**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**———————————**

**FORM      10-Q**

| x |   | **QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---|--------|------------------------------------------------------------------------------------------------------------------------------------------|

**For      the Quarterly Period Ended September 30, 2006**

**OR**

| ྑ |   | **TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934** |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

**For      the transition period from _______________ to      _______________**

**Commission      File Number 000-30707**

**First      Northern Community Bancorp**

| **California**                                                                | **68-0450397**                                         |
|-------------------------------------------------------------------------------|--------------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (I.R.S.                Employer Identification Number) |

| **195                N. First Street, Dixon, CA**       | **95620**                 |
|---------------------------------------------------------|---------------------------|
| (Address                of principal executive offices) | (Zip                Code) |

**707-678-3041**

| **Yes**x | **No** ̈** ** |
|----------|------------------------|

** **

| **Large                accelerated filer** ̈ | **Accelerated                filer**x | **Non-accelerated                filer** ̈ |
|--------------------------------------------------|---------------------------------------|------------------------------------------------|

| **Yes** ̈ | **No**x |
|---------------|---------|

----

**FIRST      NORTHERN COMMUNITY BANCORP**

**INDEX**

|                                             |   | **Page**                                                                                                                        |
|--------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|                                             |   |                                                                                                                            |
| **PART                I: FINANCIAL INFORMATION** |   |                                                                                                                            |
|                                             |   |                                                                                                                            |   |   |
| Item                1                            |   | Financial                Statements                                                                                             |   |   |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Unaudited                Condensed Consolidated Balance Sheets                                                                  |   | 3 |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Unaudited                Condensed Consolidated Statements of Income                                                            |   | 4 |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Unaudited                Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive                Income |   | 5 |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Unaudited                Condensed Consolidated Statements of Cash Flows                                                        |   | 6 |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Notes                to Unaudited Condensed Consolidated Financial Statements                                                   |   | 7 |
|                                             |   |                                                                                                                            |   |   |
| Item                2                            |   | Management’s                Discussion and Analysis of Financial Condition and Results of Operations                      |   | 16 |
|                                             |   |                                                                                                                            |   |   |
| Item                3                            |   | Quantitative                and Qualitative Disclosures About Market Risk                                                       |   | 30 |
|                                             |   |                                                                                                                            |   |   |
| Item                4                            |   | Controls                and Procedures                                                                                          |   | 30 |
|                                             |   |                                                                                                                            |   |   |
| **PART                II: OTHER INFORMATION**    |   |                                                                                                                            |
|                                             |   |                                                                                                                            |   |   |
| Item                1A                           |   | Risk                Factors                                                                                                     |   | 31 |
|                                             |   |                                                                                                                            |   |   |
| Item                2                            |   | Unregistered                Sales of Equity Securities and Use of Proceeds                                                      |   | 31 |
|                                             |   |                                                                                                                            |   |   |
| Item                6                            |   | Exhibits                                                                                                                        |   | 32 |
|                                             |   |                                                                                                                            |   |   |
|                                             |   | Signatures                                                                                                                      |   | 32 |

----

**PART      I - FINANCIAL INFORMATION**

**ITEM      1.**

**CONSOLIDATED      FINANCIAL STATEMENTS**

***CONDENSED      CONSOLIDATED BALANCE SHEETS***

|                                                                                                                                                                        |   | (UNAUDITED)                       |    |                             |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|----------------------------------|--------|
|                                                                                                                                                                        |   | September                30, 2006 |    | December                31, 2005 |   |
| ASSETS                                                                                                                                                                      |   |                              |    |                             |   |
| Cash                and due from banks                                                                                                                                      |   | $                                 | 25,406  |                             | $      | 35,507 |   |
| Federal                funds sold                                                                                                                                           |   |                              | 39,495  |                             |   | 87,185 |   |
| Investment                securities - available for sale                                                                                                                   |   |                              | 70,461  |                             |   | 48,788 |   |
| Loans,                net of allowance for loan losses of                                                                                                                   |   |                              |    |                             |   |   |   |
| $8,400                at September 30, 2006 and $7,917 at December 31, 2005                                                                                                 |   |                              | 485,775 |                             |   | 456,061 |   |
| Loans                held-for-sale                                                                                                                                          |   |                              | 4,629   |                             |   | 4,440 |   |
| Premises                and equipment, net                                                                                                                                  |   |                              | 8,093   |                             |   | 8,311 |   |
| Other                Real Estate Owned                                                                                                                                      |   |                              | — |                             |   | 268 |   |
| Accrued                interest receivable and other assets                                                                                                                 |   |                              | 21,958  |                             |   | 20,087 |   |
|        TOTAL ASSETS                                                                                                                 |   | $                                 | 655,817 |                             | $      | 660,647 |   |
|                                                                                                                                                                        |   |                              |    |                             |   |   |   |
| LIABILITIES                AND STOCKHOLDERS' EQUITY                                                                                                                         |   |                              |    |                             |   |   |   |
| Liabilities                                                                                                                                                                 |   |                              |    |                             |   |   |   |
|                                                                                                                                                                        |   |                              |    |                             |   |   |   |
| Deposits                                                                                                                                                                    |   |                              |    |                             |   |   |   |
| Demand                deposits                                                                                                                                              |   | $                                 | 175,124 |                             | $      | 192,436 |   |
| Interest-bearing                transaction deposits                                                                                                                        |   |                              | 102,287 |                             |   | 85,560 |   |
| Savings                & MMDA's                                                                                                                                         |   |                              | 187,445 |                             |   | 185,878 |   |
| Time,                under $100,000                                                                                                                                         |   |                              | 47,954  |                             |   | 51,921 |   |
| Time,                $100,000 and over                                                                                                                                      |   |                              | 64,609  |                             |   | 65,986 |   |
|        Total deposits                                                                                                               |   |                              | 577,419 |                             |   | 581,781 |   |
| FHLB                Advance and other borrowings                                                                                                                            |   |                              | 10,878  |                             |   | 14,969 |   |
| Accrued                interest payable and other liabilities                                                                                                               |   |                              | 6,924   |                             |   | 7,095 |   |
|        TOTAL LIABILITIES                                                                                                            |   |                              | 595,221 |                             |   | 603,845 |   |
|                                                                                                                                                                        |   |                              |    |                             |   |   |   |
| Stockholders'                equity                                                                                                                                         |   |                              |    |                             |   |   |   |
| Common                stock, no par value; 16,000,000 shares authorized;                                                                                                    |   |                              |    |                             |   |   |   |
| 7,973,364                shares issued and outstanding at September 30, 2006 and 7,558,759                shares                issued and outstanding at December 31, 2005 |   |                              | 45,925  |                             |   | 36,100 |   |
| Additional                paid in capital                                                                                                                                   |   |                              | 977     |                             |   | 977 |   |
| Retained                earnings                                                                                                                                            |   |                              | 13,810  |                             |   | 19,606 |   |
| Accumulated                other comprehensive (loss) income                                                                                                                |   |                              | (116    | )                                |   | 119 |   |
|        TOTAL STOCKHOLDERS' EQUITY                                                                                              |   |                              | 60,596  |                             |   | 56,802 |   |
|                                                                                                                                                                        |   |                              |    |                             |   |   |   |
|        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                    |   | $                                 | 655,817 |                             | $      | 660,647 |   |

----

***UNAUDITED      CONDENSED CONSOLIDATED STATEMENTS OF INCOME***

| .                                                                                                                                                                      |   | Three                months       |    | Three                months       |   | Nine                months        |   | Nine                months        |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|-----------------------------------|--------|-----------------------------------|---------|
|                                                                                                                                                                   |   | ended                             |    | ended                             |   | ended                             |   | ended                             |    |
|                                                                                                                                                                   |   | September                30, 2006 |    | September                30, 2005 |   | September                30, 2006 |   | September                30, 2005 |    |
| Interest Income                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |
|      Loans                                                                                                                                    |   | $                                 | 11,070  |                              | $      | 9,331                             |   | $                                 | 31,189  |   | $ | 26,233 |   |
|      Federal funds sold                                                                                                             |   |                              | 506     |                              |   | 671                               |   |                              | 2,117   |   |   | 1,602 |   |
|      Investment securities                                                                                                               |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|           Taxable                                                                                                    |   |                              | 670     |                              |   | 452                               |   |                              | 1,893   |   |   | 1,489 |   |
|           Non-taxable                                                                                                |   |                              | 162     |                              |   | 136                               |   |                              | 436     |   |   | 427 |   |
|                Total interest income                                              |   |                              | 12,408  |                              |   | 10,590                            |   |                              | 35,635  |   |   | 29,751 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Interest Expense                                                                                                                                                  |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|      Deposits                                                                                                                                 |   |                              | 2,483   |                              |   | 1,445                             |   |                              | 6,326   |   |   | 3,556 |   |
|      Other borrowings                                                                                                                    |   |                              | 68      |                              |   | 123                               |   |                              | 284     |   |   | 371 |   |
|                Total interest expense                                             |   |                              | 2,551   |                              |   | 1,568                             |   |                              | 6,610   |   |   | 3,927 |   |
|                Net interest income                                                |   |                              | 9,857   |                              |   | 9,022                             |   |                              | 29,025  |   |   | 25,824 |   |
| Provision for                (recovery of) loan losses                                                                                                  |   |                              | 810     |                              |   | (69                               | )      |                              | 585     |   |   | — |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|                Net interest income after provision                for   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|                                     (recovery of) loan losses |   |                              | 9,047   |                              |   | 9,091                             |   |                              | 28,440  |   |   | 25,824 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Other operating income                                                                                                                                       |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|      Service charges on deposit accounts                                                                                  |   |                              | 749     |                              |   | 618                               |   |                              | 2,050   |   |   | 1,788 |   |
|      Gain on sales of other                real estate owned                                                              |   |                              | — |                              |   | 27                                |   |                              | 6       |   |   | 27 |   |
|      Gains on sales of loans                held-for-sale                                                                 |   |                              | 100     |                              |   | 147                               |   |                              | 192     |   |   | 328 |   |
|      Investment and brokerage services income                                                                             |   |                              | 61      |                              |   | 45                                |   |                              | 173     |   |   | 210 |   |
|      Mortgage brokerage income                                                                                                      |   |                              | 101     |                              |   | 142                               |   |                              | 310     |   |   | 325 |   |
|      Loan servicing income                                                                                                          |   |                              | 49      |                              |   | 156                               |   |                              | 193     |   |   | 343 |   |
|      Fiduciary                activities income                                                                                               |   |                              | 39      |                              |   | 32                                |   |                              | 114     |   |   | 88 |   |
|      ATM fees                                                                                                                            |   |                              | 70      |                              |   | 80                                |   |                              | 203     |   |   | 195 |   |
|      Signature                based transaction fees                                                                                          |   |                              | 102     |                              |   | 72                                |   |                              | 272     |   |   | 201 |   |
|      Gains                on sales of available for sale securities                                                                           |   |                              | — |                              |   | 15                                |   |                              | — |   |   | 15 |   |
|      Other income                                                                                                                        |   |                              | 175     |                              |   | 172                               |   |                              | 505     |   |   | 565 |   |
|                Total other operating income                                  |   |                              | 1,446   |                              |   | 1,506                             |   |                              | 4,018   |   |   | 4,085 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Other operating expenses                                                                                                                                     |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|      Salaries and employee benefits                                                                                            |   |                              | 4,347   |                              |   | 4,132                             |   |                              | 13,237  |   |   | 11,961 |   |
|      Occupancy and equipment                                                                                                        |   |                              | 983     |                              |   | 826                               |   |                              | 2,723   |   |   | 2,387 |   |
|      Data processing                                                                                                                     |   |                              | 368     |                              |   | 308                               |   |                              | 1,082   |   |   | 892 |   |
|      Stationery and supplies                                                                                                        |   |                              | 135     |                              |   | 106                               |   |                              | 375     |   |   | 360 |   |
|      Advertising                                                                                                                              |   |                              | 162     |                              |   | 198                               |   |                              | 611     |   |   | 491 |   |
|      Directors’ fees                                                                                                               |   |                              | 42      |                              |   | 31                                |   |                              | 108     |   |   | 88 |   |
|      Other                real estate owned expense                                                                                           |   |                              | — |                              |   | 21                                |   |                              | — |   |   | 21 |   |
|      Other expense                                                                                                                       |   |                              | 1,213   |                              |   | 1,138                             |   |                              | 3,582   |   |   | 3,757 |   |
|                Total other operating expenses                                |   |                              | 7,250   |                              |   | 6,760                             |   |                              | 21,718  |   |   | 19,957 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|                Income before income tax expense                         |   |                              | 3,243   |                              |   | 3,837                             |   |                              | 10,740  |   |   | 9,952 |   |
| Provision for income taxes                                                                                                                              |   |                              | 1,195   |                              |   | 1,419                             |   |                              | 3,996   |   |   | 3,519 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
|                Net income                                                              |   | $                                 | 2,048   |                              | $      | 2,418                             |   | $                                 | 6,744   |   | $ | 6,433 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Basic Income per share                                                                                                                             |   | $                                 | 0.26    |                              | $      | 0.30                              |   | $                                 | 0.84    |   | $ | 0.80 |   |
| Diluted Income per share                                                                                                                                |   | $                                 | 0.25    |                              | $      | 0.29                              |   | $                                 | 0.81    |   | $ | 0.77 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Other                comprehensive income                                                                                                                              |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| Unrealized                gain (loss) on available for sale                                                                                                            |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |
| securities,                net of tax effect                                                                                                                           |   |                              | 345     |                              |   | (132                              | )      |                              | (235    | ) |   | (706 | ) |
| Total                comprehensive income                                                                                                                              |   |                              | 2,393   |                              |   | 2,286                             |   |                              | 6,509   |   |   | 5,727 |   |
|                                                                                                                                                                   |   |                              |    |                              |   |                              |   |                              |    |   |   |   |   |

----

***UNAUDITED      CONDENSED CONSOLIDATED STATEMENT***

***OF      STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME***

| (in                thousands, except share amounts)                                                                                               |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                              |   |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   | Accumulated |   |   |   |
|                                                                                                                                              |   |   |   |   |   |   |   | Additional |   |   |   | Other |   |   |   |
|                                                                                                                                              |   | Common                Stock |   | Comprehensive |   | Paid-in |   | Retained |   | Comprehensive |   |   |   |
| Description                                                                                                                                       |   | Shares |   | Amounts |   | Income |   | Capital |   | Earnings |   | Income                / (Loss) |   | Total |   |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at December 31, 2005                                                                                                       |   |   | 7,558,759 |   | $ | 36,100 |   |   |   |   | $ | 977 |   | $ | 19,606 |   | $ | 119 |   | $ | 56,802 |   |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income:                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                income                                                                                                                         |   |   |   |   |   |   |   | $ | 6,744 |   |   |   |   |   | 6,744 |   |   |   |   |   | 6,744 |   |
| Other                comprehensive loss:                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized                holding losses on securities arising during the current period, net                of tax                effect of $157 |   |   |   |   |   |   |   |   | (235 | ) |   |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification                adjustment due to gains realized on sales of securities, net of tax                effect                of $0    |   |   |   |   |   |   |   |   | — |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                other comprehensive loss, net of tax effect of $157                                                                          |   |   |   |   |   |   |   |   | (235 | ) |   |   |   |   |   |   |   | (235 | ) |   | (235 | ) |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive                income                                                                                                               |   |   |   |   |   |   |   | $ | 6,509 |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 6%                stock dividend                                                                                                                  |   |   | 455,472 |   |   | 12,525 |   |   |   |   |   |   |   |   | (12,525 | ) |   |   |   |   | — |   |
| Cash                in lieu of fractional shares                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (15 | ) |   |   |   |   | (15 | ) |
| Stock-based                compensation and related tax benefits                                                                                  |   |   |   |   |   | 599 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 599 |   |
| Stock                options exercised, net of swapped shares                                                                                     |   |   | 84,733 |   |   | 138 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 138 |   |
| Stock                repurchase and retirement                                                                                                    |   |   | (125,600 | ) |   | (3,437 | ) |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,437 | ) |
|                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance                at September 30, 2006                                                                                                      |   |   | 7,973,364 |   | $ | 45,925 |   |   |   |   | $ | 977 |   | $ | 13,810 |   | $ | (116 | ) | $ | 60,596 |   |

----

***UNAUDITED      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS***

|                                                                                                                                                                                                                      |   | (in                thousands)                                      |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|---------|
|                                                                                                                                                                                                                      |   | Nine                months Ended September                30, 2006 |    | Nine                months Ended September                30, 2005 |   |
| **Operating                Activities**                                                                                                                                                                                   |   |                                                               |    |   |   |
|           Net Income                                                                                                                                               |   | $                                                                  | 6,744   |   | $ | 6,433 |   |
|           Adjustments to reconcile net income to net                                                                                      |   |                                                               |    |   |   |   |   |
|  cash provided by operating activities:                                                                                                                                                          |   |                                                               |    |   |   |   |   |
| Depreciation                                                                                                                                                                                                              |   |                                                               | 780     |   |   | 760 |   |
| Provision                for loan losses                                                                                                                                                                                  |   |                                                               | 585     |   |   | — |   |
| Stock                plan accruals                                                                                                                                                                                        |   |                                                               | 292     |   |   | 307 |   |
| Tax                benefit for stock options                                                                                                                                                                              |   |                                                               | 307     |   |   | — |   |
| Gains                on sales of available for sale securities                                                                                                                                                            |   |                                                               | — |   |   | 15 |   |
| Gains                on sales of loans                                                                                                                                                                                    |   |                                                               | (192    | ) |   | (313 | ) |
| Gains                on sales of other real estate owned                                                                                                                                                                  |   |                                                               | (6      | ) |   | (27 | ) |
| Proceeds                from sales of loans held-for-sale                                                                                                                                                                 |   |                                                               | 28,897  |   |   | 43,848 |   |
| Originations                of loans held-for-sale                                                                                                                                                                        |   |                                                               | (28,894 | ) |   | (46,903 | ) |
| Increase                in accrued interest receivable and other assets                                                                                                                                                   |   |                                                               | (1,956  | ) |   | (3,548 | ) |
| (Decrease)                increase in accrued interest payable and other liabilities                                                                                                                                      |   |                                                               | (171    | ) |   | 1,771 |   |
|                     Net cash provided by operating activities                                |   |                                                               | 6,386   |   |   | 2,343 |   |
|                                                                                                                                                                                                                      |   |                                                               |    |   |   |   |   |
| **Investing Activities**                                                                                                                                                                                             |   |                                                               |    |   |   |   |   |
|           Net (increase) decrease in investment securities                                                                                     |   |                                                               | (21,516 | ) |   | 8,808 |   |
|           Net increase in loans                                                                                                                          |   |                                                               | (30,299 | ) |   | (19,954 | ) |
|           Net                decrease in other real estate owned                                                                                                   |   |                                                               | 274     |   |   | 1,402 |   |
|           Purchases of premises and equipment, net                                                                                             |   |                                                               | (562    | ) |   | (1,864 | ) |
|                     Net cash used in investing activities                                    |   |                                                               | (52,103 | ) |   | (11,608 | ) |
|                                                                                                                                                                                                                      |   |                                                               |    |   |   |   |   |
| **Financing Activities**                                                                                                                                                                                             |   |                                                               |    |   |   |   |   |
|           Net                (decrease) increase in deposits                                                                                             |   |                                                               | (4,362  | ) |   | 16,891 |   |
|           Net decrease in FHLB advances                                                                                                             |   |                                                               | (4,091  | ) |   | (833 | ) |
|           Cash dividends paid                                                                                                                                 |   |                                                               | (15     | ) |   | (16 | ) |
|           Proceeds                from stock options exercised                                                                                           |   |                                                               | 138     |   |   | 96 |   |
| Tax                benefit for stock options                                                                                                                                                                              |   |                                                               | (307    | ) |   | — |   |
|           Repurchase of stock                                                                                                                                 |   |                                                               | (3,437  | ) |   | (2,948 | ) |
|                     Net cash (used in) provided                by financing activities       |   |                                                               | (12,074 | ) |   | 13,190 |   |
|                                                                                                                                                                                                            |   |                                                               |    |   |   |   |   |
|                     Net (decrease)                increase in cash and cash equivalents |   |                                                               | (57,791 | ) |   | 3,925 |   |
| Cash and cash equivalents at beginning of period                                                                                                                                       |   |                                                               | 122,692 |   |   | 116,704 |   |
| Cash and cash equivalents at end of period                                                                                                                                             |   | $                                                                  | 64,901  |   | $ | 120,629 |   |
|                                                                                                                                                                                                                      |   |                                                               |    |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                                                                                                               |   |                                                               |    |   |   |   |   |
| Cash paid during the period for:                                                                                                                                                                 |   |                                                               |    |   |   |   |   |
|                     Interest                                                                                          |   | $                                                                  | 6,524   |   | $ | 3,917 |   |
|                     Income Taxes                                                                                 |   | $                                                                  | 4,615   |   | $ | 4,846 |   |
|                                                                                                                                                                                                                      |   |                                                               |    |   |   |   |   |
| Supplemental disclosures of non-cash investing and financing activities:                                                                                                               |   |                                                               |    |   |   |   |   |
| Transfer                of loans held-to-maturity to OREO                                                                                                                                                                 |   |                                                               | — |   | $ | 3,226 |   |
| Stock dividend distributed                                                                                                                                                                                      |   | $                                                                  | 12,525  |   | $ | 6,158 |   |

----

*NOTES      TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS*

| 1. | BASIS                OF PRESENTATION |
|----|--------------------------------------|

*Reclassifications*

----

|                                        |   | (in                thousands)                                 |   |
|---------------------------------------------|--------|---------------------------------------------------------------|--------|
|                                        |   |                                                          |   |   |   |
|                                        |   | Nine                months ended September                30, |   | Year                ended December 31, |   |
|                                        |   | 2006                                                          |   | 2005 |   | 2005 |   |
| Balance,                beginning of period |   | $                                                             | 7,917  |   | $ | 7,445 |   | $ | 7,445 |   |
| Provision                for loan losses    |   |                                                          | 585    |   |   | — |   |   | 600 |   |
| Loan                charge-offs             |   |                                                          | (717   | ) |   | (201 | ) |   | (855 | ) |
| Loan                recoveries              |   |                                                          | 615    |   |   | 704 |   |   | 727 |   |
| Balance,                end of period       |   | $                                                             | 8,400  |   | $ | 7,948 |   | $ | 7,917 |   |

| 3. | MORTGAGE                OPERATIONS |
|----|------------------------------------|

|                                     |   | (in                thousands)    |   |
|------------------------------------------|--------|----------------------------------|--------|
|                                     |   | December                31, 2005 |   | Additions |   | Reductions |   | September                30, 2006 |   |
|                                     |   |                             |   |   |   |   |   |   |   |
| Mortgage                servicing rights |   | $                                | 973    |   | $ | 95 |   | $ | 116 |   | $ | 952 |   |

----

| 4. | OUTSTANDING                SHARES AND EARNINGS PER SHARE |
|----|----------------------------------------------------------|

|                                                      |   | (in                thousands, except share and earnings per share amounts) |      |
|-----------------------------------------------------------|--------|----------------------------------------------------------------------------|-----------|
|                                                      |   | Three                months ended September 30,                            |      | Nine                months ended September 30, |   |
|                                                      |   | 2006                                                                       |      | 2005 |   | 2006 |   | 2005 |   |
| Basic                earnings per share:                  |   |                                                                       |      |   |   |   |   |   |   |
| Net                income                                 |   | $                                                                          | 2,048     |   | $ | 2,418 |   | $ | 6,744 |   | $ | 6,433 |   |
|                                                      |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding |   |                                                                       | 7,978,274 |   |   | 8,019,459 |   |   | 7,998,922 |   |   | 8,067,433 |   |
| Basic                EPS                                  |   | $                                                                          | 0.26      |   | $ | 0.                30 |   | $ | 0.84 |   | $ | 0.                80 |   |
|                                                      |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Diluted                earnings per share:                |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Net                income                                 |   | $                                                                          | 2,048     |   | $ | 2,418 |   | $ | 6,744 |   | $ | 6,433 |   |
|                                                      |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding |   |                                                                       | 7,978,274 |   |   | 8,019,459 |   |   | 7,998,922 |   |   | 8,067,433 |   |
|                                                      |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
| Effect                of dilutive options                 |   |                                                                       | 262,573   |   |   | 383,868 |   |   | 288,426 |   |   | 335,063 |   |
|                                                      |   |                                                                       |      |   |   |   |   |   |   |   |   |   |   |
|                                                      |   |                                                                       | 8,240,847 |   |   | 8,403,327 |   |   | 8,287,348 |   |   | 8,402,496 |   |
| Diluted                EPS                                |   | $                                                                          | 0.25      |   | $ | 0.29 |   | $ | 0.81 |   | $ | 0.77 |   |

----

| 5. | STOCK                OPTION PLAN |
|----|----------------------------------|

*Accounting      for Stock-Based *
*Compensation      *
*-*
*      Transition and Disclosure*
*,      an      amendment of FASB Statement No. 123*

|   | (in                thousands, except earnings per share                amounts) |
|--------|---------------------------------------------------------------------------------|

|                               | Three                months        |   | Nine                months |
|------------------------------------|------------------------------------|--------|----------------------------|
| ended                September 30, | ended                September 30, |
|                               |                               | 2005   |                       | 2005 |

|                                                                                                                                                                                                    |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
| Net                income, as reported                                                                                                                                                                  |   | $2,418 |   | $6,433 |
|                                                                                                                                                                                                    |   |   |   |   |
| Add:                Stock-based employee compensation expense included in reported net                income,                net of related tax effects                                                 |   | 72     |   | 215    |
|                                                                                                                                                                                                    |   |   |   |   |
| Deduct:                Total stock-based employee compensation expense determined under                fair                value based method for all awards, net of related tax                effects |   | (90)   |   | (268)  |
|                                                                                                                                                                                                    |   |   |   |   |
| Pro                forma net income under SFAS No. 123                                                                                                                                                  |   | $2,400 |   | $6,380 |
|                                                                                                                                                                                                    |   |   |   |   |
| Basic                earnings per share:                                                                                                                                                                |   |   |   |   |
| As                reported                                                                                                                                                                              |   | $0.30  |   | $0.80  |
| Pro                forma under SFAS No. 123                                                                                                                                                             |   | $0.30  |   | $0.79  |
|                                                                                                                                                                                                    |   |   |   |   |
| Diluted                earnings per share:                                                                                                                                                              |   |   |   |   |
| As                reported                                                                                                                                                                              |   | $0.29  |   | $0.77  |
| Pro                forma under SFAS No. 123                                                                                                                                                             |   | $0.29  |   | $0.76  |

----

|                                                      |   | Number                of Shares |    | Weighted                Average Exercise Price |   | Aggregate                Intrinsic Value |   | Weighted                Average Remaining Contractual Term |      |
|-----------------------------------------------------------|--------|---------------------------------|---------|------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------------------------|-----------|
| Options                outstanding at Beginning of Period |   |                            | 540,282 |                                           | $      | 10.84                                    |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |    |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Granted                                                   |   |                            | — |                                           |   | —                                  |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |    |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Cancelled                / Forfeited                      |   |                            | — |                                           |   | —                                  |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |    |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Exercised                                                 |   |                            | (4,000  | )                                              |   | 4.50                                     |   | $                                                          | 86,000    |   |   |   |   |
|                                                      |   |                            |    |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Options                outstanding at End of Period       |   |                            | 536,282 |                                           | $      | 10.88                                    |   | $                                                          | 7,723,978 |   |   | 6.16 |   |
|                                                      |   |                            |    |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Exercisable                (vested) at End of Period      |   |                            | 353,178 |                                           | $      | 8.18                                     |   | $                                                          | 6,028,509 |   |   | 5.09 |   |

|                                                      |   | Number                of Shares |     | Weighted                Average Exercise Price |   | Aggregate                Intrinsic Value |   | Weighted                Average Remaining Contractual Term |      |
|-----------------------------------------------------------|--------|---------------------------------|----------|------------------------------------------------|--------|------------------------------------------|--------|------------------------------------------------------------|-----------|
| Options                outstanding at Beginning of Period |   |                            | 602,696  |                                           | $      | 8.84                                     |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |     |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Granted                                                   |   |                            | 57,790   |                                           |   | 24.98                                    |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |     |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Cancelled                / Forfeited                      |   |                            | (10,425  | )                                              |   | 10.48                                    |   |                                                       |      |   |   |   |   |
|                                                      |   |                            |     |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Exercised                                                 |   |                            | (113,779 | )                                              |   | 7.23                                     |   | $                                                          | 2,148,200 |   |   |   |   |
|                                                      |   |                            |     |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Options                outstanding at End of Period       |   |                            | 536,282  |                                           | $      | 10.88                                    |   | $                                                          | 7,723,978 |   |   | 6.16 |   |
|                                                      |   |                            |     |                                           |   |                                     |   |                                                       |      |   |   |   |   |
| Exercisable                (vested) at End of Period      |   |                            | 353,178  |                                           | $      | 8.18                                     |   | $                                                          | 6,028,509 |   |   | 5.09 |   |

----

|                                     | Three                Months Ended |   | Nine                Months Ended |
|------------------------------------------|-----------------------------------|--------|----------------------------------|
| September                30, 2006*       | September                30, 2006 |
| Risk                Free Interest Rate   | —                           |   | 4.57%                            |
|                                     |                              |   |                             |
| Expected                Dividend Yield   | —                           |   | 0.00%                            |
|                                     |                              |   |                             |
| Expected                Life in Years    | —                           |   | 4.67                             |
|                                     |                              |   |                             |
| Expected                Price Volatility | —                           |   | 26.39%                           |

----

|                                     | Three                Months Ended |   | Nine                Months Ended |
|------------------------------------------|-----------------------------------|--------|----------------------------------|
| September                30, 2006        | September                30, 2006 |
| Risk                Free Interest Rate   | 1.36%                             |   | 1.36%                            |
|                                     |                              |   |                             |
| Expected                Dividend Yield   | 0.00%                             |   | 0.00%                            |
|                                     |                              |   |                             |
| Expected                Life in Years    | 2.00                              |   | 2.00                             |
|                                     |                              |   |                             |
| Expected                Price Volatility | 23.80%                            |   | 23.80%                           |

----

| 6. | FIRST                NORTHERN BANK - EXECUTIVE SALARY CONTINUATION                PLAN |
|----|----------------------------------------------------------------------------------------|

|                                                   |   | Three                months ended September 30, |   |
|--------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                   |   | 2006                                            |   | 2005 |   |
| Components                of Net Periodic Benefit Cost |   |                                            |   |   |   |   |   |
| Service                Cost                            |   | $                                               | 51,326 |   | $ | 40,049 |   |
| Interest                Cost                           |   |                                            | 16,332 |   |   | 13,321 |   |
| Amortization                of prior service cost      |   |                                            | 3,257  |   |   | 3,257 |   |
| Net                periodic benefit cost               |   | $                                               | 70,915 |   | $ | 56,627 |   |

----

| 7.   |    FIRST                NORTHERN BANK - DIRECTORS’ RETIREMENT                PLAN |
|----------------|--------------------------------------------------------------------------------------------------------|

|                                                   |   | Three                months ended September 30, |   |
|--------------------------------------------------------|--------|-------------------------------------------------|--------|
|                                                   |   | 2006                                            |   | 2005 |   |
| Components                of Net Periodic Benefit Cost |   |                                            |   |   |   |   |   |
| Service                Cost                            |   | $                                               | 13,518 |   | $ | 18,218 |   |
| Interest                Cost                           |   |                                            | 5,943  |   |   | 5,233 |   |
| Amortization                of net loss                |   |                                            | 234    |   |   | 1,295 |   |
| Net                periodic benefit cost               |   | $                                               | 19,695 |   | $ | 24,746 |   |

----

**ITEM      2. **
** **

**MANAGEMENT’S      DISCUSSION AND ANALYSIS OF**

**FINANCIAL      CONDITION AND RESULTS OF OPERATIONS**

**FORWARD-LOOKING      STATEMENTS**

----

**INTRODUCTION**

| ·   | Year-to-date                net income of $6.74 million, up 4.8% over the $6.43 million earned                in the                same fiscal period last year. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Diluted                earnings per share for the nine months ended September 30, 2006 of                $0.81,                up 5.2% from the $0.77 reported in the same period last year (all                2005 per                share earnings have been adjusted for a 6% stock dividend issued                March 31,                2006). |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provision                for loan losses of $585,000 for the nine-month period ended September                30,                2006 compared to no provision for the same period in                2005. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Annualized                Return on Average Assets for the nine-month period ended September                30,                2006 of 1.36%, compared to 1.35% for the same period in 2005. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Annualized                Return on Beginning Core Equity for the nine-month period ended September                30, 2006 of 15.86%, compared to 16.85% one year ago. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total                assets at September 30, 2006 of $655.8 million, an increase of $6.2                million, or 1.0% from prior-year third quarter levels. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total                deposits of $577.4 million at September 30, 2006, an increase of                $3.3                million or 0.6% compared to September 30, 2005 figures. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total                net loans at September 30, 2006 (including loans held-for-sale) increased                $37.7 million, or 8.3%, to $490.4 million compared to September 30,                2005                figures. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Total                investment securities at September 30, 2006 increased $23.7 million,                or                50.6%, to $70.5 million compared to September 30, 2005                figures. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                income for the quarter of $2.05 million, down 15.3% from the $2.42                million                earned in the third quarter of 2005. (Third quarter 2005 net income                was                increased through a $41 thousand, net of tax, recovery of provision                for                loan losses from a prior period, compared to a $478 thousand, net                of tax,                provision for loan losses for the current quarter.) |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Diluted                earnings per share for the quarter of $0.25 compared to $0.29 per                diluted                share earned a year ago. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During                the third quarter of 2006, the Company also opened its Folsom Financial                Center in Folsom at 2360 East Bidwell Street. The Bank has a strong                team                of local financial experts managing the Center which offers full                service                banking, commercial loans, real estate mortgage loans, investment&                brokerage services, as well as trust                administration. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SUMMARY**

|         |                                                                  | (in                thousands, except earnings per share and percentage                amounts) |
|--------------|-----------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    |                                                                  |                                                                                           |   |              Three                months |  Three                months |  Nine                months |  Nine                months |
|         |                                                                  |                                                                                           |   |             ended | ended |   | ended |   |   | ended |   |
|         |                                                                  |                                                                                           | September                30, 2006 |   |   | September                30, 2005 |   |   | September                30, 2006 |   |   | September                30, 2005 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         | For                the Period:                                        |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         | Net                Income                                             |                                                                                           |   | $2,048 |   |   | $2,418 |   |   | $6,744                  |   |   | $6,433 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         |  Basic                Income Per Share*                          |                                                                                           | $0.26 |   |   | $0.30 |   |   | $0.84 |   |   | $0.80 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         | Diluted                Income Per share*                              |                                                                                           | $0.25 |   |   | $0.29 |   |   | $0.81 |   |   | $0.77 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|         | Return                on Average Assets                               |                                                                                           | 1.25% |   |   | 1.50% |   |   | 1.36% |   |   | 1.35% |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         | Net                Income / Beginning Equity                          |                                                                                           | 14.45% |   |   | 19.00% |   |   | 15.86% |   |   | 16.85%  |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         | At                Period End:                                         |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|         | Total                Assets                                           |                                                                                           | $655,817 |   |   | $649,668 |   |   | $655,817 |   |   | $649,668 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
|         |  Total                Loans, Net (including loans held-for-sale) |                                                                                           | $490,404 |   |   | $452,687 |   |   | $490,404 |   |   | $452,687 |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|         | Total                Deposits                                         |                                                                                           | $577,419 |   |   | $574,077 |   |   | $577,419  |   |   | $574,077  |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |
|         |  Loan-To-Deposit                Ratio                            | 84.9%                                                                                          |   |   | 78.9% |   |   | 84.9% |   |   | 78.9% |   |
|         |                                                                  |                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         | *Adjusted                for stock dividends                          |                                                                                           |   |   |   |   |   |   |   |   |   |

----

**Distribution      of Average Statements of Condition and Analysis of Net Interest      Income**

|                                                                                                                                                                                                             | Three                months ended |     | Three                months ended |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------|----------|-----------------------------------|
|                                                                                                                                                                                                             | September                30, 2006 |     | September                30, 2005 |
|                                                                                                                                                                                                             | Average                           |     | Yield/                            |   | Average |   | Yield/ |
|                                                                                                                                                                                                             | Balance                           | Interest | Rate                              |   | Balance | Interest | Rate |
| **Assets**                                                                                                                                                                                                       |                              |     |                              |   |   |   |   |
| Interest-earning                assets:                                                                                                                                                                          |                              |     |                              |   |   |   |   |
| Loans                (1)                                                                                                                                                                                         | $489,094                          | $11,070  | 8.98%                             |   | $458,496 | $9,331 | 8.07% |
| Investment                securities, taxable                                                                                                                                                                    | 55,870                            | 670      | 4.76%                             |   | 37,106 | 452 | 4.83% |
| Investment                securities, non-taxable (2)                                                                                                                                                            | 14,098                            | 162      | 4.56%                             |   | 11,420 | 136 | 4.72% |
| Federal                funds sold                                                                                                                                                                                | 37,982                            | 506      | 5.29%                             |   | 79,695 | 671 | 3.34% |
| Total                interest-earning assets                                                                                                                                                                     | 597,044                           | 12,408   | 8.25%                             |   | 586,717 | 10,590 | 7.16% |
| Non-interest-earning                assets:                                                                                                                                                                      |                              |     |                              |   |   |   |   |
| Cash                and due from banks                                                                                                                                                                           | 29,401                            |     |                              |   | 29,263 |   |   |
| Premises                and equipment, net                                                                                                                                                                       | 8,147                             |     |                              |   | 7,412 |   |   |
| Other                real estate owned                                                                                                                                                                           | —                           |     |                              |   | 2,661 |   |   |
| Accrued                interest receivable and other assets                                                                                                                                                      | 21,217                            |     |                              |   | 17,767 |   |   |
| Total                average assets                                                                                                                                                                              | 655,809                           |     |                              |   | 643,820 |   |   |
|                                                                                                                                                                                                             |                              |     |                              |   |   |   |   |
| **Liabilities                and Stockholders’ Equity:**                                                                                                                                                   |                              |     |                              |   |   |   |   |
| Interest-bearing                liabilities:                                                                                                                                                                     |                              |     |                              |   |   |   |   |
| Interest-bearing                transaction deposits                                                                                                                                                             | 96,590                            | 473      | 1.94%                             |   | 78,536 | 149 | 0.75% |
| Savings                & MMDA’s                                                                                                                                                                        | 187,583                           | 1,046    | 2.21%                             |   | 188,196 | 655 | 1.38% |
| Time,                under $100,000                                                                                                                                                                              | 49,301                            | 356      | 2.86%                             |   | 54,099 | 262 | 1.92% |
| Time,                $100,000 and over                                                                                                                                                                           | 66,196                            | 608      | 3.64%                             |   | 63,649 | 379 | 2.36% |
| FHLB                advances and other borrowings                                                                                                                                                                | 10,601                            | 68       | 2.54%                             |   | 14,290 | 123 | 3.41% |
| Total                interest-bearing liabilities                                                                                                                                                                | 410,271                           | 2,551    | 2.47%                             |   | 398,770 | 1,568 | 1.56% |
| Non-interest-bearing                liabilities:                                                                                                                                                                 |                              |     |                              |   |   |   |   |
| Non-interest-bearing                demand deposits                                                                                                                                                              | 179,716                           |     |                              |   | 186,541 |   |   |
| Accrued                interest payable and other liabilities                                                                                                                                                    | 6,226                             |     |                              |   | 4,884 |   |   |
| Total                liabilities                                                                                                                                                                                 | 596,213                           |     |                              |   | 590,195 |   |   |
| Total                stockholders’ equity                                                                                                                                                                  | 59,596                            |     |                              |   | 53,625 |   |   |
| Total                average liabilities and stockholders’ equity                                                                                                                                          | $655,809                          |     |                              |   | $643,820 |   |   |
| Net                interest income and net interest margin (3)                                                                                                                                                   |                              | $9,857   | 6.55%                             |   |   | $9,022 | 6.10% |
|                                                                                                                                                                                                             |                              |     |                              |   |   |   |   |
| 1.                Average balances for loans include loans held-for-sale and non-accrual                loans and are net of the allowance for loan losses, but non-                                             |
|                    accrued interest thereon is excluded. Loan interest income includes                loan                fees of approximately $741 and $773 for the three                months |
| ended                September 30, 2006 and 2005, respectively.                                                                                                                                                  |
| 2.                Interest income and yields on tax-exempt securities are not presented                on a                taxable equivalent basis.                                                             |
| 3.                Net interest margin is computed by dividing net interest income by                total                average interest-earning assets.                                                        |

----

**Distribution      of Average Statements of Condition and Analysis of Net Interest      Income**

|                                                                                                                                                                                                       |   | Nine                months ended  |    | Nine                months ended  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
|                                                                                                                                                                                                       |   | September                30, 2006 |    | September                30, 2005 |   |
|                                                                                                                                                                                                       |   | Average                           |    |                              |   | Yield/ |   | Average |   |   |   | Yield/ |   |
|                                                                                                                                                                                                       |   | Balance                           |    | Interest                          |   | Rate |   | Balance |   | Interest |   | Rate |   |
| **Assets**                                                                                                                                                                                                 |   |                              |    |                              |   |   |   |   |   |   |   |   |   |
| Interest-earning                assets:                                                                                                                                                                    |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                (1)                                                                                                                                                                                   |   | $                                 | 477,398 |                              | $      | 31,189 |   |   | 8.73 | % | $ | 451,539 |   | $ | 26,233 |   |   | 7.77 | % |
| Investment                securities, taxable                                                                                                                                                              |   |                              | 52,423  |                              |   | 1,893 |   |   | 4.83 | % |   | 39,803 |   |   | 1,489 |   |   | 5.00 | % |
| Investment                securities, non-taxable (2)                                                                                                                                                      |   |                              | 12,402  |                              |   | 436 |   |   | 4.70 | % |   | 11,926 |   |   | 427 |   |   | 4.79 | % |
| Federal                funds sold                                                                                                                                                                          |   |                              | 60,197  |                              |   | 2,117 |   |   | 4.70 | % |   | 75,686 |   |   | 1,602 |   |   | 2.83 | % |
| Total                interest-earning assets                                                                                                                                                               |   |                              | 602,420 |                              |   | 35,635 |   |   | 7.91 | % |   | 578,954 |   |   | 29,751 |   |   | 6.87 | % |
| Non-interest-earning                assets:                                                                                                                                                                |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                and due from banks                                                                                                                                                                     |   |                              | 30,189  |                              |   |   |   |   |   |   |   | 31,382 |   |   |   |   |   |   |   |
| Premises                and equipment, net                                                                                                                                                                 |   |                              | 8,193   |                              |   |   |   |   |   |   |   | 7,491 |   |   |   |   |   |   |   |
| Other                real estate owned                                                                                                                                                                     |   |                              | 76      |                              |   |   |   |   |   |   |   | 932 |   |   |   |   |   |   |   |
| Accrued                interest receivable and other assets                                                                                                                                                |   |                              | 20,378  |                              |   |   |   |   |   |   |   | 17,403 |   |   |   |   |   |   |   |
| Total                average assets                                                                                                                                                                        |   |                              | 661,256 |                              |   |   |   |   |   |   |   | 636,162 |   |   |   |   |   |   |   |
|                                                                                                                                                                                                       |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                and Stockholders’ Equity:**                                                                                                                                             |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                liabilities:                                                                                                                                                               |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                transaction deposits                                                                                                                                                       |   |                              | 90,003  |                              |   | 951 |   |   | 1.41 | % |   | 70,874 |   |   | 306 |   |   | 0.58 | % |
| Savings                & MMDA’s                                                                                                                                                                  |   |                              | 190,990 |                              |   | 2,704 |   |   | 1.89 | % |   | 191,978 |   |   | 1,541 |   |   | 1.07 | % |
| Time,                under $100,000                                                                                                                                                                        |   |                              | 50,434  |                              |   | 998 |   |   | 2.65 | % |   | 55,522 |   |   | 694 |   |   | 1.67 | % |
| Time,                $100,000 and over                                                                                                                                                                     |   |                              | 67,756  |                              |   | 1,673 |   |   | 3.30 | % |   | 66,864 |   |   | 1,015 |   |   | 2.03 | % |
| FHLB                advances and other borrowings                                                                                                                                                          |   |                              | 11,581  |                              |   | 284 |   |   | 3.28 | % |   | 14,357 |   |   | 371 |   |   | 3.45 | % |
| Total                interest-bearing liabilities                                                                                                                                                          |   |                              | 410,764 |                              |   | 6,610 |   |   | 2.15 | % |   | 399,595 |   |   | 3,927 |   |   | 1.31 | % |
| Non-interest-bearing                liabilities:                                                                                                                                                           |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest-bearing                demand deposits                                                                                                                                                        |   |                              | 186,540 |                              |   |   |   |   |   |   |   | 179,440 |   |   |   |   |   |   |   |
| Accrued                interest payable and other liabilities                                                                                                                                              |   |                              | 5,730   |                              |   |   |   |   |   |   |   | 3,943 |   |   |   |   |   |   |   |
| Total                liabilities                                                                                                                                                                           |   |                              | 603,034 |                              |   |   |   |   |   |   |   | 582,978 |   |   |   |   |   |   |   |
| Total                stockholders’ equity                                                                                                                                                            |   |                              | 58,222  |                              |   |   |   |   |   |   |   | 53,184 |   |   |   |   |   |   |   |
| Total                average liabilities and stockholders’ equity                                                                                                                                    |   | $                                 | 661,256 |                              |   |   |   |   |   |   | $ | 636,162 |   |   |   |   |   |   |   |
| Net                interest income and net interest margin (3)                                                                                                                                             |   |                              |    |                              | $      | 29,025 |   |   | 6.44 | % |   |   |   | $ | 25,824 |   |   | 5.96 | % |
|                                                                                                                                                                                                       |   |                              |    |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1.                Average balances for loans include loans held-for-sale and non-accrual                loans and are net of the allowance for loan losses, but non-                                       |
|                    accrued interest thereon is excluded. Loan interest income includes                loan                fees of approximately $2,171 and $2,239 for the nine months ended |
| months                ended September 30, 2006 and 2005, respectively.                                                                                                                                     |
| 2.                Interest income and yields on tax-exempt securities are not presented                on a                taxable equivalent basis.                                                       |
| 3.                Net interest margin is computed by dividing net interest income by                total                average interest-earning assets.                                                  |

----

**CHANGES      IN FINANCIAL CONDITION**

----

**CHANGES      IN RESULTS OF OPERATIONS**

----

----

|   |                                                                      | (in                thousands) |
|--------|---------------------------------------------------------------------------|-------------------------------|
|   |                                                                      |                          |   | Three                  monthsended | Three                  monthsended | Nine                  monthsended | Nine                  monthsended |
|   |                                                                      |                          | September                30, 2006 | September                30, 2005 | September                30, 2006 | September                30, 2005 |
|   |                                                                      |                          |   |   |   |   |   |   |   |   |   |   |   |
|   | Other                miscellaneous operating expenses                     |                          |   |   |   |   |   |   |   |   |   |   |   |
|   | (Recovery                  of) provision for unfunded lending commitments |                          | $(61) |   |   | $— |   |   | $(61) |   |   | $81 |   |
|   | Legal                fees                                                 |                          | 71 |   |   | 30 |   |   | 214 |   |   | 118 |   |
|   | Accounting                and audit fees                                  |                          | 113 |   |   | 102 |   |   | 364 |   |   | 428 |   |
|   | Consulting                fees                                            |                          |   | 188 |   |   | 96 |   |   | 418 |   |   | 313 |   |
|   | Postage                expense                                            |                          |   | 88 |   |   | 81 |   |   | 276 |   |   | 218 |   |
|   | Telephone                expense                                          |                          |   | 56 |   |   | 50 |   |   | 156 |   |   | 159 |   |
|   | Training                expense                                           |                          | 64 |   |   | 71 |   |   | 209 |   |   | 188 |   |
|   | Loan                origination expense                                   |                          | 153 |   |   | 201 |   |   | 445 |   |   | 674 |   |
|   | Computer                software depreciation                             |                          | 60 |   |   | 58 |   |   | 189 |   |   | 179 |   |
|   | Other                miscellaneous expense                                |                          | 481 |   |   | 449 |   |   | 1,372 |   |   | 1,399 |   |
|   |                                                                      |                          |   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                      |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   | Total                other miscellaneous operating expenses               |                          | $1,213 |   |   | $1,138 |   |   | $3,582 |   |   | $3,757 |   |

----

|                                        |   | (in                thousands)     |    |
|---------------------------------------------|--------|-----------------------------------|---------|
|                                        |   |                              |    |   |   |
|                                        |   | September                30, 2006 |    | December                31, 2005 |   |
| Undisbursed                loan commitments |   | $                                 | 193,589 |   | $ | 203,101 |   |
| Standby                letters of credit    |   |                              | 13,050  |   |   | 14,077 |   |
|                                        |   | $                                 | 206,639 |   | $ | 217,178 |   |

----

*See*

----

|                                                                                                      |   | Nine                months ended |    | Year                ended   |   |
|-----------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|-----------------------------|--------|
|                                                                                                      |   | September                30,     |    | December                31, |   |
|                                                                                                      |   | 2006                             |    | 2005                        |   | 2005 |   |
| Balance at Beginning of Period                                                        |   | $                                | 7,917   |                        | $      | 7,445 |   | $ | 7,445 |   |
| Provision for Loan Losses                                                                  |   |                             | 585     |                        |   | — |   |   | 600 |   |
| Loans Charged-Off:                                                                                   |   |                             |    |                        |   |   |   |   |   |   |
|    Commercial                                                                              |   |                             | (400    | )                           |   | (91 | ) |   | (670 | ) |
|    Agriculture                                                                             |   |                             | — |                        |   | — |   |   | — |   |
|    Real Estate Mortgage                                                          |   |                             | — |                        |   | — |   |   | — |   |
|    Real Estate Construction                                                      |   |                             | — |                        |   | — |   |   | — |   |
|    Installment Loans to Individuals                                         |   |                             | (317    | )                           |   | (110 | ) |   | (185 | ) |
|                                                                                                      |   |                             |    |                        |   |   |   |   |   |   |
|         Total Charged-Off                                    |   |                             | (717    | )                           |   | (201 | ) |   | (855 | ) |
| Recoveries:                                                                                               |   |                             |    |                        |   |   |   |   |   |   |
|    Commercial                                                                              |   |                             | 480     |                        |   | — |   |   | 64 |   |
|    Agriculture                                                                             |   |                             | — |                        |   | 663 |   |   | 663 |   |
|    Real Estate Mortgage                                                          |   |                             | — |                        |   | — |   |   | — |   |
|    Real Estate Construction                                                      |   |                             | — |                        |   | — |   |   | — |   |
|    Installment Loans to Individuals                                         |   |                             | 135     |                        |   | 41 |   |   | — |   |
|                                                                                                      |   |                             |    |                        |   |   |   |   |   |   |
|         Total Recoveries                                     |   |                             | 615     |                        |   | 704 |   |   | 727 |   |
| Net (Charge-Offs)                Recoveries                                                     |   |                             | (102    | )                           |   | 503 |   |   | (128 | ) |
| Balance at End of Period                                                              |   | $                                | 8,400   |                        | $      | 7,948 |   | $ | 7,917 |   |
| Ratio of Net (Charge-Offs)Recoveries                                                  |   |                             |    |                        |   |   |   |   |   |   |
|    To Average Loans Outstanding During the Period            |   |                             | (0.02   | %)                          |   | 0.11 | % |   | (0.03 | %) |
| Allowance for Loan Losses                                                                  |   |                             |    |                        |   |   |   |   |   |   |
|    To Total Loans at the end of the Period         |   |                             | 1.70    | %                           |   | 1.75 | % |   | 1.71 | % |
|    To Nonperforming Loans at the end of the Period |   |                             | 300.21  | %                           |   | 247.14 | % |   | 351.71 | % |

----

|                                       |   | (in                thousands)     |   |
|--------------------------------------------|--------|-----------------------------------|--------|
|                                       |   |                              |   |   |   |
|                                       |   | September                30, 2006 |   | December                31, 2005 |   |
| Three                months or less        |   | $                                 | 21,613 |   | $ | 30,401 |   |
| Over                three to twelve months |   |                              | 37,315 |   |   | 31,129 |   |
| Over                twelve months          |   |                              | 5,681  |   |   | 3,456 |   |
|                                       |   | $                                 | 64,609 |   | $ | 65,986 |   |

|                             |   | (in                thousands, except percentage amounts) |   |
|----------------------------------|--------|----------------------------------------------------------|--------|
|                             |   |                                                     |   |   |   |   |   |
|                             |   | Actual                                                   |   | Well                Capitalized Ratio Requirement |   | Minimum |   |
|                             |   | Capital                                                  |   | Ratio |   |   |   | Capital |   |
| Leverage                         |   | $60,076                                                  |   | 9.14% |   | 5.0% |   | 4.0% |   |
| Tier                1 Risk-Based |   | $                                                        | 60,076 |   |   | 10.72 | % |   | 6.0 | % |   | 4.0 | % |
| Total                Risk-Based  |   | $                                                        | 66,749 |   |   | 11.91 | % |   | 10.0 | % |   | 8.0 | % |

|                                                       |   | Nine                months ended September                30, 2006 |   | Nine                months ended September                30,2005 |   | Year                ended December                31,2005 |   |
|------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------------------------------|--------|-----------------------------------------------------------|--------|
| Annualized                return on average assets         |   |                                                               | 1.36   | %                                                                 |   | 1.35                                                      | %      |   | 1.35 | % |
| Annualized                return on beginning core equity* |   |                                                               | 15.86  | %                                                                 |   | 16.85                                                     | %      |   | 17.06 | % |

|                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| *                Core equity does not include any gains or losses on available for                sale                securities and other intangible                   assets |   | .      |
| Core                equity consisted of $60,712,000, $54,788,000 and $56,683,000 at September                30, 2006, September 30, 2005 and December 31, 2005,                respectively. |   |   |

----

----

**ITEM      3. **
** **

**QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**ITEM      4. **
** **

**CONTROLS      AND PROCEDURES**

----

**PART      II - OTHER INFORMATION**

**ITEM      1A. **
** **

**RISK      FACTORS**

*Changes      in the premiums payable to the Federal Deposit Insurance Corporation will      increase our costs and could adversely affect our business.*

**ITEM      2. **
** **

**UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**Repurchases      of Equity Securities**

|                                            |   | (a)                                            |   | (b)                                                       |   | (c)                                                                                                     |   | (d)                                                                                                          |   |
|-------------------------------------------------|--------|------------------------------------------------|--------|-----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------|--------|
| Period                                          |   | Total                number of sharespurchased |   | Average                pricepaid                per share |   | Number                of shares purchased as part of publicly announcedplans                or programs |   | Maximum                number of shares that may yet be purchased under the plans or                programs |   |
| July                1 - July 31, 2006           |   |                                           | 10,221 |                                                      | $      | 26.54                                                                                                   |   |                                                                                                         | 10,221 |   |   | 162,752 |   |
| August                1 - August 31, 2006       |   |                                           | 7,273  |                                                      | $      | 26.12                                                                                                   |   |                                                                                                         | 7,273  |   |   | 155,479 |   |
| September                1 - September 30, 2006 |   |                                           | 500    |                                                      | $      | 25.25                                                                                                   |   |                                                                                                         | 500    |   |   | 154,979 |   |
| Total                                           |   |                                           | 17,994 |                                                      | $      | 26.34                                                                                                   |   |                                                                                                         | 17,994 |   |   | 154,979 |   |

----

**ITEM      6. **
** **

**EXHIBITS**

| **Exhibit** |         |
|-------------|--------------|
| **Number**  | **Exhibits** |
|        |         |
| 31.1        |         | Certification                of the Company’s Chief Executive Officer pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 |
| 31.2        |         | Certification                of the Company’s Chief Financial Officer pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 |
| 32.1        |         | Certification                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
| 32.2        |         | Certification                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of                2002 |
|        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        |         |   |   |   |   |   |   |   |   |   |   |   |   |   |

**SIGNATURES**

|   |                                  | FIRST                NORTHERN COMMUNITY BANCORP                                                        |
|--------|---------------------------------------|--------------------------------------------------------------------------------------------------------|
|   |                                  |                                                                                                   |
|   | Date:                November 8, 2006 | By:                /s/ Louise A. Walker                                                           |
|   |                                  |                                                                                                   |
|   |                                  | Louise                A. Walker, Sr. Executive Vice President / Chief Financial                Officer |
|   |                                  | (Principal                Financial Officer and Duly Authorized                Officer)                |

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