FIRST NORTHERN COMMUNITY BANCORP

First Northern Community Bancorp operates as a bank holding company registered under the Bank Holding Company Act of 1956, providing a full range of community banking services to individual and corporate customers throughout the California Counties of Solano, Yolo, Placer, and Sacramento as well as portions of El Dorado County through its wholly-owned subsidiary bank, First Northern Bank of Dixon. The Bank was established in 1910 under a California state charter as Northern Solano Bank and opened for business on February 1st of that year. The Company's operating policy since inception has emphasized the banking needs of individuals and small- to medium-sized businesses. The Bank has fourteen full-service branches located in the cities of Auburn, Colusa, Davis, Dixon, Fairfield, Orland, Rancho Cordova, Roseville, Sacramento, Vacaville, West Sacramento, Winters, Willows and Woodland, one satellite banking office inside a retirement community in the city of Davis, and a residential mortgage loan office located in the Davis branch. The Bank engages financial advisors, through Raymond James Financial Services, Inc., who offer non-FDIC insured investment and brokerage services from offices in West Sacramento, Roseville, Davis and Auburn. The business of banking in California remains highly competitive, with principal competitors including other banks, savings and loan associations, credit unions, large financial institutions with substantial capital, technology and marketing resources, constituent entities with the Federal Farm Credit System for agricultural loans, thrift and loans, mortgage brokerage companies, insurance companies, brokerage houses, mutual fund companies, credit card companies, retail establishments, internet-based banking institutions, and non-traditional financial technology companies. Current federal law has made it easier for out-of-state banks to enter and compete in California, and competition has further intensified as a result of the Dodd-Frank Act which permitted out-of-state de novo branching by national banks, state banks and foreign banks from other states. In order to compete with major financial institutions and other competitors in its primary service areas, the Bank relies upon the experience of its executive and senior officers in serving business clients, and upon its specialized services, local promotional activities and the personal contacts made by its officers, directors and employees.

The Company's primary competitors for deposits and loans include other banks, savings and loan associations, credit unions, large financial institutions that have substantial capital, technology and marketing resources well in excess of the Company's, constituent entities with the Federal Farm Credit System for agricultural loans, thrift and loans, mortgage brokerage companies, insurance companies, brokerage houses, mutual fund companies, credit card companies, retail establishments, internet-based banking institutions, and non-traditional financial technology companies. The Company's stated competitive advantages include the experience of its executive and senior officers in serving business clients, its specialized services, local promotional activities, and the personal contacts made by its officers, directors and employees. The Company does not disclose a specific market share percentage in the filing.

The Company generates most of its revenue by providing a wide range of products and services to small- and medium-sized businesses and individuals, including accepting demand, interest bearing transaction, savings, and time deposits, and making commercial, consumer, and real estate related loans. The Bank's principal source of revenue is interest income, which is primarily derived from interest and fees on loans and leases, interest on investments, and due from banks interest bearing accounts. For the year ended December 31, 2025, these sources comprised approximately 70%, 22%, and 6%, respectively, of the Company's interest income. The Bank also rents safe deposit boxes and provides other customary banking services, offers a broad range of alternative investment products, fiduciary and other financial services through Raymond James Financial Services, Inc., and offers equipment leasing, credit cards, merchant card processing, payroll services, and limited international banking services through third parties.

The Bank's loan portfolio is composed of commercial loans, commercial real estate loans, agriculture loans, residential mortgage loans, residential construction loans, and consumer loans. As of December 31, 2025, commercial loans totaled $146,178,000 ¹, commercial real estate loans were $702,455,000 ², agriculture loans were $93,627,000 ³, residential mortgage loans were $100,684,000 ⁴, residential construction loans were $5,837,000 ⁵, and consumer loans totaled $15,478,000 ⁶. The Bank's investment securities portfolio as of December 31, 2025 consisted of U.S. Treasury Securities of $87,556,000 ⁷, Securities of U.S. Government Agencies and Corporations of $85,344,000 ⁸, Obligations of State and Political Subdivisions of $75,003,000 ⁹, Collateralized Mortgage Obligations of $92,284,000 ¹⁰, and Mortgage-Backed Securities of $277,056,000 ¹¹, for total investments of $617,243,000 ¹². The Bank's deposit base as of December 31, 2025 included demand deposits of $632,128,000 ¹³, interest-bearing transaction deposits of $438,901,000 ¹⁴, savings and MMDAs of $466,453,000 ¹⁵, time deposits of $250,000 or less of $88,031,000 ¹⁶, and time deposits over $250,000 of $53,630,000 ¹⁷, for total deposits of $1,679,143,000 ¹⁸.

On March 27, 2024, the Company approved a stock repurchase program effective May 1, 2024, which remains in effect until April 30, 2026 unless terminated sooner, allowing for repurchases by the Company in an aggregate amount of no more than 6% of the Company's 17,144,680 outstanding shares of common stock as of March 21, 2024, representing total shares of 1,028,679 eligible for repurchase at May 1, 2024. The Company repurchased 452,589 shares (adjusted for stock dividends) of the Company's outstanding common stock during the year ended December 31, 2025, and 147,142 shares remained available for repurchase under the stock repurchase program at December 31, 2025. In the prior two fiscal years and to date, the Company has declared 5% stock dividends payable on March 25, 2024, March 25, 2025, and March 25, 2026. The Company does not expect to pay a cash dividend in the foreseeable future. On January 22, 2026, the Company declared a 5% stock dividend payable on March 25, 2026 to shareholders of record as of February 27, 2026. The Company and its subsidiaries employed 204 full-time-equivalent employees as of December 31, 2025 ¹⁹.

The Company reported net income of $21.1 million ²⁰ for 2025, a 5.5% increase compared to net income of $20.0 million ²¹ for 2024. Net income per common share for 2025 was $1.30 ²², an increase of 8.3% compared to net income per common share of $1.20 ²³ for 2024. Net income per common share on a fully diluted basis was $1.27 ²⁴ for 2025, an increase of 6.7% compared to net income per common share on a fully diluted basis of $1.19 ²⁵ for 2024. Net interest income totaled $67.5 million ²⁶ for 2025, an increase of 4.8% from $64.4 million ²⁷ in 2024. Net interest margin was 3.77% ²⁸ for the year ended 2025, a 4.7% or 17 basis point increase from the 3.60% ²⁹ reported for the year ended 2024. No provision for credit losses was recorded in 2025, compared to a reversal of provision for credit losses of $0.3 million ³⁰ in 2024. Non-interest income totaled $6.1 million ³¹ in 2025, an increase of 1.3% from $6.0 million ³² in 2024. Non-interest expenses totaled $46.2 million ³³ for 2025, up 7.9% from $42.8 million ³⁴ in 2024. The Company reported total assets of $1.91 billion ³⁵ and $1.89 billion ³⁶ for the years ended December 31, 2025 and 2024, respectively. Stockholders' equity increased to $212.0 million ³⁷ as of December 31, 2025, a 20.2% increase from $176.3 million ³⁸ as of December 31, 2024.

The Company's growth strategy focuses on its core community banking business, emphasizing the banking needs of individuals and small- to medium-sized businesses. The Bank's business strategy is to focus on commercial business loans (which includes agricultural loans), construction loans, and commercial and multi-family real estate loans. The Company seeks to grow through its existing branch network of fourteen full-service branches located in the cities of Auburn, Colusa, Davis, Dixon, Fairfield, Orland, Rancho Cordova, Roseville, Sacramento, Vacaville, West Sacramento, Winters, Willows and Woodland, one satellite banking office in Davis, and a residential mortgage loan office in the Davis branch. The Bank also engages financial advisors, through Raymond James Financial Services, Inc., who offer non-FDIC insured investment and brokerage services from offices in West Sacramento, Roseville, Davis and Auburn. The Company's ability to compete effectively depends on its ability to continue to adapt its technology on a timely and cost-effective basis to meet customer requirements, including advances in cloud computing, artificial intelligence and machine learning, biometric authentication and data protection enhancements, as well as increased online and mobile device interaction with customers.

The Company's net interest margin was 3.77% for the year ended 2025, a 4.7% or 17 basis point increase from the 3.60% reported for the year ended 2024. The net interest spread was 3.16% ³⁹ in 2025 and 2.98% ⁴⁰ in 2024. The increase in net spread was due to an overall increase in interest rates on earning assets, which was partially offset by an overall increase in interest rates on deposits. The Company is primarily funded by core deposits, with non-interest-bearing demand deposits historically being a significant source of funds, and this lower-cost funding base is expected to have a positive impact on net interest income and net interest margin in a rising interest rate environment. Non-interest expenses increased to $46,164,000 in 2025 from $42,789,000 in 2024, representing an increase of $3,375,000 ⁴¹, or 7.9% ⁴². The increase in salaries and employee benefits was primarily due to a 4.1% increase in regular salaries, 47.4% increase in contingent compensation, and 42.1% increase in group insurance.

The Company and its subsidiaries employed 204 full-time-equivalent employees as of December 31, 2025 . The Company's operations center is located in Dixon and provides back-office support including information services, central operations, and the central loan department. In 2019, the Bank opened an additional administrative office in Sacramento. The Company has implemented a comprehensive cybersecurity risk management program that includes a risk assessment process, a third-party Managed Detection and Response service monitoring information systems around-the-clock, a third-party Managed Security Service Provider covering all critical cyber defense functions, a training program for employees, and an incident response plan tested on a periodic basis. The Company engages reputable third-party auditors and security assessors to conduct various independent risk assessments on a regular basis, including cybersecurity program maturity assessments and network and systems testing.

The Company's stock repurchase program, approved on March 27, 2024 and effective May 1, 2024, allows for repurchases in an aggregate amount of no more than 6% of the Company's 17,144,680 outstanding shares of common stock as of March 21, 2024, representing total shares of 1,028,679 eligible for repurchase at May 1, 2024. The Company repurchased 452,589 shares (adjusted for stock dividends) of the Company's outstanding common stock during the year ended December 31, 2025, and 147,142 shares remained available for repurchase under the stock repurchase program at December 31, 2025. The Company does not expect to pay a cash dividend in the foreseeable future. The Company has historically paid stock dividends rather than cash dividends, declaring 5% stock dividends payable on March 25, 2024, March 25, 2025, and March 25, 2026. The Company does not disclose specific R&D spending levels or capital expenditure plans in the filing.

The Company faces significant structural headwinds from the highly competitive banking environment in California, where major banks dominate the commercial banking industry with substantially larger capital bases and lending limits. Competition is likely to further intensify as a result of consolidation of financial services companies, particularly in the Company's market area. The Company also faces competition from internet-based banking institutions and non-traditional financial services firms, such as financial technology companies, which do not always have a physical presence in the Company's market footprint and have grown rapidly in recent years. The current Trump Administration has taken actions to promote innovation across financial services through a regulatory environment favorable to cryptocurrencies, digital assets, open banking initiatives and financial technology companies, which has the potential to further increase competition. Emerging technologies, such as artificial intelligence and quantum computing, have the potential to intensify competition and accelerate disruption in the financial services industry.

Management has identified several macroeconomic and regulatory constraints that could affect the Company's operations. The Trump Administration's imposition of increased tariffs on goods imported to the U.S. from other countries, and retaliatory tariffs from other countries, could be of particular concern to U.S. companies operating in the agricultural sector who export agricultural goods to other countries, and the Company's customers include a number of agricultural businesses which could be negatively affected. The FRB has signaled caution in easing monetary policy, and at its January 2026 meeting determined to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent. Changes to monetary policy may adversely impact U.S. economic activity and have adverse consequences on the Company's customers' and the Company's earnings and operations. The Company is also subject to extensive state and federal regulation, supervision, and legislation, which govern almost all aspects of its operations, and any change in applicable laws, regulations, or policies may have a material adverse effect on the business, financial condition, or results of operations.

The Company faces material risks from its concentration in real estate lending, with loans secured by real estate comprising approximately 84% ⁴³ of total loans at December 31, 2025, and all real estate mortgage and construction loans secured fully or in part by deeds of trust, making the Company vulnerable to deterioration in the Northern California real estate market. The Company's allowance for credit losses on loans was $14.5 million ⁴⁴ at December 31, 2025, or 1.36% ⁴⁵ of total loans, and increases in the allowance would adversely affect financial condition and results of operations. The Company is subject to significant interest rate risk, as changes in the relationship between short-term and long-term market interest rates can impact the interest rate differential, and the FRB's target range for the federal funds rate was 3.50% to 3.75% as of December 31, 2025. The Company faces risks from the imposition of increased tariffs by the Trump Administration, which could be of particular concern to the Company's agricultural business customers, and from the potential for a U.S. recession. The Company also faces risks from the limited public market for its common stock, which is not listed on any exchange but trades on the OTC Markets under the symbol FNRN, making it difficult for shareholders to dispose of their shares.

Management's message emphasizes the Company's financial performance for 2025, highlighting net income of $21.1 million , a 5.5% increase compared to net income of $20.0 million for 2024, and net income per common share of $1.30 , an increase of 8.3% compared to $1.20 for 2024. Management notes that net interest income totaled $67.5 million for 2025, an increase of 4.8% from $64.4 million in 2024, and net interest margin was 3.77% for the year ended 2025, a 4.7% or 17 basis point increase from the 3.60% reported for the year ended 2024. Management attributes the increase in net interest income primarily to increases in yields earned on loans and investment securities, partially offset by decreases both in volume and yield earned on due from banks and increases in average rate paid on average interest-bearing transaction deposits and savings and MMDAs. Management states that no provision for credit losses was recorded in 2025 primarily due to positive trends in gross domestic product and single-family home prices, coupled with an overall decrease in forecasted loss rates and improvements in qualitative risk factors. Management emphasizes that the Company reported total assets of $1.91 billion and stockholders' equity increased to $212.0 million as of December 31, 2025, a 20.2% increase from $176.3 million as of December 31, 2024, primarily due to 2025 net income of $21.1 million and a decrease in accumulated other comprehensive loss, net of $18.4 million ⁴⁶. The strategic priorities emphasized include managing capital through the stock repurchase program, maintaining a strong capital position in excess of regulatory guidelines for a well capitalized institution, and continuing the policy of annual stock dividends rather than cash dividends to match capital and asset growth through retained earnings and a managed program of geographic growth.