the Committee, any previous Beneficiary Designations are hereby revoked. - --------------------------------------------------------------------------- Date: ---------------------- -------------------------------------------- (Signature of Participant) -------------------------------------------- (Type of Print Name) The Participant acknowledges that any change of Beneficiary will not be effective until acknowledged and accepted in writing by the Committee in the space provided below: Beneficiary Designation herein acknowledged and accepted on , 2002 --------------- Employer: First Northern Bank Committee Member: -------------------------------------------- (Signature of Participant) -------------------------------------------- (Type of Print Name) First Northern Bank 2001 Executive Deferral Plan (EDP) Beneficiary Designation Form I, , am the spouse of , a --------------------- ------------------------- Participant in the First Northern Bank 2001 Deferred Compensation Plan. I acknowledge that my spouse has named someone other than me as a primary beneficiary in connection with that Plan, and I hereby approve of that designation. I agree that the designation shall be binding upon me with the same effect as if I had personally executed said designation. Date: ------------------ ------------------------------------- (Signature of Spouse) ------------------------------------- (Type or Print Name) First Northern Bank 2001 Executive Deferral Plan (EDP) Election Form I acknowledge that as an employee of First Northern Bank or a participating subsidiary, I have been offered an opportunity to participate in the 2001 Executive Deferral Plan (the "Plan"). I will participate in the 2001 Executive Deferral Plan and irrevocably authorize my Employer to make the appropriate deductions, as indicated on this form, from my paycheck and/or Annual Bonus check. I agree to defer $ of my Base Annual Salary (must be at least ------------------- $2,000) effective . ----------------- I agree to defer $ of my Annual Bonus (must be at least $2,000) ------------- paid on . ------------------ Date: ----------------------------- ------------------------------------ (Signature of Participant) ------------------------------------ (Type or Print Name) EXECUTIVE DEFERRAL PLAN OF FIRST NORTHERN BANK Form of Benefit Payment I elect to receive benefits under the Agreement in the following form: [Initial One] Lump Sum - ---- Equal monthly installment for Sixty (60) months - ---- Equal monthly installments for One Hundred Twenty (120) months - ---- Equal monthly installments for One Hundred Eighty (180) months - ---- I understand that I may not change the form of benefit elected, even if I later change the amount of my deferrals under the Agreement without written approval of the Board of Directors of First Northern Bank. Date: -------------------------- ---------------------------------- (Participant's Signature) ---------------------------------- (Type or Print Name) EX-10.14 4 dex1014.txt FORM OF BANK DIRECTOR DEFERRED FEE AGREEMENT Exhibit 10.14 DIRECTOR DEFERRED FEE AGREEMENT THIS AGREEMENT is entered into this day of , 2002 by and ---- --------- between First Northern Bank of Dixon, a California-chartered commercial bank located in Dixon, California (the "Company"), and (the ------------------ "Director"). INTRODUCTION To encourage the Director to remain a member of the Company's Board of Directors, the Company is willing to provide to the Director a deferred fee opportunity. The Company will pay the Director's benefits from its general assets. AGREEMENT The Director and the Company agree as follows: ARTICLE 1 DEFINITIONS Whenever used in this Agreement, the following words and phrases shall have the meanings specified: 1.1 "Base Rate" shall be 125% of the Moody's Rate. The Moody's Rate shall mean the interest rate determined by the Committee at any time before the commencement of each Plan Year. The Moody's Rate for the Plan Year shall be the most current monthly "Seasoned Corporate Bond" rate published by Moody's Investors Services, Inc., or any successor to that service, available prior to the announcement by the Committee. The Seasoned Corporate rate is an economic indicator, based on an arithmetic average of the yield of representative bonds, including industrial, public utilities, Aaa, A and Baa bonds, and is calculated as a monthly average of the composite yield. 1.2 "Change of Control" means that any of the following events occur: (a) Merger: First Northern Community Bancorp parent corporation of First Northern Bank of Dixon, merges into or consolidates with another corporation, or merges another corporation into First Northern Community Bancorp, and as a result less than 50% of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were the holders of First Northern Community Bancorp voting securities immediately before the merger or consolidation. For purposes of this Agreement, the term "person" means an individual, corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or other entity, (b) Acquisition of Significant Share Ownership: a report on Schedule 13D or another form or schedule (other than Schedule 13G) is filed or is required to be filed under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 20% or more of a class of First Northern Community Bancorp voting securities, but this paragraph (b) shall not apply to beneficial ownership of voting securities of First Northern Community Bancorp held in a fiduciary capacity by an entity in which directly or indirectly beneficially owns 50% or more of the outstanding voting securities, or beneficial ownership of voting securities held by an employee benefit plan maintained for the benefit of First Northern Bank of Dixon's employees, or (c) Change in Board Composition: during any period of two consecutive years, individuals who constitute First Northern Community Bancorp board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority thereof; provided, however, - that for purposes of this paragraph (c) - each director who is first elected by the board (or first nominated by the board for election by stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the period shall be deemed to have been a director at the beginning of the two-year period. 1.3 "Code" means the Internal Revenue Code of 1986, as amended. 1.4 "Corporation" means First Northern Community Bancorp, parent corporation of First Northern Bank of Dixon. 1.5 "Deferred Account" means the Company's accounting of the Director's accumulated Deferrals plus accrued interest. 1.6 "Deferrals" means the amount of the Director's Fees, which the Director elects to defer according to this Agreement. 1.7 "Disability" means, if the Director is covered by a bank-sponsored disability policy, total disability as defined in the policy without regard to any waiting period. If the Director is not covered by such a policy, Disability means suffering a sickness, accident or injury that - in the judgment of a physician satisfactory to First Northern Bank of Dixon - prevents the Director from performing substantially all of the Director's normal duties for First Northern Bank of Dixon. As a condition to receiving any Disability benefits, First Northern Bank of Dixon may require the Director to submit to physical or mental evaluations and tests, as First Northern Bank of Dixon's board of directors deems appropriate. 1.8 "Effective Date" means the date and year first written above. 1.9 "Election Form" means the Form attached as Exhibit A. 1.10 "Fees" means the total directors fees payable to the Director during a plan year. 1.11 "Normal Retirement Age" means the Director's sixty-fifth (65th) birthday. 1.12 "Normal Retirement Date" means the later of the Normal Retirement Age or Termination of Service. 1.13 "Plan Year" means the calendar year ending on December 31. 1.14 "Projected Benefit" means the balance that would have accumulated in the Director's Deferral Account at Normal Retirement Age if it is assumed that the Director: (1) continued to defer Fees at the same rate that the Director had been deferring Fees on the date of the Director's death: and (2) the Director reached Normal Retirement Age. 1.15 "Termination for Cause" means the Company's board of directors or a duly authorized committee of the board of directors determines at any time that the Director will not be nominated by the board or committee for reelection as a Director of First Northern Community Bancorp after the expiration of his current term, or if the Director is removed as a director of the Company, in either case because of the Director's: (a) gross negligence or gross neglect of duties to the Company; or (b) commission of a felony, or of a gross misdemeanor involving moral turpitude in connection with the Director's service to the Company; or (c) fraud, disloyalty, dishonesty, or willful violation of any law or significant Company policy committed in connection with the Director's service and in the Company's sole judgment, resulting in an adverse effect on the Company; or (d) removal from service or permanent prohibition from participation in the conduct of the Company's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act [ 12 U.S.C. 1818(e)(4) or (g)(1)]. 1.16 "Termination of Service" means that the Director ceases to be a member of First Northern Bank of Dixon's board of directors for any reason whatsoever. If the Director ceases to be a member of First Northern Bank of Dixon's board of directors but continues to serve on the board of directors of First Northern Community Bancorp, Termination of Service shall be deemed to have occurred instead when the Director ceases also to be a member of the board of directors of First Northern Community Bancorp. For purposes of this Agreement, it there is a dispute over the service status of the Director or the date of the Director's Termination of Service, First Northern Bank of Dixon shall have the sole and absolute right to decide the dispute unless the first occurrence of a Change of Control shall have occurred within 24 months before Termination of Service. ARTICLE 2 DEFERRAL ELECTION 2.1 INITIAL ELECTION. The Director shall make an initial deferral election under this Agreement by filing with the Company a signed Election Form within fifteen (15) days after the date of this Agreement. The Election Form shall set forth the amount of Fees to be deferred and the form of benefit payment. The Election Form shall be effective to defer only Fees earned after the date the Election Form is received by the Company. 2.2 ELECTION CHANGES 2.2.1 GENERALLY. The Director may modify the amount of Fees to be deferred by filing a subsequent signed Election Form with the Company and obtaining written approval by the Board of Directors of the Company. The modified deferral shall not be effective until the calendar year following the year in which the subsequent Election Form is received by the Company. The Director may not change the form of benefit payment initially elected under Section 2.1 without the written approval of the Board of Directors of the Company. 2.2.2 HARDSHIP. If an unforeseeable financial emergency arising from the death of a family member, divorce, sickness, injury, catastrophe or similar event outside the control of the Director occurs, the Director, by written instructions to the Company may reduce future deferrals under this Agreement. ARTICLE 3 DEFERRAL ACCOUNT 3.1 ESTABLISHING AND CREDITING. The Company shall establish a Deferral Account on its books for the Director, and shall credit to the Deferral Account the following amounts: 3.1.1 DEFERRALS. The Fees deferred by the Director as of the time the Fees would have otherwise been paid to the Director. 3.1.2 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distribution of benefits, interest shall be credited and compounded annually on the Director's Deferral Account Balance at the Base Rate. For purposes of this crediting and compounding, all amounts deferred during a Plan Year shall be treated as having been deferred as of the beginning of the Plan Year. In the event of Retirement, Disability, death or a Termination of Employment prior to the end of a Plan Year, the basis for that year's interest crediting will be a fraction of the full year's interest, based on the number of full months that the Director served with the Company during the Plan Year prior to the occurrence of such event. 3.1.3 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. In the event a benefit is paid in installments, interest shall be credited on the undistributed portion of the Director's Deferral Account Balance commencing on the first day of the month in which the Director terminates service on the Board using a fixed interest rate that is determined by averaging the Base Rates for the Plan Year in which installment payments commence and the three (3) preceding Plan Years. If a Director has completed fewer than four (4) Plan Years, this average shall be determined using the Base Rates for the Plan Years during which the Director participated in the Plan. 3.2 STATEMENT OF ACCOUNTS. The Company shall provide to the Director, within one hundred twenty (120) days after each anniversary of this Agreement, a statement setting forth the Deferral Account balance. 3.3 ACCOUNTING DEVICE ONLY. The Deferral Account is solely a device for measuring amounts to be paid under this Agreement. The Deferral Account is not a segregated fund of any kind. The Director is a general unsecured creditor of the Company for the payment of benefits. The benefits represent the mere Company promise to pay such benefits. The Director's rights are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by the Director's creditors. ARTICLE 4 LIFETIME BENEFITS 4.1 NORMAL BENEFIT. Upon the Normal Retirement Date, the Company shall pay to the Director the benefit described in this Section 4.1. in lieu of any other benefit under this Agreement. 4.1.1 AMOUNT OF BENEFIT. The benefit under this Section 4.1 is the Deferral Account balance at the Director's Normal Retirement Date. 4.1.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Director in the form elected by the Director on the Election Form. The Company shall credit interest as described under Section 3.1.2 or 3.1.3. 4.2 EARLY TERMINATION BENEFIT. Upon Termination of Service prior to the Normal Retirement Age for reasons other than death, Change of Control or Disability, the Company shall pay to the director the benefit described in this Section 4.2 in lieu of any other benefit under this Agreement. 4.2.1 AMOUNT OF BENEFIT. The benefit under this Section 4.2 is the Deferral Account balance at the Director's Termination of Service. 4.2.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Director in the form elected by the Director on the Election Form within forty-five (45) days after the Director's Termination of Service. The Company shall credit interest as described under Section 3.1.2 or 3.1.3. 4.3 DISABILITY BENEFIT. If the Director terminates service as a director for Disability prior to Normal Retirement Age, the Company shall pay to the Director the benefit described in this Section 4.3. in lieu of any other benefit under this Agreement. 4.3.1 AMOUNT OF BENEFIT. The benefit under this Section 4.3 is the Deferral Account balance at the Director's Termination of Service. 4.3.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Director in the form elected by the Director on the Election Form within forty-five (45) days after the Director's Termination of Service. The Company shall credit interest as described under Section 3.1.2 or 3.1.3 4.4 CHANGE OF CONTROL BENEFIT. Upon a Change of Control while the Director is in the active service of the Company, the Company shall pay to the Director the benefit described in this Section 4.4 in lieu of any other benefit under this Agreement. 4.4.1 AMOUNT OF BENEFIT. The benefit under this Section 4.4 is the Deferral Account balance at the date of the Director's Termination of Service. 4.4.2 PAYMENT OF BENEFIT. The Company shall pay the benefit to the Director in the form elected by the Director on the Election Form within forty-five (45) days after the Director's Termination of Service. The Company shall credit interest as described under Section 3.1.2 or 3.1.3. 4.5 HARDSHIP DISTRIBUTION. Upon the Company's determination (following petition by the Director) that the Director has suffered an unforeseeable financial emergency as described in Section 2.2.2, the Company shall distribute to the Director all or a portion of the Deferral Account balance as determined by the Company, but in no event shall the distribution be greater than is necessary to relieve the financial hardship. ARTICLE 5 BENEFICIARIES 5.1 BENEFICIARY DESIGNATIONS. The Director shall designate a beneficiary by filing a written designation with the Company. The Director may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Director and accepted by the Company during the Director's lifetime. The Director's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Director, or if the Director names a spouse as beneficiary and the marriage is subsequently dissolved. If the Director dies without a valid beneficiary designation, all payments shall be made to the Director's surviving spouse, if any, and if none, to the Director's surviving children and the descendants of any deceased child by right of representation, and if no children or descendants survive, to the Director's estate. 5.2 FACILITY OF PAYMENT. If a benefit is payable to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Company may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit. ARTICLE 6 GENERAL LIMITATIONS 6.1 INSURANCE. The Company may acquire an insurance policy on the life of the Director. The Company will be the owner and beneficiary of the policy. The Director will have no interest in or right to the policy. 6.2 GENERAL. Notwithstanding anything to the contrary contained in this Agreement, the Director is entitled to only one benefit which shall be determined by the first event to occur which is dealt with by this Agreement. Subsequent occurrence of events dealt with by this Agreement shall not entitle the Director or his or her beneficiaries to other or further benefits under this Agreement. 6.3 TAX CONSEQUENCES. The Company does not insure or guarantee the tax consequences of payments provided hereunder for matters beyond its control, and the Director certifies that his decision to reduce and defer to receive his compensation is not due to any reliance upon financial, tax or legal advice given by the Company, and of its employees, agents, accountants or legal advisors. 6.4 TERMINATION FOR CAUSE. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement that is in excess of the Director's Deferrals (i.e., the interest earned on the Deferred Account) if the Company terminates the Director's service for cause as defined in Section 1.15. ARTICLE 7 CLAIMS AND REVIEW PROCEDURES 7.1 CLAIMS PROCEDURE. A person or beneficiary ("claimant") who has not received benefits under the Agreement that he or she believes should be paid shall make a claim for such benefits as follows: 7.1.1 INITIATION - WRITTEN RESPONSE. The claimant initiates a claim by submitting to the Company a written claim for the benefits. 7.1.2 TIMING OF COMPANY RESPONSE. The Company shall respond to such claimant within 90 days after receiving the claim. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 90-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 7.1.3 NOTICE OF DECISION. If the Company denies part or all of the claim, the Company shall notify the claimant in writing of such denial. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 7.1.3.1 The specific reasons for the denial, 7.1.3.2 A reference to the specific provisions of the Agreement on which the denial is based, 7.1.3.3 A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed, 7.1.3.4 An explanation of the Agreement's review procedures and the time limits applicable to such procedures, and 7.1.3.5 A statement of the claimant's right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review. 7.2 REVIEW PROCEDURE. If the Company denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Company of the denial, as follows: 7.2.1 INITIATION - WRITTEN REQUEST. To initiate the review, the claimant, within 60 days after receiving the Company's notice of denial, must file with the Company a written request for review. 7.2.2 ADDITIONAL SUBMISSIONS - INFORMATION ACCESS. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Company shall also provide the claimant, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits. 7.2.3 CONSIDERATIONS ON REVIEW. In considering the review, the Company shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. 7.2.4 TIMING OF COMPANY RESPONSE. The Company shall respond in writing to such claimant within 60 days after receiving the request for review. If the Company determines that special circumstances require additional time for processing the claim, the Company can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Company expects to render its decision. 7.2.5 NOTICE OF DECISION. The Company shall notify the claimant in writing of its decision on review. The Company shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth: 7.2.5.1 The specific reasons for the denial, 7.2.5.2 A reference to the specific provisions of the Agreement on which the denial is based, 7.2.5.3 A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant's claim for benefits, and 7.2.5.4 A statement of the claimant's right to bring a civil action under ERISA Section 502(a). ARTICLE 8 AMENDMENTS AND TERMINATION The Company may amend or terminate this Agreement at any time prior to the Director's Termination of Service by written notice to the Director. In no event shall this Agreement be terminated without payment to the Director of the Deferral Account balance attributable to the Director's deferrals and interest credited on such amounts unless the Agreement terminates as a result of Termination for Cause in which event the Director forfeits the interest credited on the Director's Deferrals. ARTICLE 9 MISCELLANEOUS 9.1 BINDING EFFECT. This Agreement shall bind the Director and the Company, and their beneficiaries, successors and assigns, survivors, executors, administrators and transferees. 9.2 NO GUARANTEE OF SERVICE. This Agreement is not a contract for services. It does not give the Director the right to remain a director of the Company, nor does it interfere with the shareholders' rights to replace the Director. It also does not require the Director to remain a director nor interfere with the Director's right to terminate services at any time. 9.3 NON-TRANSFERABILITY. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner. 9.4 TAX WITHHOLDING. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. 9.5 APPLICABLE LAW. The Agreement and all rights hereunder shall be governed by the laws of California except to the extent preempted by the laws of the United States of America. 9.6 UNFUNDED ARRANGEMENT. The Director and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Director's life is a general asset of the Company to which the Director and beneficiary have no preferred or secured claim. 9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Director as to the subject matter hereof. No rights are granted to the Director by virtue of this Agreement other than those specifically set forth herein. 9.8 ADMINISTRATION. The Company shall have powers which are necessary to administer this Agreement, including but not limited to: 9.8.1 Interpreting the provisions of the Agreement; 9.8.2 Establishing and revising the method of accounting for the Agreement; 9.8.3 Maintaining a record of benefit payments; and 9.8.4 Establishing rules and prescribing any forms necessary or desirable to administer the Agreement. 9.9 NAMED FIDUCIARY. The Company shall be the named fiduciary and plan administrator under the Agreement. The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the Service of advisors and the delegation of ministerial duties to qualified individuals. IN WITNESS WHEREOF, the Director and a duly authorized First Northern Bank officer have signed this Agreement. DIRECTOR: COMPANY: ------------------------ ------------------------- President EXHIBIT A FIRST NORTHERN BANK DIRECTOR DEFERRED FEE AGREEMENT Deferral Election I elect to defer fees under my Director Deferred Fee Agreement with First Northern Bank of Dixon, as follows:
=========================================================================================== Amount of Deferral Frequency of Deferral Duration - ------------------------------------------------------------------------------------------- (Initial and Complete One) (Initial One) (Initial One) I elect to defer % of fees Beginning of Year This year only - -- ---- -- -- I elect to defer $ of fees Each fee period For Years - -- ---- -- -- ----- I elect not to defer fees End of year Until Termination of Service - -- -- -- Until -- -------- (date) ===========================================================================================
I understand that I may change the amount, frequency and duration of my deferrals by filing a new election form with First Northern Bank and obtaining written approval of the Board of Directors of First Northern Bank; provided, however, that any subsequent election will not be effective until the calendar year following the year in which the new election is received by First Northern Bank. Date: ---------------- --------------------------- Director's Signature --------------------------- Type or Print Name FIRST NORTHERN BANK DIRECTOR DEFERRED FEE AGREEMENT Form of Benefit Payment I elect to receive benefits under the Agreement in the following form: [Initial One] Lump Sum - ---- Equal monthly installment for Sixty (60) months - ---- Equal monthly installments for One Hundred Twenty (120) months - ---- Equal monthly installments for One Hundred Eighty (180) months - ---- I understand that I may not change the form of benefit elected, even if I later change the amount of my deferrals under the Agreement without written approval of the Board of Directors of First Northern Bank. Date: ---------------- --------------------------- Director's Signature --------------------------- Type or Print Name FIRST NORTHERN BANK DIRECTOR DEFERRED FEE AGREEMENT Beneficiary Designation I designate the following as beneficiary of benefits under the Deferred Fee Agreement payable following my death: Primary: --------------------------------------- Contingent: ------------------------------------ NOTE: To name a trust as beneficiary, please provide the name of the trustee and the exact date of the trust agreement. ----- I understand that I may change these beneficiary designations by filing a new written designation with the Company. I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary, in the event of the dissolution of our marriage. Upon acknowledgement and acceptance by the Company any previous Beneficiary - --------------------------------------------------------------------------- Designations are hereby revoked. - -------------------------------- Date: ---------------- --------------------------- Director's Signature --------------------------- Type or Print Name The Director acknowledges that any change of Beneficiary will not be effective until acknowledged and accepted in writing by the Company in the space provided below: Beneficiary Designation herein acknowledged and accepted on . ---------- Date Accepted by ---------------------------------- Company Representative Title: -------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----