WAUKEGAN, Ill., Feb. 21, 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 a fourth quarter 2017 loss of $6.3 million (a loss of $0.07 per share).  The Company had a net loss of $6.4 million for the year 2017 compared to net income of $2.1 million for the year 2016.  The loss in the fourth quarter of 2017 reflects the year-end 2017 adjustment to the Company’s Deferred Tax Asset (“DTA”) due to the Tax Cuts and Jobs Act of 2017, which resulted in a reduction in the DTA by $6.9 million.  The reduction reflects the estimated amount of DTA that would not be recaptured with the new federal corporate income tax rate being reduced from 34% to 21%.  Income tax increased to $7.4 million in the fourth quarter of 2017 primarily as a result of the adjustment to the DTA.  Future income taxes are expected to be reduced significantly due to the change in the federal corporate income tax rate.

Aside from the one-time DTA adjustment and its effect on income tax expense in the fourth quarter, the other major impact to 2017 earnings was the $3.1 million expense for the write-down of other real estate owned in the second quarter.  While both of these one-time events negatively impacted 2017 earnings, core earnings (income before taxes and single non-recurring expense events) continued to increase each quarter in 2017.

A positive effect to earnings was the increase to total loans by over 6% at year-end 2017 compared to year-end 2016.  The Company’s loan to deposit ratio stands at 77% at year-end 2017.  Loan yields increased from 4.40% in the fourth quarter of 2016 to 4.52% in the fourth quarter of 2017.  Average loan balances increased from $283.0 million in the fourth quarter of 2016 to $310.4 million in the fourth quarter of 2017. Total earning assets yields increased from 3.21% in the fourth quarter of 2016 to 3.55% in the fourth quarter of 2017.  Average noninterest-earning assets decreased from $53.5 million in the fourth quarter of 2016 to $44.9 million in the fourth quarter of 2017.

Total deposits increased a modest 2% at year-end 2017 compared to year-end 2016; however non-interest bearing deposits increased 15% between these two dates.  Total core deposits (deposits less time and public deposits) increased 6% from year-end 2017 compared to year-end 2016.  Cost of funds increased to 0.17% in the fourth quarter of 2017 from 0.14% in the fourth quarter of 2016.  At the Bank level, the cost of funds was 0.11% in the fourth quarter of 2017.

Credit quality was negatively affected by the need to classify two substantial legacy credits in the fourth quarter of 2017.  The non-performing loans increased approximately $9.0 million to $17.8 million at December 31, 2017 compared to $8.8 million at December 31, 2016.  The Company was able to use unallocated reserves from the allowance for loan and lease losses to cover potential loss exposure.  Other real estate owned decreased $8.2 million, or 80%, to $2.0 million at December 31, 2017 compared to December 31, 2016.

“While we were disappointed with some legacy credit issues in the fourth quarter, we were encouraged with our continued increase in demand deposits, solid loan growth and core earnings,” stated Scott Yelvington, President and Chief Executive Officer of the Company.  “We intend to continue our focus on improving credit and increasing earnings in 2018.”

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, credit risk, inflation, changes in 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 periods 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 
 
 December 31, September 30, June 30, March 31, December 31,
For the quarter ended 2017   2017   2017   2017   2016 
 
Net income (loss) available to common stockholders$(6,266) $963  $(1,448) $370  $983 
Basic income (loss) per average outstanding share (0.07)  0.01   (0.02)  0.00   0.01 
Diluted income (loss) per average outstanding share (0.07)  0.01   (0.02)  0.00   0.01 
Return on average assets (4.92)%  0.78%  (1.19)%  0.30%  0.78%
Return on average equity (42.46)%  6.62%  (9.77)%  2.52%  6.85%
Yield on interest-earning assets 3.55%  3.71%  3.44%  3.36%  3.21%
Cost of interest-bearing liabilities 0.26%  0.24%  0.21%  0.20%  0.19%
Net interest spread 3.29%  3.47%  3.23%  3.16%  3.02%
Net interest margin 3.37%  3.54%  3.29%  3.21%  3.07%
Net charged-off (recovered) loans$(1) $(1,172) $(1) $56  $54 
Net charged-off loans to average loans (annualized) 0.00%  (1.55)%  0.00%  0.08%  0.08%
 
 December 31, September 30, June 30, March 31, December 31,
  2017   2017   2017   2017   2016 
 
Total stockholders' equity$52,474  $58,859  $57,795  $59,047  $58,460 
Book value per common share$0.57  $0.65  $0.64  $0.65  $0.65 
Common shares outstanding 92,252,244   90,345,174   90,345,174   90,345,174   90,345,174 
 
 December 31, September 30, June 30, March 31, December 31,
  2017   2017   2017   2017   2016 
Nonperforming assets 
Loans on nonaccrual status$12,545  $3,444  $3,407  $2,878  $2,990 
Loans 90 days or more past due, still accruing 434   561   537   140   309 
Loan troubled debt restructurings 4,783   4,845   4,969   5,309   5,465 
Total nonperforming loans 17,762   8,850   8,913   8,327   8,764 
Other real estate owned 2,039   2,217   6,935   10,174   10,236 
Total nonperforming assets$19,801  $11,067  $15,848  $18,501  $19,000 
 
Nonperforming assets excluding trouble debt restructurings$15,018  $6,222  $10,879  $13,192  $13,535 
Nonperforming loans to total assets 3.58%  1.74%  1.86%  1.68%  1.79%
Nonperforming assets to total assets 3.99%  2.18%  3.30%  3.74%  3.88%
Nonperforming assets excluding trouble debt restructurings to total assets 3.03%  1.22%  2.27%  2.67%  2.76%
Allowance for loan and lease losses to total loans 2.22%  2.20%  1.92%  1.94%  1.97%
                    


NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
Condensed Consolidated Balance SheetDecember 31,  September 30,  June 30,  March 31,  December 31,
  2017   2017   2017   2017   2016 
Assets 
Cash and due from banks$4,323  $4,557  $4,431  $4,853  $4,552 
Interest bearing deposits in financial institutions - maturities less than 90 days 59,062   61,682   37,956   47,132   41,179 
Total cash and cash equivalents 63,385   66,239   42,387   51,985   45,731 
Interest bearing deposits in financial institutions - maturities of 90 days or greater 28,492   24,592   26,774   30,510   29,233 
Securities available for sale 50,570   53,190   56,272   59,640   63,180 
Securities held to maturity 12,714   12,786   12,856   12,926   12,996 
Loans and leases, net of deferred fees 307,448   310,209   294,901   290,801   289,594 
Less: Allowance for loan and lease losses (6,821)   (6,820)   (5,648)   (5,647)   (5,703)
Loans and leases, net 300,627   303,389   289,253   285,154   283,891 
Federal Home Loan Bank stock 492   492   492   335   931 
Office buildings and equipment, net 8,443   8,419   8,630   8,674   8,525 
Other real estate owned 2,039   2,217   6,935   10,174   10,236 
Accrued interest receivable 1,224   1,358   1,165   1,255   1,247 
Bank owned life insurance 10,886   10,816   10,743   10,675   10,597 
Deferred tax asset, net 15,693   23,041   23,159   22,202   22,436 
Other assets 1,360   1,426   1,242   1,055   985 
Total assets$495,925  $507,965  $479,908  $494,585  $489,988 
Liabilities and Stockholders' Equity                   
Liabilities 
Deposits 
Noninterest-bearing deposits$115,619  $112,821  $107,470  $106,096  $100,870 
Interest-bearing  deposits 283,027   296,462   277,249   290,899   289,940 
Total deposits 398,646   409,283   384,719   396,995   390,810 
Securities sold under repurchase agreements 29,012   26,062   22,331   22,820   25,901 
Subordinated debentures 10,310   10,310   10,310   10,310   10,310 
Advances from borrowers for taxes and insurance 2,897   957   2,137   2,820   1,902 
Accrued interest payable and other liabilities 2,586   2,494   2,616   2,593   2,605 
Total liabilities 443,451   449,106   422,113   435,538   431,528 
Stockholders' Equity  
Common stock 927   906   906   906   906 
Deferred compensation (2,542)   (945)   (1,050)   (1,155)   (1,260)
Additional paid-in capital 35,700   34,019   34,019   34,019   34,019 
Retained earnings 18,927   25,193   24,230   25,678   25,308 
Treasury stock, at cost (241)   (182)   (182)   (182)   (182)
Accumulated other comprehensive income (loss), net (297)   (132)   (128)   (219)   (331)
Total stockholders' equity 52,474   58,859   57,795   59,047   58,460 
Total liabilities and stockholders' equity$495,925  $507,965  $479,908  $494,585  $489,988 
                    
Common shares outstanding 92,252,244   90,345,174   90,345,174   90,345,174   90,345,174 
Book value per common share$0.57  $0.65  $0.64  $0.65  $0.65 
                    


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,
  2017   2017   2017   2017   2016 
Interest income  
Loans (including fee income)$3,496  $3,566  $3,195  $3,148  $3,103 
Securities 
Taxable 312   333   334   357   353 
Exempt from federal income tax 0   0   0   0   3 
Federal funds sold and other 314   223   177   160   145 
Total interest income 4,122   4,122   3,706   3,665   3,604 
Interest expense                   
Time deposits 99   74   54   61   61 
Other deposits 27   26   26   25   23 
Repurchase agreements and federal funds purchased 1   1   0   1   1 
Subordinated debentures 90   87   82   76   74 
Total interest expense 217   188   162   163   159 
Net interest income 3,905   3,934   3,544   3,502   3,445 
Provision for loan and lease losses 0   0   0   0   0 
Net interest income after provision for loan and lease losses 3,905   3,934   3,544   3,502   3,445 
Noninterest income                   
Service fees on deposits 387   373   384   380   403 
Net gain on sale of other assets 0   68   0   0   0 
Net gain (loss) on sale of other real estate owned 3   (51)   (12)   (4)   68 
Bank owned life insurance income 70   72   69   78   78 
Other operating income 397   352   436   395   424 
Total noninterest income 857   814   877   849   973 
Noninterest expense 
Salaries and employee benefits 1,993   1,953   1,910   1,945   2,593 
Occupancy and equipment, net 450   475   515   486   557 
Data processing 427   488   466   456   490 
Legal 29   54   62   23   72 
FDIC insurance 30   60   60   30   45 
Audit and other professional 236   150   231   181   169 
Printing and supplies expense 54   32   38   51   42 
Write-down of other real estate owned 194   0   3,109   0   55 
Other real estate owned expense (58)   103   164   330   164 
Other operating expenses 271   344   314   317   326 
Total noninterest expense 3,626   3,659   6,869   3,819   4,513 
Net income before income taxes 1,136   1,089   (2,448)   532   (95)
Income tax expense 7,402   126   (1,000)   162   (1,078)
Net income (loss)$(6,266) $963  $(1,448) $370  $983 
                    
Average common shares outstanding 91,886,314   90,345,174   90,345,174   90,345,174   87,961,621 
Basic income per average outstanding share$(0.07) $0.01  $(0.02) $0.00  $0.01 
Diluted income per average outstanding share$(0.07) $0.01  $(0.02) $0.00  $0.01 
                    


NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
 
 December 31,  September 30,  June 30,  March 31,  December 31,
  2017   2017   2017   2017   2016 
Loans 
Commercial $26,493  $26,530  $26,355  $27,462  $28,179 
Real estate-construction  38,661   37,843   30,866   26,534   26,975 
Real estate-mortgage 1-4 family  49,717   47,760   48,658   50,533   48,593 
Real estate-mortgage 5+ family  77,200   75,605   61,714   59,331   59,272 
Real estate-mortgage commercial  105,488   112,803   118,271   118,917   115,514 
Home equity  8,518   8,468   8,526   7,428   10,411 
Installment  1,691   1,572   899   892   949 
Deferred loan fees  (320)   (372)   (388)   (296)   (299)
Total loans $307,448  $310,209  $294,901  $290,801  $289,594 
 
 December 31,  September 30,  June 30,  March 31,  December 31,
  2017   2017   2017   2017   2016 
Deposits 
Demand - noninterest bearing$115,619  $112,821  $107,470  $106,096  $100,870 
Demand - interest bearing 61,288   73,491   69,326   64,951   70,127 
Money market accounts 53,347   54,060   49,709   50,161   48,231 
Savings 89,876   92,363   92,735   91,861   90,095 
Time, over $250,000 26,892   24,270   12,355   30,651   26,510 
Time, $250,000 and under 51,624   52,278   53,124   53,275   54,977 
Total deposits$398,646  $409,283  $384,719  $396,995  $390,810 
                    


NORTHERN STATES FINANCIAL CORPORATION 
($000s, except per share data) (Unaudited) 
 
 4Q 2017  3Q 2017  2Q 2017  1Q 2017  4Q 2016  
 AverageYield/ AverageYield/ AverageYield/ AverageYield/ AverageYield/ 
 balanceRate balanceRate balanceRate balanceRate balanceRate 
Earning assets 
Loans$310,4264.52%$302,2664.73%$290,3074.42%$289,0854.37%$283,0294.40%
Securities taxable 65,0821.91  68,2861.95  71,5431.86  75,3611.88  81,3821.73 
Securities tax-exempt 00.00  00.00  00.00  00.00  2835.65 
Interest-bearing deposits 89,3461.41  74,8881.19  70,2991.01  73,0510.88  86,0560.67 
Total earning assets 464,8543.55% 445,4403.71% 432,1493.44% 437,4973.36% 450,7503.21%
Non interest earning assets 44,855  48,475  53,124  53,678  53,461 
Total assets$509,709 $493,915 $485,273 $491,175 $504,211 
 
Interest-bearing liabilities 
Interest-bearing demand deposits$70,0970.10%$69,3730.10%$67,1120.10%$63,8700.11%$73,4670.08%
Money market deposits 53,7860.05  52,5260.05  50,6820.05  48,3220.05  55,0720.05 
Savings deposits 91,3820.01  92,3960.01  92,3600.01  90,6260.01  89,4000.01 
Time deposits 77,1710.51  73,1530.40  70,8980.30  85,0140.29  86,6550.28 
Other borrowings 38,2520.95  32,4381.09  31,7411.03  37,7370.82  35,6130.84 
Total interest-bearing liabilities 330,6880.26% 319,8860.24% 312,7930.21% 325,5690.20% 340,2070.19%
Demand deposits 115,391  111,545  107,571  101,689  102,406 
Other liabilities 4,607  4,295  5,621  5,201  4,175 
Stockholders' equity 59,023  58,189  59,288  58,716  57,423 
Total liabilities and stockholders' equity$509,709 $493,915 $485,273 $491,175 $504,211 
 
Cost of funds (including demand deposits) 0.17% 0.17% 0.15% 0.15% 0.14%
 
Net interest spread 3.29% 3.47% 3.23% 3.16% 3.02%
Net interest margin 3.37% 3.54% 3.29% 3.21% 3.07%

Primary Logo