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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
($000s, except per share data) (Unaudited)
Condensed Consolidated Balance SheetSeptember 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Assets
Cash and due from banks$ 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
($000s, except per share data) (Unaudited)
Condensed Consolidated Statement of Income
For the quarter endedSeptember 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Interest income
Loans (including fee income)$ 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
($000s, except per share data) (Unaudited)
3Q 2017 2Q 2017 1Q 2017 4Q 2016 3Q 2016
Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/
balanceRate balanceRate balanceRate balanceRate balanceRate
Earning assets
Loans$ 302,2664.73 % $ 290,3074.42 % $ 289,0854.37 % $ 283,0294.40 % $ 269,3954.49 %
Securities taxable 68,2861.95 71,5431.86 75,3611.88 81,3821.73 84,1281.81
Securities tax-exempt 00.00 00.00 00.00 2835.65 2956.78
Interest-bearing deposits 74,8881.19 70,2991.01 73,0510.88 86,0560.67 96,3580.68
Total earning assets 445,4403.71 % 432,1493.44 % 437,4973.36 % 450,7503.21 % 450,1763.17 %
Non interest earning assets 48,475 53,124 53,678 53,461 53,823
Total assets$493,915 $485,273 $491,175 $504,211 $503,999
Interest-bearing liabilities
Interest-bearing demand deposits$ 69,3730.10 % $ 67,1120.10 % $ 63,8700.11 % $ 73,4670.08 % $ 75,2950.06 %
Money market deposits 52,5260.05 50,6820.05 48,3220.05 55,0720.05 56,1680.05
Savings deposits 92,3960.01 92,3600.01 90,6260.01 89,4000.01 89,0820.01
Time deposits 73,1530.40 70,8980.30 85,0140.29 86,6550.28 91,0030.29
Other borrowings 32,4381.09 31,7411.03 37,7370.82 35,6130.84 30,6690.89
Total interest-bearing liabilities 319,8860.24 % 312,7930.21 % 325,5690.20 % 340,2070.19 % 342,2170.18 %
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 %

Source:Northern States Financial Corporation