WAUKEGAN, Ill., July 24, 2017 (GLOBE NEWSWIRE) — Northern States Financial Corporation (OTC PINK:NSFC) (the “Company”), the holding company of NorStates Bank (the “Bank”), today reported a second quarter 2017 loss of $1,448,000 as compared with net income of $370,000 for the first quarter 2017. The second quarter 2017 loss was due to the Bank recognizing $3,109,000 in write-downs on properties which have been carried for several quarters as other real estate owned (“OREO”).  The effected properties are primarily under agreements to sell and the sales are expected to be completed in the third quarter. Generally Accepted Accounting Principles requires the Company to recognize these write-downs in the second quarter.  Per share book value at June 30, 2017 was $0.64, compared to $0.65 at March 31, 2017.

Scott Yelvington, President and Chief Executive Officer stated, “We were able to increase our net interest income and non-interest income, as well as loans, in the second quarter.  However, in an effort to substantially reduce non-performing assets (‘NPAs’), we decided to enter into contracts on several OREO properties representing almost 75% of the $10 million OREO balance.  While the one-time write-downs are painful, we believe that the associated expense reduction and resulting effect on NPAs was appropriate at this time.  Unfortunately, by the accounting rules, we need to recognize the write-down loss this quarter.  The sales of these properties will reduce the OREO balance by $5.5 million in the third quarter of 2017 with no additional loss incurred.”  Yelvington continued, “Regrettably, the OREO loss obfuscated what was a steady increase in loans, core deposits and core earnings.”

Some highlights of continued financial improvement during the second quarter of 2017 included the following:

  • Non-performing assets (“NPAs”), consisting of nonaccrual loans, ninety days or more past due loans still accruing, loans considered troubled debt restructurings and other real estate owned, decreased by $3.2 million from December 31, 2016 to June 30, 2017.  NPAs less trouble debt restructurings to total assets decreased to 2.27% at June 30, 2017 from 2.76% at December 31, 2016.  At June 30, 2017, the allowance for loan and lease losses to total loans and leases ratio was 1.92%, down slightly from 1.94% at March 31, 2017.
     
  • Average loans increased by $35.8 million for the second quarter of 2017 compared with the second quarter of 2016.  Loan interest income increased $232 thousand for the second quarter of 2017 compared to the second quarter of 2016.  The increased loan interest income contributed to a net interest margin for the second quarter of 2017 of 3.29%.
     
  • Core deposits consisting of personal and business non-time deposits increased $7.6 million from December 31, 2016.   Core deposits growth assisted the Company in maintaining a low cost of funds during the second quarter of 2017 at 15 basis points with the Bank’s cost of funds at 8 basis points.
     
  • Excluding the OREO write-downs, the Company’s pretax income for the second quarter of 2017 was $661,000 as compared with pretax income of $532,000 for the first quarter of 2017, and the Bank’s pretax income for the second quarter of 2017 was $782,000 as compared with pretax income of $645,000 for the first quarter of 2017.

About Northern States Financial Corporation

Northern States Financial Corporation is the holding company for NorStates Bank, a full-service commercial bank with eight branches in Lake County, Illinois.  NorStates Bank is the successor to financial institutions dating to 1919.  NorStates Bank serves the populations of northeastern Illinois and southeastern Wisconsin.

Forward-Looking Information

This release may contain forward-looking statements that are subject to risks and uncertainties.  Such risks and uncertainties may include, but are not necessarily limited to, fluctuations in interest rates, inflation, government regulations, general economic conditions, competition within the business areas in which the Company conducts its operations including the real estate market in Illinois, and other factors beyond the Company’s control.  Such risks and uncertainties could cause actual results for subsequent interim periods or for the entire year to differ materially from those expressed or implied by any forward-looking statement.  Readers should not place undue reliance on the forward-looking statements, which reflect management’s beliefs, expectations and assumptions only as of the date hereof.  The Company undertakes no obligation to update statements to reflect new information or subsequent events or circumstances.

                     
NORTHERN STATES FINANCIAL CORPORATION                  
($000s, except per share data) (Unaudited)                    
Key Performance Data                    
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
  For the quarter ended   2017       2017       2016       2016       2016  
                     
Net income available to common stockholders $   (1,448 )   $   370     $   983     $   483     $   354  
Basic income (loss) per average outstanding share   (0.02 )     0.00       0.01       0.01       0.00  
Diluted income (loss) per average outstanding share   (0.02 )     0.00       0.01       0.01       0.00  
Return on average assets     (1.19 )%     0.30 %     0.78 %     0.38 %     0.29 %
Return on average equity     (9.77 )%     2.52 %     6.85 %     3.38 %     2.50 %
Yield on interest-earning assets   3.44 %     3.36 %     3.21 %     3.17 %     3.20 %
Cost of interest-bearing liabilities   0.21 %     0.20 %     0.19 %     0.18 %     0.19 %
Net interest spread   3.23 %     3.16 %     3.02 %     2.99 %     3.01 %
Net interest margin   3.29 %     3.21 %     3.07 %     3.03 %     3.06 %
Net charged-off (recovered) loans $   (1 )   $   56     $   54     $   (407 )   $   168  
Net charged-off loans to average loans (annualized)   0.00 %     0.08 %     0.08 %       (0.60 )%     0.26 %
                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
      2017       2017       2016       2016       2016  
                     
Total stockholders’ equity $   57,795     $   59,047     $   58,460     $   57,258     $   56,868  
Book value per common share $   0.64     $   0.65     $   0.65     $   0.65     $   0.65  
Common shares outstanding   90,345,174       90,345,174       90,345,174       87,604,088       87,604,088  
                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
        2017         2017       2016       2016         2016  
Nonperforming assets                    
Loans on nonaccrual status $   3,407     $   2,878     $   2,990     $   3,054     $   3,465  
Loans 90 days or more past due, still accruing   537       140       309       0       0  
Loan troubled debt restructurings   4,969       5,309       5,465       5,584       5,415  
  Total nonperforming loans   8,913       8,327       8,764       8,638       8,880  
Other real estate owned   6,935       10,174       10,236       10,958       11,418  
  Total nonperforming assets $   15,848     $   18,501     $   19,000     $   19,596     $   20,298  
                     
Nonperforming assets excluding trouble debt                    
  restructurings $   10,879     $   13,192     $   13,535     $   14,012     $   14,883  
Nonperforming loans to total assets   1.86 %     1.68 %     1.79 %     1.70 %     1.78 %
Nonperforming assets to total assets   3.30 %     3.74 %     3.88 %     3.85 %     4.06 %
Nonperforming assets excluding trouble debt                    
  restructurings to total assets   2.27 %     2.67 %     2.76 %     2.76 %     2.98 %
Allowance for loan and lease losses to total loans   1.92 %     1.94 %     1.97 %     2.10 %     2.05 %

                       
NORTHERN STATES FINANCIAL CORPORATION                    
($000s, except per share data) (Unaudited)                      
Condensed Consolidated Balance Sheet   June 30,   March 31,   December 31,   September 30,   June 30,  
      2017       2017       2016       2016       2016    
  Assets                      
Cash and due from banks $   4,431     $   4,853     $   4,552     $   5,491     $   4,965    
Interest bearing deposits in financial institutions –                      
  maturities less than 90 days   37,956       47,132       41,179       61,013       66,743    
  Total cash and cash equivalents   42,387       51,985       45,731       66,504       71,708    
Interest bearing deposits in financial institutions –                      
  maturities of 90 days or greater   26,774       30,510       29,233       33,880       31,049    
Securities available for sale   56,272       59,640       63,180       71,341       69,689    
Securities held to maturity   12,856       12,926       12,996       13,360       13,428    
Loans and leases, net of deferred fees   294,901       290,801       289,594       274,281       264,244    
Less: Allowance for loan and lease losses   (5,648 )     (5,647 )     (5,703 )     (5,757 )     (5,425 )  
  Loans and leases, net   289,253       285,154       283,891       268,524       258,819    
Federal Home Loan Bank stock   492       335       931       931       931    
Office buildings and equipment, net   8,630       8,674       8,525       8,425       8,519    
Other real estate owned   6,935       10,174       10,236       10,958       11,418    
Accrued interest receivable   1,165       1,255       1,247       1,297       1,173    
Bank owned life insurance   10,743       10,675       10,597       10,520       10,439    
Deferred tax asset, net   23,159       22,202       22,436       21,461       21,479    
Other assets   1,242       1,055       985       1,252       1,112    
  Total assets $   479,908     $   494,585     $   489,988     $   508,453     $   499,764    
  Liabilities and Stockholders’ Equity                      
Liabilities                      
Deposits                      
  Noninterest-bearing deposits $   107,470     $   106,096     $   100,870     $   99,245     $   102,097    
  Interest-bearing  deposits   277,249       290,899       289,940       314,834       307,334    
  Total deposits   384,719       396,995       390,810       414,079       409,431    
Securities sold under repurchase agreements   22,331       22,820       25,901       23,686       18,015    
Subordinated debentures   10,310       10,310       10,310       10,310       10,310    
Advances from borrowers for taxes and insurance   2,137       2,820       1,902       510       2,195    
Accrued interest payable and other liabilities   2,616       2,593       2,605       2,610       2,945    
  Total liabilities   422,113       435,538       431,528       451,195       442,896    
Stockholders’ Equity                      
Common stock   906       906       906       878       878    
Deferred compensation   (1,050 )     (1,155 )     (1,260 )     0       0    
Additional paid-in capital   34,019       34,019       34,019       32,088       32,088    
Retained earnings   24,230       25,678       25,308       28,858       28,375    
Treasury stock, at cost   (182 )     (182 )     (182 )     (4,674 )     (4,674 )  
Accumulated other comprehensive income (loss), net   (128 )     (219 )     (331 )     108       201    
  Total stockholders’ equity   57,795       59,047       58,460       57,258       56,868    
  Total liabilities and stockholders’ equity $   479,908     $   494,585     $   489,988     $   508,453     $   499,764    
                       
Common shares outstanding   90,345,174       90,345,174       90,345,174       87,604,088       87,604,088    
Book value per common share $   0.64     $   0.65     $   0.65     $   0.65     $   0.65    
                       

NORTHERN STATES FINANCIAL CORPORATION                    
($000s, except per share data) (Unaudited)                      
                       
Condensed Consolidated Statement of Income                      
  For the quarter ended June 30,   March 31,   December 31,   September 30,   June 30,  
        2017         2017       2016         2016         2016  
Interest income                      
  Loans (including fee income) $   3,195     $   3,148     $   3,103     $   3,010     $   2,963  
  Securities                      
  Taxable   334       357       353       378       377  
  Exempt from federal income tax   0       0       3       3       3  
  Federal funds sold and other   177       160       145       163       130  
  Total interest income   3,706       3,665       3,604       3,554       3,473  
Interest expense                      
  Time deposits   54       61       61       67       68  
  Other deposits   26       25       23       21       24  
  Repurchase agreements and federal funds purchased   0       1       1       0       0  
  Subordinated debentures   82       76       74       68       66  
  Total interest expense   162       163       159       156       158  
Net interest income   3,544       3,502       3,445       3,398       3,315  
Provision for loan and lease losses   0       0       0       (75 )     0  
Net interest income after provision for                      
  loan and lease losses   3,544       3,502       3,445       3,473       3,315  
Noninterest income                      
  Service fees on deposits   384       380       403       398       320  
  Gain on sale of securities   0       0       0       0       104  
  Net gain (loss) on sale of other real estate owned   (12 )     (4 )     68       (7 )     126  
  Bank owned life insurance income   69       78       78       80       82  
  Other operating income   436       395       424       419       416  
  Total noninterest income   877       849       973       890       1,048  
Noninterest expense                      
  Salaries and employee benefits   1,910       1,945       2,593       1,787       1,861  
  Occupancy and equipment, net   515       486       557       490       520  
  Data processing   466       456       490       325       427  
  Legal   62       23       72       28       81  
  FDIC insurance   60       30       45       76       118  
  Audit and other professional   231       181       169       125       151  
  Printing and supplies expense   38       51       42       44       45  
  Write-down of other real estate owned   3,109       0       55       487       126  
  Other real estate owned expense   164       330       164       92       171  
  Other operating expenses   314       317       326       297       309  
  Total noninterest expense   6,869       3,819       4,513       3,751       3,809  
Net income before income taxes   (2,448 )     532       (95 )     612       554  
Income tax expense   (1,000 )     162       (1,078 )     129       200  
Net income $   (1,448 )   $   370     $   983     $    483     $   354  
                       
Average common shares outstanding     90,345,174         90,345,174         87,961,621         87,604,088         87,604,088  
Basic income per average outstanding share $   (0.02 )   $   0.00     $   0.01     $   0.01     $   0.00  
Diluted income per average outstanding share $   (0.02 )   $   0.00     $   0.01     $   0.01     $   0.00  
                       

NORTHERN STATES FINANCIAL CORPORATION                    
($000s, except per share data) (Unaudited)                      
                       
    June 30,   March 31,   December 31,   September 30,   June 30,  
      2017       2017       2016       2016       2016    
Loans                      
  Commercial $   26,355     $   27,462     $   28,179     $   14,977     $   12,556    
  Real estate-construction   30,866       26,534       26,975       22,255       17,531    
  Real estate-mortgage 1-4 family   48,658       50,533       48,593       47,826       49,530    
  Real estate-mortgage 5+ family   61,714       59,331       59,272       56,179       49,321    
  Real estate-mortgage commercial   118,271       118,917       115,514       121,491       123,717    
  Home equity   8,526       7,428       10,411       10,955       10,965    
  Installment   899       892       949       873       893    
  Deferred loan fees   (388 )     (296 )     (299 )     (275 )     (269 )  
  Total loans $   294,901     $   290,801     $   289,594     $   274,281     $   264,244    
                       
                       
    June 30,   March 31,   December 31,   September 30,   June 30,  
      2017       2017       2016       2016       2016    
Deposits                      
  Demand – noninterest bearing $   107,470     $   106,096     $   100,870     $   99,245     $   102,097    
  Demand – interest bearing   69,326       64,951       70,127       78,310       75,389    
  Money market accounts   49,709       50,161       48,231       56,921       54,297    
  Savings   92,735       91,861       90,095       88,578       88,813    
  Time, over $250,000   12,355       30,651       26,510       33,613       29,332    
  Time, $250,000 and under   53,124       53,275       54,977       57,412       59,503    
  Time, brokered   0       0       0       0       0    
  Total deposits $   384,719     $   396,995     $   390,810     $   414,079     $   409,431    
                       

NORTHERN STATES FINANCIAL CORPORATION                                  
($000s, except per share data) (Unaudited)                                      
                                         
  2Q 2017   1Q 2017   4Q 2016   3Q 2016   2Q 2016  
  Average   Yield/   Average   Yield/   Average   Yield/   Average   Yield/   Average   Yield/  
  balance   Rate   balance   Rate   balance   Rate   balance   Rate   balance   Rate  
Earning assets                                        
  Loans $   290,307   4.42 %   $   289,085   4.37 %   $   283,029   4.40 %   $   269,395   4.49 %   $   254,545   4.67 %
  Securities taxable   71,543   1.86       75,361   1.88       81,382   1.73       84,128   1.81       88,592   1.70  
  Securities tax-exempt   0   0.00       0   0.00       283   5.65       295   6.78       295   5.42  
  Interest-bearing deposits   70,299   1.01       73,051   0.88       86,056   0.67       96,358   0.68       92,069   0.56  
  Total earning assets   432,149   3.44 %     437,497   3.36 %     450,750   3.21 %     450,176   3.17 %     435,501   3.20 %
Non interest earning assets   53,124           53,678           53,461           53,823           55,761      
Total assets $   485,273         $   491,175         $   504,211         $   503,999         $   491,262      
                                         
Interest-bearing liabilities                                        
  Interest-bearing demand deposits $   67,112   0.10 %   $   63,870   0.11 %   $   73,467   0.08 %   $   75,295   0.06 %   $   72,646   0.09 %
  Money market deposits   50,682   0.05       48,322   0.05       55,072   0.05       56,168   0.05       52,475   0.05  
  Savings deposits   92,360   0.01       90,626   0.01       89,400   0.01       89,082   0.01       89,415   0.01  
  Time deposits   70,898   0.30       85,014   0.29       86,655   0.28       91,003   0.29       89,727   0.30  
  Other borrowings   31,741   1.03       37,737   0.82       35,613   0.84       30,669   0.89       26,040   1.01  
  Total interest-bearing liabilities.   312,793   0.21 %     325,569   0.20 %     340,207   0.19 %     342,217   0.18 %     330,303   0.19 %
Demand deposits   107,571           101,689           102,406           100,066           98,491      
Other liabilities   5,621           5,201           4,175           4,547           5,932      
Stockholders’ equity   59,288           58,716           57,423           57,169           56,536      
Total liabilities and stockholders’ equity $   485,273         $   491,175         $   504,211         $   503,999         $   491,262      
                                         
Cost of funds (including demand deposits)   0.15 %     0.15 %     0.14 %     0.14 %     0.15 %
                                         
Net interest spread   3.23 %     3.16 %     3.02 %     2.99 %     3.01 %
Net interest margin   3.29 %     3.21 %     3.07 %     3.03 %     3.06 %
                                         

CONTACT: For Additional Information, Contact:

Scott Yelvington, President and Chief Executive Officer: (847) 775-8200 Ext. 1201
Websites: www.nsfc.com  www.nsfc.net