Northern States Financial Corporation Reports Third Quarter 2017 Earnings

WAUKEGAN, Ill., Oct. 13, 2017 (GLOBE NEWSWIRE) — Northern States Financial Corporation (OTC PINK:NSFC) (the “Company”), the holding company of NorStates Bank (the “Bank”), today reported a third quarter 2017 earnings of $963,000 as compared with a loss of $1,448,000 for the second quarter of 2017 and earnings of $483,000 for the third quarter of 2016. Per share book value at September 30, 2017 was $0.65, compared to $0.64 at June 30, 2017.

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

  • The Bank’s pretax earnings for the third quarter of 2017 were $1,201,000 as compared with $707,000 for the third quarter of 2016, an increase of 69.9%.
     
  • 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 $4.8 million from June 30, 2017 to September 30, 2017.  The decrease to NPAs resulted from sales of other real estate owned (“OREO”).  It is expected that the costs for carrying the OREO will be substantially reduced in future quarters. NPAs less troubled debt restructurings to total assets decreased to 1.22% at September 30, 2017 from 2.27% at June 30, 2017.  
     
  • At September 30, 2017, the allowance for loan and lease losses to total loans and leases ratio was 2.20%, increasing from 1.92% at June 30, 2017 as the Bank received a $1.2 million recovery during the third quarter of 2017.
     
  • Loans increased by $15.3 million for the third quarter of 2017 compared with the second quarter of 2017.  Loan interest income increased $371 thousand for the third quarter of 2017 compared to the second quarter of 2017 which included $50,000 in loan prepayment penalties and additional loan fee income classified as interest resulting from the loan growth.  The increased loan interest income contributed to a net interest margin for the third quarter of 2017 of 3.54%.
     
  • Core deposits consisting of personal and business non-time deposits increased $4.8 million from June 30, 2017.   Core deposits growth assisted the Company in having a low cost of funds, 17 basis points, during the third quarter of 2017. The Bank’s cost of funds for the third quarter was 10 basis points.
     
  • Third quarter Illinois corporate income tax rates increased from 7.75% to 9.50% which resulted in a $269,000 increase in the deferred tax asset related to our Illinois net operating loss carry forward. This also resulted in a non-cash tax benefit during the third quarter.  This rate increase will have an impact on income tax expense in future quarters.             

“Q3 was an exceptionally good quarter for our Company,” stated Scott Yelvington, President and Chief Executive Officer of the Company, “as the reduction in NPA’s and the increase in loans had a very favorable impact on earnings. Additionally, we continue to emphasize growth in core deposits, reduction of expenses, and prudent deployment of excess liquidity.” 

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.

For Additional Information, Contact:

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

                   
NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
Key Performance Data 
                   
  September 30,   June 30,   March 31,   December 31,   September 30,
For the quarter ended   2017       2017       2017       2016       2016  
                   
Net income available to common stockholders $   963     $   (1,448 )   $   370     $   983     $   483  
Basic income (loss) per average outstanding share   0.01       (0.02 )     0.00       0.01       0.01  
Diluted income (loss) per average outstanding share   0.01       (0.02 )     0.00       0.01       0.01  
Return on average assets   0.78 %     -1.19 %     0.30 %     0.78 %     0.38 %
Return on average equity   6.62 %     -9.77 %     2.52 %     6.85 %     3.38 %
Yield on interest-earning assets   3.71 %     3.44 %     3.36 %     3.21 %     3.17 %
Cost of interest-bearing liabilities   0.24 %     0.21 %     0.20 %     0.19 %     0.18 %
Net interest spread   3.47 %     3.23 %     3.16 %     3.02 %     2.99 %
Net interest margin   3.54 %     3.29 %     3.21 %     3.07 %     3.03 %
Net charged-off (recovered) loans $   (1,172 )   $   (1 )   $   56     $   54     $   (407 )
Net charged-off loans to average loans (annualized)   -1.55 %     0.00 %     0.08 %     0.08 %     -0.60 %
                   
                   
  September 30,   June 30,   March 31,   December 31,   September 30,
    2017       2017       2017       2016       2016  
                   
Total stockholders’ equity $   58,859     $   57,795     $   59,047     $   58,460     $   57,258  
Book value per common share $   0.65     $   0.64     $   0.65     $   0.65     $   0.65  
Common shares outstanding   90,345,174       90,345,174       90,345,174       90,345,174       87,604,088  
                   
                   
  September 30,   June 30,   March 31,   December 31,   September 30,
      2017         2017         2017       2016       2016  
Nonperforming assets                  
Loans on nonaccrual status $   3,444     $   3,407     $   2,878     $   2,990     $   3,054  
Loans 90 days or more past due, still accruing   561       537       140       309       0  
Loan troubled debt restructurings   4,845       4,969       5,309       5,465       5,584  
   Total nonperforming loans   8,850       8,913       8,327       8,764       8,638  
Other real estate owned   2,217       6,935       10,174       10,236       10,958  
   Total nonperforming assets $   11,067     $   15,848     $   18,501     $   19,000     $   19,596  
                   
Nonperforming assets excluding trouble debt                  
  restructurings $   6,222     $   10,879     $   13,192     $   13,535     $   14,012  
Nonperforming loans to total assets   1.74 %     1.86 %     1.68 %     1.79 %     1.70 %
Nonperforming assets to total assets   2.18 %     3.30 %     3.74 %     3.88 %     3.85 %
Nonperforming assets excluding trouble debt                  
  restructurings to total assets   1.22 %     2.27 %     2.67 %     2.76 %     2.76 %
Allowance for loan and lease losses to total loans   2.20 %     1.92 %     1.94 %     1.97 %     2.10 %
                   
                   
NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
Condensed Consolidated Balance Sheet September 30,   June 30,   March 31,   December 31,   September 30,
    2017       2017       2017       2016       2016  
    Assets                  
Cash and due from banks $   4,557     $   4,431     $   4,853     $   4,552     $   5,491  
Interest bearing deposits in financial institutions –                  
     maturities less than 90 days   61,682       37,956       47,132       41,179       61,013  
   Total cash and cash equivalents   66,239       42,387       51,985       45,731       66,504  
Interest bearing deposits in financial institutions –                  
     maturities of 90 days or greater   24,592       26,774       30,510       29,233       33,880  
Securities available for sale   53,190       56,272       59,640       63,180       71,341  
Securities held to maturity   12,786       12,856       12,926       12,996       13,360  
Loans and leases, net of deferred fees   310,209       294,901       290,801       289,594       274,281  
Less: Allowance for loan and lease losses   (6,820 )     (5,648 )     (5,647 )     (5,703 )     (5,757 )
   Loans and leases, net   303,389       289,253       285,154       283,891       268,524  
Federal Home Loan Bank stock   492       492       335       931       931  
Office buildings and equipment, net   8,419       8,630       8,674       8,525       8,425  
Other real estate owned   2,217       6,935       10,174       10,236       10,958  
Accrued interest receivable   1,358       1,165       1,255       1,247       1,297  
Bank owned life insurance   10,816       10,743       10,675       10,597       10,520  
Deferred tax asset, net   23,041       23,159       22,202       22,436       21,461  
Other assets   1,426       1,242       1,055       985       1,252  
   Total assets $   507,965     $   479,908     $   494,585     $   489,988     $   508,453  
   Liabilities and Stockholders’ Equity                  
Liabilities                  
Deposits                  
   Noninterest-bearing deposits $   112,821     $   107,470     $   106,096     $   100,870     $   99,245  
   Interest-bearing  deposits   296,462       277,249       290,899       289,940       314,834  
      Total deposits   409,283       384,719       396,995       390,810       414,079  
Securities sold under repurchase agreements   26,062       22,331       22,820       25,901       23,686  
Subordinated debentures   10,310       10,310       10,310       10,310       10,310  
Advances from borrowers for taxes and insurance   957       2,137       2,820       1,902       510  
Accrued interest payable and other liabilities   2,494       2,616       2,593       2,605       2,610  
      Total liabilities   449,106       422,113       435,538       431,528       451,195  
Stockholders’ Equity                   
Common stock   906       906       906       906       878  
Deferred compensation   (945 )     (1,050 )     (1,155 )     (1,260 )     0  
Additional paid-in capital   34,019       34,019       34,019       34,019       32,088  
Retained earnings   25,193       24,230       25,678       25,308       28,858  
Treasury stock, at cost   (182 )     (182 )     (182 )     (182 )     (4,674 )
Accumulated other comprehensive income (loss), net   (132 )     (128 )     (219 )     (331 )     108  
   Total stockholders’ equity   58,859       57,795       59,047       58,460       57,258  
      Total liabilities and stockholders’ equity $   507,965     $   479,908     $   494,585     $   489,988     $   508,453  
                   
Common shares outstanding   90,345,174       90,345,174       90,345,174       90,345,174       87,604,088  
Book value per common share $   0.65     $   0.64     $   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 September 30,   June 30,   March 31,   December 31,   September 30,
      2017         2017         2017       2016         2016  
Interest income                   
   Loans (including fee income) $   3,566     $   3,195     $   3,148     $   3,103     $   3,010  
   Securities                  
      Taxable   333       334       357       353       378  
      Exempt from federal income tax   0       0       0       3       3  
   Federal funds sold and other   223       177       160       145       163  
         Total interest income   4,122       3,706       3,665       3,604       3,554  
Interest expense                  
   Time deposits   74       54       61       61       67  
   Other deposits   26       26       25       23       21  
   Repurchase agreements and federal funds purchased      1       0       1       1       0  
   Subordinated debentures   87       82       76       74       68  
         Total interest expense   188       162       163       159       156  
Net interest income   3,934       3,544       3,502       3,445       3,398  
Provision for loan and lease losses   0       0       0       0       (75 )
Net interest income after provision for                  
     loan and lease losses   3,934       3,544       3,502       3,445       3,473  
Noninterest income                  
   Service fees on deposits   373       384       380       403       398  
   Net gain on sale of other assets   68       0       0       0       0  
   Net gain (loss) on sale of other real estate owned   (51 )     (12 )     (4 )     68       (7 )
   Bank owned life insurance income   72       69       78       78       80  
   Other operating income   352       436       395       424       419  
      Total noninterest income   814       877       849       973       890  
Noninterest expense                  
   Salaries and employee benefits   1,953       1,910       1,945       2,593       1,787  
   Occupancy and equipment, net   475       515       486       557       490  
   Data processing   488       466       456       490       325  
   Legal   54       62       23       72       28  
   FDIC insurance   60       60       30       45       76  
   Audit and other professional   150       231       181       169       125  
   Printing and supplies expense   32       38       51       42       44  
   Write-down of other real estate owned   0       3,109       0       55       487  
   Other real estate owned expense   103       164       330       164       92  
   Other operating expenses   344       314       317       326       297  
      Total noninterest expense   3,659       6,869       3,819       4,513       3,751  
Net income before income taxes   1,089       (2,448 )     532       (95 )     612  
Income tax expense   126       (1,000 )     162       (1,078 )     129  
Net income $   963     $   (1,448 )   $   370     $   983     $   483  
                   
Average common shares outstanding     90,345,174         90,345,174         90,345,174         87,961,621         87,604,088  
Basic income per average outstanding share $   0.01     $   (0.02 )   $   0.00     $   0.01     $   0.01  
Diluted income per average outstanding share $   0.01     $   (0.02 )   $   0.00     $   0.01     $   0.01  
                   
                   
NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
                   
  September 30,   June 30,   March 31,   December 31,   September 30,
    2017       2017       2017       2016       2016  
Loans                  
   Commercial $   26,530     $   26,355     $   27,462     $   28,179     $   14,977  
   Real estate-construction   37,843       30,866       26,534       26,975       22,255  
   Real estate-mortgage 1-4 family   47,760       48,658       50,533       48,593       47,826  
   Real estate-mortgage 5+ family   75,605       61,714       59,331       59,272       56,179  
   Real estate-mortgage commercial   112,803       118,271       118,917       115,514       121,491  
   Home equity   8,468       8,526       7,428       10,411       10,955  
   Installment   1,572       899       892       949       873  
   Deferred loan fees   (372 )     (388 )     (296 )     (299 )     (275 )
      Total loans $   310,209     $   294,901     $   290,801     $   289,594     $   274,281  
                   
                   
  September 30,   June 30,   March 31,   December 31,   September 30,
    2017       2017       2017       2016       2016  
Deposits                  
   Demand – noninterest bearing $   112,821     $   107,470     $   106,096     $   100,870     $   99,245  
   Demand – interest bearing   73,491       69,326       64,951       70,127       78,310  
   Money market accounts   54,060       49,709       50,161       48,231       56,921  
   Savings   92,363       92,735       91,861       90,095       88,578  
   Time, over $250,000   24,470       12,355       30,651       26,510       33,613  
   Time, $250,000 and under   52,278       53,124       53,275       54,977       57,412  
      Total deposits $   409,483     $   384,719     $   396,995     $   390,810     $   414,079  
                   

  

                               
NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited) 
                               
  3Q 2017   2Q 2017   1Q 2017   4Q 2016   3Q 2016  
  Average  Yield/    Average  Yield/    Average  Yield/    Average  Yield/    Average  Yield/   
  balance Rate   balance Rate   balance Rate   balance Rate   balance Rate  
Earning assets                              
   Loans $   302,266 4.73  %  $   290,307 4.42  %  $   289,085 4.37  %  $   283,029 4.40  %  $   269,395 4.49  % 
   Securities taxable   68,286 1.95     71,543 1.86     75,361 1.88     81,382 1.73     84,128 1.81  
   Securities tax-exempt   0 0.00     0 0.00     0 0.00     283 5.65     295 6.78  
   Interest-bearing deposits   74,888 1.19     70,299 1.01     73,051 0.88     86,056 0.67     96,358 0.68  
   Total earning assets   445,440 3.71  %    432,149 3.44  %    437,497 3.36  %    450,750 3.21  %    450,176 3.17  % 
Non interest earning assets   48,475       53,124       53,678       53,461       53,823    
Total assets $ 493,915     $ 485,273     $ 491,175     $ 504,211     $ 503,999    
                               
Interest-bearing liabilities                              
   Interest-bearing demand deposits $   69,373 0.10  %  $   67,112 0.10  %  $   63,870 0.11  %  $   73,467 0.08  %  $   75,295 0.06  % 
   Money market deposits   52,526 0.05     50,682 0.05     48,322 0.05     55,072 0.05     56,168 0.05  
   Savings deposits    92,396 0.01     92,360 0.01     90,626 0.01     89,400 0.01     89,082 0.01  
   Time deposits   73,153 0.40     70,898 0.30     85,014 0.29     86,655 0.28     91,003 0.29  
   Other borrowings   32,438 1.09     31,741 1.03     37,737 0.82     35,613 0.84     30,669 0.89  
   Total interest-bearing liabilities   319,886 0.24  %    312,793 0.21  %    325,569 0.20  %    340,207 0.19  %    342,217 0.18  % 
Demand deposits   111,545       107,571       101,689       102,406       100,066    
Other liabilities   4,295       5,621       5,201       4,175       4,547    
Stockholders’ equity   58,189       59,288       58,716       57,423       57,169    
Total liabilities and stockholders’ equity $   493,915     $   485,273     $   491,175     $   504,211     $   503,999    
                               
Cost of funds (including demand deposits)        0.17  %    0.15  %    0.15  %    0.14  %    0.14  % 
                               
Net interest spread     3.47  %    3.23  %    3.16  %    3.02  %    2.99  % 
Net interest margin     3.54  %    3.29  %    3.21  %    3.07  %    3.03  %