Northern States Financial Corporation Reports Second Quarter 2018 Earnings

WAUKEGAN, Ill., July 18, 2018 (GLOBE NEWSWIRE) — Northern States Financial Corporation (OTC PINK:NSFC) (the “Company”), holding company for NorStates Bank (the “Bank”), an FDIC insured financial institution, today reported second quarter 2018 net income after tax of $410,000, a decrease of $456,000 compared to the first quarter 2018 net income after tax of $866,000.  Second quarter 2018 net income was negatively impacted by costs related to the impending merger with First Midwest Bancorp, Inc., which was announced on June 7, 2018.  The Company’s per share book value at June 30, 2018 was $0.58.

Some highlights during the second quarter of 2018 included the following:

  • Average loans increased by $20.5 million for the second quarter of 2018 compared with the second quarter of 2017.  Loan interest income increased $406,000 for the second quarter of 2018 compared to the second quarter of 2017.  The increased loan interest income contributed to a net interest margin for the second quarter of 2018 of 3.44% compared to 3.29% for the second quarter of 2017.
  • Non-performing assets, consisting of nonaccrual loans, ninety days or more past due loans still accruing interest, loans considered troubled debt restructurings and other real estate owned (“OREO”), decreased by $6.9 million from December 31, 2017 to June 30, 2018.  At June 30, 2018, the allowance for loan and lease losses to total loans and leases ratio was 2.05%.
  • Second quarter 2018 noninterest income was impacted by a loss on the sale of OREO of $558,000.  Without this loss, noninterest income would have been $851,000, a decrease of $26,000 compared to the first quarter of 2018.
  • Noninterest expense increased $179,000 during the second quarter of 2018 compared to the first quarter of 2018.  Combined legal fees and audit and other professional fees increased $159,000 during the second quarter 2018 compared to the first quarter of 2018 in part due to expenses related to the impending merger with First Midwest Bancorp, Inc. 
  • The Company focused on growing deposits which, as of June 30, 2018, increased $59.0 million, or 15.4%, as compared with June 30, 2017.  Low cost demand – noninterest bearing deposits and demand – interest bearing deposits increased $16.4 million and $20.8 million, respectively, at June 30, 2018 as compared with June 30, 2017.  Low cost deposits assisted the Company in maintaining a low cost of funds during the second quarter of 2018 at 29 basis points, with the Bank’s cost of funds at 19 basis points.

“Until the merger with First Midwest Bancorp, Inc. closes, deposit growth and reducing non-performing assets will remain a focus along with our continued efforts to reduce expenses and increase profitability,” stated Scott Yelvington, President and Chief Executive Officer.

About Northern States Financial Corporation

Northern States Financial Corporation is the holding company for NorStates Bank. NorStates Bank maintains its principal executive offices in Waukegan, Illinois. NorStates Bank is a client-focused bank committed to providing quality financial services with a personal touch through a complete line of loan, deposit and cash management services. It provides these financial services through eight banking locations in Lake County, Illinois. NorStates Bank’s website is www.norstatesbank.com.

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 limited to, the risk that the merger may not be completed or may not be completed in a timely manner, 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   2018   2018   2017   2017   2017
                     
Net income (loss) available to common stockholders   $ 410     $ 866     $ (6,266 )   $ 963     $ (1,448 )
Basic income (loss) per average outstanding share     0.00       0.01       (0.07 )     0.01       (0.02 )
Diluted income (loss) per average outstanding share     0.00       0.01       (0.07 )     0.01       (0.02 )
Return on average assets     0.33 %     0.71 %     -4.92 %     0.78 %     -1.19 %
Return on average equity     3.06 %     6.57 %     -42.46 %     6.62 %     -9.77 %
Yield on interest-earning assets     3.71 %     3.64 %     3.55 %     3.71 %     3.44 %
Cost of interest-bearing liabilities     0.40 %     0.29 %     0.26 %     0.24 %     0.21 %
Net interest spread     3.31 %     3.35 %     3.29 %     3.47 %     3.23 %
Net interest margin     3.44 %     3.45 %     3.37 %     3.54 %     3.29 %
Net charged-off (recovered) loans   $ 531     $ (76 )   $ (1 )   $ (1,172 )   $ (1 )
Net charged-off loans to average loans (annualized)     0.68 %     (0.10 ) %   0.00 %     (1.55 ) %   0.00 %
                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
                     
Total stockholders’ equity   $ 53,501     $ 53,138     $ 52,474     $ 58,859     $ 57,795  
Book value per common share   $ 0.58     $ 0.58     $ 0.57     $ 0.65     $ 0.64  
Common shares outstanding     92,302,244       92,252,244       92,252,244       90,345,174       90,345,174  
                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
Nonperforming assets                    
Loans on nonaccrual status   $ 11,180     $ 11,410     $ 12,545     $ 3,444     $ 3,407  
Loans 90 days or more past due, still accruing     260       137       434       561       537  
Loan troubled debt restructurings     554       4,177       4,783       4,845       4,969  
Total nonperforming loans     11,994       15,724       17,762       8,850       8,913  
Other real estate owned     942       1,898       2,039       2,217       6,935  
Total nonperforming assets   $ 12,936     $ 17,622     $ 19,801     $ 11,067     $ 15,848  
                     
Nonperforming assets excluding trouble debt                    
restructurings   $ 12,832     $ 13,445     $ 15,018     $ 6,222     $ 10,879  
Nonperforming loans to total assets     2.26 %     3.23 %     3.58 %     1.74 %     1.86 %
Nonperforming assets to total assets     2.44 %     3.62 %     3.99 %     2.18 %     3.30 %
Nonperforming assets excluding trouble debt                    
restructurings to total assets     2.33 %     2.76 %     3.03 %     1.22 %     2.27 %
Allowance for loan and lease losses to total loans     2.05 %     2.17 %     2.22 %     2.20 %     1.92 %
                     
                     
NORTHERN STATES FINANCIAL CORPORATION                    
($000s, except per share data) (Unaudited)                    
Condensed Consolidated Balance Sheet   June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
Assets                    
Cash and due from banks   $ 4,023     $ 3,595     $ 4,323     $ 4,557     $ 4,431  
Interest bearing deposits in financial institutions –                    
maturities less than 90 days     112,963       45,850       59,062       61,682       37,956  
Total cash and cash equivalents     116,986       49,445       63,385       66,239       42,387  
Interest bearing deposits in financial institutions –                    
maturities of 90 days or greater     18,096       26,678       28,492       24,592       26,774  
Securities available for sale     41,940       47,999       50,570       53,190       56,272  
Securities held to maturity     10,589       12,643       12,714       12,786       12,856  
Loans and leases, net of deferred fees     310,453       317,376       307,448       310,209       294,901  
Less: Allowance for loan and lease losses     (6,366 )     (6,897 )     (6,821 )     (6,820 )     (5,648 )
Loans and leases, net     304,087       310,479       300,627       303,389       289,253  
Federal Home Loan Bank stock     554       492       492       492       492  
Office buildings and equipment, net     8,298       8,417       8,443       8,419       8,630  
Other real estate owned     942       1,898       2,039       2,217       6,935  
Accrued interest receivable     1,174       1,358       1,224       1,358       1,165  
Bank owned life insurance     11,024       10,955       10,886       10,816       10,743  
Deferred tax asset, net     15,306       15,423       15,693       23,041       23,159  
Other assets     1,285       1,304       1,360       1,426       1,242  
Total assets   $ 530,281     $ 487,091     $ 495,925     $ 507,965     $ 479,908  
Liabilities and Stockholders’ Equity                    
Liabilities                    
Deposits                    
Noninterest-bearing deposits   $ 123,827     $ 120,113     $ 115,619     $ 112,821     $ 107,470  
Interest-bearing deposits     319,979       272,182       283,027       296,462       277,249  
Total deposits     443,806       392,295       398,646       409,283       384,719  
Securities sold under repurchase agreements     17,458       25,268       29,012       26,062       22,331  
Subordinated debentures     10,310       10,310       10,310       10,310       10,310  
Advances from borrowers for taxes and insurance     2,344       3,481       2,897       957       2,137  
Accrued interest payable and other liabilities     2,862       2,599       2,586       2,494       2,616  
Total liabilities     476,780       433,953       443,451       449,106       422,113  
Stockholders’ Equity                    
Common stock     927       927       927       906       906  
Deferred compensation     (2,580 )     (2,542 )     (2,542 )     (945 )     (1,050 )
Additional paid-in capital     35,738       35,700       35,700       34,019       34,019  
Retained earnings     20,203       19,793       18,927       25,193       24,230  
Treasury stock, at cost     (297 )     (297 )     (297 )     (182 )     (182 )
Accumulated other comprehensive income (loss), net     (490 )     (443 )     (241 )     (132 )     (128 )
Total stockholders’ equity     53,501       53,138       52,474       58,859       57,795  
Total liabilities and stockholders’ equity   $ 530,281     $ 487,091     $ 495,925     $ 507,965     $ 479,908  
                     
Common shares outstanding     92,302,244       92,252,244       92,252,244       90,345,174       90,345,174  
Book value per common share   $ 0.58     $ 0.58     $ 0.57     $ 0.65     $ 0.64  
                     
                     
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,
    2018   2018   2017   2017   2017
Interest income                    
Loans (including fee income)   $ 3,601     $ 3,473     $ 3,496     $ 3,566     $ 3,195  
Securities                    
Taxable     319       339       312       333       334  
Federal funds sold and other     387       273       314       223       177  
Total interest income     4,307       4,085       4,122       4,122       3,706  
Interest expense                    
Time deposits     167       98       99       74       54  
Other deposits     29       26       27       26       26  
Repurchase agreements and federal funds purchased     9       1       1       1       0  
Subordinated debentures     114       98       90       87       82  
Total interest expense     319       223       217       188       162  
Net interest income     3,988       3,862       3,905       3,934       3,544  
Provision for loan and lease losses     0       0       0       0       0  
Net interest income after provision for                    
loan and lease losses     3,988       3,862       3,905       3,934       3,544  
Noninterest income                    
Service fees on deposits     359       378       387       373       384  
Net gain on sale of other assets     0       0       0       68       0  
Net gain (loss) on sale of other real estate owned     (558 )     41       3       (51 )     (12 )
Bank owned life insurance income     69       69       70       72       69  
Other operating income     423       389       397       352       436  
Total noninterest income     293       877       857       814       877  
Noninterest expense                    
Salaries and employee benefits     1,839       1,876       1,993       1,953       1,910  
Occupancy and equipment, net     442       482       450       475       515  
Data processing     434       416       427       488       466  
Legal     144       76       29       54       62  
FDIC insurance     90       70       30       60       60  
Audit and other professional     335       244       236       150       231  
Printing and supplies expense     32       40       54       32       38  
Write-down of other real estate owned     55       0       194       0       3,109  
Other real estate owned expense     12       55       (58 )     103       164  
Other operating expenses.     351       296       271       344       314  
Total noninterest expense     3,734       3,555       3,626       3,659       6,869  
Net income before income taxes     547       1,184       1,136       1,089       (2,448 )
Income tax expense     137       318       7,402       126       (1,000 )
Net income   $ 410     $ 866     $ (6,266 )   $ 963     $ (1,448 )
                     
Average common shares outstanding     92,286,859       92,252,244       91,886,314       90,345,174       90,345,174  
Basic income per average outstanding share   $ 0.00     $ 0.01     $ (0.07 )   $ 0.01     $ (0.02 )
Diluted income per average outstanding share   $ 0.00     $ 0.01     $ (0.07 )   $ 0.01     $ (0.02 )
                     
                     
NORTHERN STATES FINANCIAL CORPORATION                    
($000s, except per share data) (Unaudited)                    
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
Loans                    
Commercial   $ 26,786     $ 26,152     $ 26,493     $ 26,530     $ 26,355  
Real estate-construction     35,198       38,163       38,661       37,843       30,866  
Real estate-mortgage 1-4 family     48,637       47,716       49,717       47,760       48,658  
Real estate-mortgage 5+ family     80,569       81,553       77,200       75,605       61,714  
Real estate-mortgage commercial     108,871       113,485       105,488       112,803       118,271  
Home equity     8,578       8,556       8,518       8,468       8,526  
Installment     2,166       2,145       1,691       1,572       899  
Deferred loan fees     (352 )     (394 )     (320 )     (372 )     (388 )
Total loans   $ 310,453     $ 317,376     $ 307,448     $ 310,209     $ 294,901  
                     
                     
    June 30,   March 31,   December 31,   September 30,   June 30,
    2018   2018   2017   2017   2017
Deposits                    
Demand – noninterest bearing   $ 123,827     $ 120,113     $ 115,619     $ 112,821     $ 107,470  
Demand – interest bearing     90,133       58,018       61,288       73,491       69,326  
Money market accounts     56,111       49,486       53,347       54,060       49,709  
Savings     88,872       91,704       89,876       92,363       92,735  
Time, over $250,000     31,565       21,064       26,892       24,270       12,355  
Time, $250,000 and under     53,298       51,910       51,624       52,278       53,124  
Total deposits   $ 443,806     $ 392,295     $ 398,646     $ 409,283     $ 384,719  
                     

 

                                       
NORTHERN STATES FINANCIAL CORPORATION                                  
($000s, except per share data) (Unaudited)                                    
                                       
  2Q 2018     1Q 2018     4Q 2017     3Q 2017     2Q 2017  
  Average Yield/     Average Yield/     Average Yield/     Average Yield/     Average Yield/  
  balance Rate     balance Rate     balance Rate     balance Rate     balance Rate  
Earning assets                                      
Loans $ 310,782 4.65 %   $ 308,736 4.51 %   $ 310,426 4.52 %   $ 302,266 4.73 %   $ 290,307 4.42 %
Securities taxable   56,337 2.24       62,757 2.14       65,082 1.91       68,286 1.95       71,543 1.86  
Interest-bearing deposits   97,142 1.59       77,326 1.41       89,346 1.41       74,888 1.19       70,299 1.01  
Total earning assets   464,261 3.71 %     448,819 3.64 %     464,854 3.55 %     445,440 3.71 %     432,149 3.44 %
Non interest earning assets   36,008         36,812         44,855         48,475         53,124    
Total assets $ 500,269       $ 485,631       $ 509,709       $ 493,915       $ 485,273    
                                       
Interest-bearing liabilities                                      
Interest-bearing demand deposits $ 63,257 0.10 %   $ 57,951 0.12 %   $ 70,097 0.10 %   $ 69,373 0.10 %   $ 67,112 0.10 %
Money market deposits   54,243 0.07       51,415 0.05       53,786 0.05       52,526 0.05       50,682 0.05  
Savings deposits   90,697 0.01       90,747 0.01       91,382 0.01       92,396 0.01       92,360 0.01  
Time deposits   78,839 0.85       74,133 0.53       77,171 0.51       73,153 0.40       70,898 0.30  
Other borrowings   30,704 1.60       37,512 1.06       38,252 0.95       32,438 1.09       31,741 1.03  
Total interest-bearing liabilities   317,740 0.40 %     311,758 0.29 %     330,688 0.26 %     319,886 0.24 %     312,793 0.21 %
Demand deposits   123,256         115,520         115,391         111,545         107,571    
Other liabilities   5,696         5,648         4,607         4,295         5,621    
Stockholders’ equity   53,577         52,705         59,023         58,189         59,288    
Total liabilities and stockholders’ equity $ 500,269       $ 485,631       $ 509,709       $ 493,915       $ 485,273    
                                       
Cost of funds (including demand deposits) 0.29 %     0.21 %     0.17 %     0.17 %     0.15 %
                                       
Net interest spread 3.31 %     3.35 %     3.29 %     3.47 %     3.23 %
Net interest margin 3.44 %     3.45 %     3.37 %     3.54 %     3.29 %
                                       

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