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Northern States Financial Corporation Reports 2016 Net Income of $2.1 million

WAUKEGAN, Ill., Feb. 09, 2017 (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 annual net income for 2016 available to stockholders of $2,141,000, or $0.02 per share.

The Company’s net income for 2016 was positively impacted by the reversal of a portion of the Company’s deferred tax allowance which allowed the booking of a $1.0 million tax credit during the fourth quarter of 2016. Partially offsetting this increase in net income was stock compensation expense of $840,000, as stock awards were issued during the fourth quarter of 2016 pursuant to the stockholder-approved 2015 Restricted Stock Plan. In 2015, the Company recognized a $21.7 million tax credit due to the reversal of a significant portion of the Company’s deferred tax allowance and had no stock compensation expense, resulting in net income available to stockholders of $23.1 million or $0.26 per share for 2015.

Pretax income for 2016 was $1,605,000 as compared with pretax income for 2015 of $1,474,000. Per share book value at December 31, 2016 was $0.65. After excluding the stock compensation expense, pretax income would have been $2,445,000, an increase of 65.9% from 2015.

For the three months ended December 31, 2016, net income was $983,000, which included tax credits from the $1.0 million reversal of the deferred tax allowance and stock compensation expense of $840,000. The Company had a pretax loss of $95,000 for the quarter ended December 31, 2016 as compared with pretax income of $323,000 for the same quarter of 2015. After excluding the stock compensation expense, pretax income would have been $745,000 for the three months ended December 31, 2016.

Assets of the Company increased $4.6 million to $490.0 million at December 31, 2016 from December 31, 2015. The Company increased its loans by 22.0% to $289.6 million at December 31, 2016 from $237.3 million at December 31, 2015. Total deposits decreased 1.2% to $390.8 million at December 31, 2016 compared to $395.4 million at December 31, 2015 as total time deposits decreased 16.5% between the same dates.

In regard to credit quality, total nonperforming loans decreased 30.3% to $8.8 million at December 31, 2016 compared with December 31, 2015. Other real estate owned decreased 18.6%, between the same dates, to $10.2 million at December 31, 2016.

“The Company continues to focus on non-performing asset (“NPA”) reduction and earnings,” stated Scott Yelvington, President and Chief Executive Officer of the Company. “We are pleased with our progress on both fronts in 2016 as we were able to reduce NPAs as a percentage of total assets to 3.9% at year-end 2016 from 5.2% at year-end 2015. Solid earnings growth has allowed us to recapture an additional $1.0 million of the deferred tax allowance, enhancing the share value of our Company. We also showed solid increases to loans and growth to our core deposits as we continued to profitably deploy our 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.

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Key Performance Data
December 31, September 30, June 30, March 31, December 31,
For the quarter ended 2016 2016 2016 2016 2015
Net income available to common stockholders$ 983 $ 483 $ 354 $ 321 $ 22,043
Basic income per average outstanding share 0.01 0.01 0.00 0.00 0.25
Diluted income per average outstanding share 0.01 0.01 0.00 0.00 0.25
Return on average assets 0.78% 0.38% 0.29% 0.26% 18.89%
Return on average equity 6.85% 3.38% 2.50% 2.28% 253.24%
Yield on interest earning assets 3.21% 3.17% 3.20% 3.11% 3.30%
Cost of interest-bearing liabilities 0.19% 0.18% 0.19% 0.19% 0.19%
Net interest spread 3.02% 2.99% 3.01% 2.92% 3.11%
Net interest margin 3.07% 3.03% 3.06% 2.96% 3.15%
Net charged-off loans$ 54 $ (407) $ 168 $ 418 $ 231
Net charged-off loans to average loans (annualized) 0.08% (0.60)% 0.26% 0.70% 0.40%
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Total stockholders' equity$ 58,460 $ 57,258 $ 56,868 $ 56,431 $ 55,673
Book value per common share$ 0.65 $ 0.65 $ 0.65 $ 0.64 $ 0.64
Common shares outstanding 90,345,174 87,604,088 87,604,088 87,604,088 87,604,088
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Nonperforming assets
Loans on nonaccrual status$ 2,990 $ 3,054 $ 3,465 $ 4,504 $ 5,469
Loans 90 days or more past due, still accruing 309 0 0 700 787
Loan troubled debt restructurings 5,465 5,584 5,415 5,477 6,312
Total nonperforming loans 8,764 8,638 8,880 10,681 12,568
Other real estate owned 10,236 10,958 11,418 13,100 12,579
Total nonperforming assets$ 19,000 $ 19,596 $ 20,298 $ 23,781 $ 25,147
Nonperforming assets excluding trouble debt restructurings $ 13,535 $ 14,012 $ 14,883 $ 18,304 $ 18,835
Nonperforming loans to total assets 1.79% 1.70% 1.78% 2.19% 2.59%
Nonperforming assets to total assets 3.88% 3.85% 4.06% 4.88% 5.18%
Nonperforming assets excluding trouble debt restructurings to total assets 2.76% 2.76% 2.98% 3.75% 3.88%
Allowance for loan and lease losses to total loans 1.97% 2.10% 2.05% 2.20% 2.53%


NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Balance Sheet December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Assets
Cash and due from banks$ 4,552 $ 5,491 $ 4,965 $ 5,539 $ 5,834
Interest bearing deposits in financial institutions - maturities less than 90 days 41,179 61,013 66,743 53,004 55,380
Total cash and cash equivalents 45,731 66,504 71,708 58,543 61,214
Interest bearing deposits in financial institutions - maturities of 90 days or greater 29,233 33,880 31,049 31,377 33,786
Securities available for sale 63,180 71,341 69,689 78,416 97,788
Securities held to maturity 12,996 13,360 13,428 13,496 10,564
Loans and leases, net of deferred fees 289,594 274,281 264,244 254,545 237,327
Less: Allowance for loan and lease losses (5,703) (5,757) (5,425) (5,593) (6,011)
Loans and leases, net 283,891 268,524 258,819 248,952 231,316
Federal Home Loan Bank stock 931 931 931 931 931
Office buildings and equipment, net 8,525 8,425 8,519 8,415 7,776
Other real estate owned 10,236 10,958 11,418 13,100 12,579
Accrued interest receivable 1,247 1,297 1,173 1,243 1,275
Bank owned life insurance 10,597 10,520 10,439 10,358 5,054
Deferred tax asset, net 22,436 21,461 21,479 22,112 21,869
Other assets 985 1,252 1,112 746 1,195
Total assets$ 489,988 $ 508,453 $ 499,764 $ 487,689 $ 485,347
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing deposits$ 100,870 $ 99,245 $ 102,097 $ 96,829 $ 93,913
Interest-bearing deposits 289,940 314,834 307,334 301,926 301,509
Total deposits 390,810 414,079 409,431 398,755 395,422
Securities sold under repurchase agreements 25,901 23,686 18,015 16,052 18,994
Subordinated debentures 10,310 10,310 10,310 10,310 10,310
Advances from borrowers for taxes and insurance 1,902 510 2,195 3,089 2,195
Accrued interest payable and other liabilities 2,605 2,610 2,945 3,052 2,753
Total liabilities 431,528 451,195 442,896 431,258 429,674
Stockholders' Equity
Common stock 906 878 878 878 878
Deferred compensation (1,260) 0 0 0 0
Additional paid-in capital 34,019 32,088 32,088 32,088 32,088
Retained earnings 25,308 28,858 28,375 28,021 27,700
Treasury stock, at cost (182) (4,674) (4,674) (4,674) (4,674)
Accumulated other comprehensive income (loss), net (331) 108 201 118 (319)
Total stockholders' equity 58,460 57,258 56,868 56,431 55,673
Total liabilities and stockholders' equity$ 489,988 $ 508,453 $ 499,764 $ 487,689 $ 485,347
Common shares outstanding 90,345,174 87,604,088 87,604,088 87,604,088 87,604,088
Book value per common share$ 0.65 $ 0.65 $ 0.65 $ 0.64 $ 0.64

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Statement of Income
For the quarter endedDecember 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Interest income
Loans (including fee income)$ 3,103 $ 3,010 $ 2,963 $ 2,788 $ 3,005
Securities
Taxable 353 378 377 420 491
Exempt from federal income tax 3 3 3 3 4
Federal funds sold and other 145 163 130 144 97
Total interest income 3,604 3,554 3,473 3,355 3,597
Interest expense
Time deposits 61 67 68 74 79
Other deposits 23 21 24 23 24
Repurchase agreements and federal funds purchased 1 0 0 1 1
Subordinated debentures 74 68 66 63 58
Total interest expense 159 156 158 161 162
Net interest income 3,445 3,398 3,315 3,194 3,435
Provision for loan and lease losses 0 (75) 0 0 (789)
Net interest income after provision for loan and lease losses 3,445 3,473 3,315 3,194 4,224
Noninterest income
Service fees on deposits 403 398 320 320 319
Gain on sale of securities 0 0 104 117 0
Net gain on sale of other assets 0 0 0 0 18
Net gain (loss) on sale of other real estate owned 68 (7) 126 13 22
Bank owned life insurance income 78 80 82 53 40
Other operating income 424 419 416 381 419
Total noninterest income 973 890 1,048 884 818
Noninterest expense
Salaries and employee benefits 2,593 1,787 1,861 1,822 1,940
Occupancy and equipment, net 557 490 520 502 526
Data processing 490 325 427 459 234
Legal 72 28 81 19 52
FDIC insurance 45 76 118 101 98
Audit and other professional 169 125 151 168 151
Printing and supplies expense 42 44 45 37 36
Write-down of other real estate owned 55 487 126 0 1,282
Other real estate owned expense 164 92 171 131 97
Other operating expenses 326 297 309 305 303
Total noninterest expense 4,513 3,751 3,809 3,544 4,719
Net income before income taxes (95) 612 554 534 323
Income tax expense (1,078) 129 200 213 (21,720)
Net income 983 483 354 321 22,043
Average common shares outstanding 87,961,621 87,604,088 87,604,088 87,604,088 87,604,088
Basic income per average outstanding share$ 0.01 $ 0.01 $ 0.00 $ 0.00 $ 0.25
Diluted income per average outstanding share$ 0.01 $ 0.01 $ 0.00 $ 0.00 $ 0.25

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Statement of Income
For the years ended December 31, 2016 2015
Interest income
Loans (including fee income)$ 11,864 $ 10,882
Securities
Taxable 1,528 2,227
Exempt from federal income tax 12 17
Federal funds sold and other 582 239
Total interest income 13,986 13,365
Interest expense
Time deposits 270 311
Other deposits 91 91
Repurchase agreements and federal funds purchased 2 2
Subordinated debentures 271 223
Total interest expense 634 627
Net interest income 13,352 12,738
Provision for loan and lease losses (75) (689)
Net interest income after provision for loan and lease losses 13,427 13,427
Noninterest income
Service fees on deposits 1,441 1,280
Gain on sale of securities 221 170
Net gain on sale of other assets 0 1,431
Net gain (loss) on sale of other real estate owned 200 231
Bank owned life insurance income 293 54
Other operating income 1,640 1,645
Total noninterest income 3,795 4,811
Noninterest expense
Salaries and employee benefits 8,063 7,079
Occupancy and equipment, net 2,069 2,211
Data processing 1,701 1,441
Legal 200 313
FDIC insurance 340 471
Audit and other professional 613 590
Printing and supplies expense 168 201
Write-down of other real estate owned 668 2,546
Other real estate owned expense 558 491
Other operating expenses 1,237 1,421
Total noninterest expense 15,617 16,764
Net income before income taxes 1,605 1,474
Income tax expense (536) (21,655)
Net income 2,141 23,129
Discount on redemption of preferred stock 0 0
Dividends to preferred stockholders 0 0
Accretion of discount on preferred stock 0 0
Net income (loss) available to common stockholders $ 2,141 $ 23,129
Average common shares outstanding 87,693,960 87,604,088
Basic income per average outstanding share$ 0.02 $ 0.26
Diluted income per average outstanding share$ 0.02 $ 0.26

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Loans
Commercial$ 28,179 $ 14,977 $ 12,556 $ 11,883 $ 12,144
Real estate-construction 26,975 22,255 17,531 15,369 21,609
Real estate-mortgage 1-4 family 48,593 47,826 49,530 41,499 28,449
Real estate-mortgage 5+ family 59,272 56,179 49,321 46,458 39,417
Real estate-mortgage commercial 115,514 121,491 123,717 129,042 125,978
Home equity 10,411 10,955 10,965 9,671 8,953
Installment 949 873 893 904 1,047
Deferred loan fees (299) (275) (269) (281) (270)
Total loans$ 289,594 $ 274,281 $ 264,244 $ 254,545 $ 237,327
December 31, September 30, June 30, March 31, December 31,
2016 2016 2016 2016 2015
Deposits
Demand - noninterest bearing$ 100,870 $ 99,245 $ 102,097 $ 96,829 $ 93,913
Demand - interest bearing 70,127 78,310 75,389 67,678 67,571
Money market accounts 48,231 56,921 54,297 52,032 51,797
Savings 90,095 88,578 88,813 88,826 84,515
Time, over $250,000 26,510 33,613 29,332 32,459 34,049
Time, $250,000 and under 54,977 57,412 59,503 60,931 63,327
Time, brokered 0 0 0 0 250
Total deposits$ 390,810 $ 414,079 $ 409,431 $ 398,755 $ 395,422

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
4Q 2016 3Q 2016 2Q 2016 1Q 2016 4Q 2015
AverageYield/ AverageYield/ AverageYield/ AverageYield/ AverageYield/
balanceRate balanceRate balanceRate balanceRate balanceRate
Earning assets
Loans$283,0294.40%$269,3954.49%$254,5454.67%$238,3274.69%$232,8215.18%
Securities taxable 81,3821.73 84,1281.81 88,5921.70 98,6301.70 112,6351.74
Securities tax-exempt 2835.65 2956.78 2955.42 2956.78 4285.61
Interest-bearing deposits 86,0560.67 96,3580.68 92,0690.56 95,5650.60 91,4020.42
Total earning assets 450,7503.21% 450,1763.17% 435,5013.20% 432,8173.11% 437,2863.30%
Non interest earning assets 53,461 53,823 55,761 51,891 29,467
Total assets$504,211 $503,999 $491,262 $484,708 $466,753
Interest-bearing liabilities
Interest-bearing demand deposits$ 73,4670.08%$ 75,2950.06%$ 72,6460.09%$ 67,8040.08%$ 71,4370.08%
Money market deposits 55,0720.05 56,1680.05 52,4750.05 52,2050.05 53,1070.05
Savings deposits 89,4000.01 89,0820.01 89,4150.01 86,0310.01 83,5360.01
Time deposits 86,6550.28 91,0030.29 89,7270.30 96,3230.31 98,6610.32
Other borrowings 35,6130.84 30,6690.89 26,0401.01 28,3380.90 30,5590.77
Total interest-bearing liabilities 340,2070.19% 342,2170.18% 330,3030.19% 330,7010.19% 337,3000.19%
Demand deposits 102,406 100,066 98,491 92,377 90,408
Other liabilities 4,175 4,547 5,932 5,406 4,228
Stockholders' equity 57,423 57,169 56,536 56,224 34,817
Total liabilities and stockholders' equity$ 504,211 $ 503,999 $ 491,262 $ 484,708 $ 466,753
Net interest spread3.02%2.99%3.01%2.92%3.11%
Net interest margin3.07%3.03%3.06%2.96%3.15%


For Additional Information, Contact: Scott Yelvington, President and Chief Executive Officer (847) 662-9828 Websites: www.nsfc.com www.nsfc.net

Source:Northern States Financial Corporation