Northern States Financial Corporation Reports 2015 Net Income of $23.1 million

WAUKEGAN, IL--(Marketwired - Mar 8, 2016) - Northern States Financial Corporation (OTCQB: NSFC) (the "Company"), holding company for NorStates Bank (the "Bank"), an FDIC insured financial institution, today reported annual net income for 2015 available to stockholders of $23,129,000, or $0.26 per share. A significant portion of the Company's net income for 2015 resulted from the reversal of almost all of the Company's deferred tax allowance which allowed the booking of a $21.7 million tax credit during the fourth quarter of 2015. At year-end 2015, there remains a deferred tax allowance of approximately $3.0 million. In 2014, the Company successfully negotiated a discount of TARP preferred shares in association with the Company's recapitalization which resulted in net income available to stockholders of $15,564,000, or $0.26 per share. Pretax income for 2015 was $1,474,000 as compared with pretax income for 2014 of $210,000. Per share book value at December 31, 2015 was $0.64.

For the three months ended December 31, 2015, the Company showed net income of $22,043,000, mainly due to the reversal of the deferred tax allowance. Pretax income for the quarter was $323,000 as compared with a loss of $142,000 for the same quarter of 2014. 

Assets of the Company increased 15.0% to $485.3 million at December 31, 2015 from year-end 2014. Despite some strategic loan payoffs and reduction of nonperforming loans, the Company increased its loans by 8.3% to $237.3 million at December 31, 2015 compared with December 31, 2014. Total deposits increased 10.9% to $395.4 million as noninterest bearing deposits increased 18.3% and interest bearing deposits increased 8.7% between the same dates.

In regards to credit quality, total nonperforming loans were reduced 60.7% to $8.3 million at December 31, 2015 compared with December 31, 2014. Other real estate owned was reduced 23.8% to $12.6 million between the same dates.

"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 2015 as we were able to reduce NPAs as a percentage of total assets to 4.3% at year-end from 8.9% at year-end 2014. Solid earnings growth has allowed us to recapture the vast majority of the deferred tax allowance enhancing share value of our Company. We were also pleased with the net increase in loans and growth to our core deposits as we move 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 quarter ended			2015				2015				2015				2015				2014
Net income (loss) available to common stockholders			$	22,043			$	514			$	392			$	180			$	(142	)
Basic income (loss) per average outstanding share				0.00				0.01				0.00				0.00				(0.00	)
Diluted income (loss) per average outstanding share				0.25				0.01				0.00				0.00				(0.00	)
Return on average assets				18.89	%			0.45	%			0.36	%			0.17	%			(0.13	%)
Return on average equity				253.24	%			6.13	%			4.73	%			2.18	%			(1.75	%)
Yield on interest earning assets				3.30	%			3.13	%			3.13	%			3.21	%			3.39	%
Cost of interest-bearing liabilities				0.19	%			0.20	%			0.19	%			0.19	%			0.18	%
Net interest spread				3.11	%			2.93	%			2.94	%			3.02	%			3.21	%
Net interest margin				3.15	%			2.97	%			2.98	%			3.07	%			3.24	%
Net charged-off loans			$	231			$	803			$	(1,681	)		$	488			$	1,866
Net charged-off loans to average loans (annualized)				0.40	%			1.38	%			(2.99	%)			0.89	%			3.45	%
			December 31,				September 30,				June 30,				March 31,				December 31,
			2015				2015				2015				2015				2014
Total stockholders' equity			$	55,673			$	34,135			$	33,214			$	33,112			$	32,333
Deferred tax asset				24,869				25,103				25,339				25,188				25,566
Deferred tax asset valuation allowance				(3,000	)			(25,183	)			(25,183	)			(25,183	)			(25,183	)
Book value per common share			$	0.64			$	0.39			$	0.38			$	0.38			$	0.37
Common shares outstanding				87,604,088				87,604,088				87,604,088				87,604,088				87,604,088
			December 31,				September 30,				June 30,				March 31,				December 31,
			2015				2015				2015				2015				2014
Nonperforming assets
Loans on nonaccrual status			$	5,469			$	8,986			$	10,820			$	9,715			$	16,551
Loans 90 days or more past due, still accruing				787				266				198				298				1,048
Loan troubled debt restructurings				1,999				2,380				2,400				3,742				3,376
	Total nonperforming loans			8,255				11,632				13,418				13,755				20,975
Other real estate owned				12,579				17,173				17,416				19,347				16,514
	Total nonperforming assets		$	20,834			$	28,805			$	30,834			$	33,102			$	37,489
Nonperforming assets excluding trouble debt restructurings			$	18,835			$	26,425			$	28,434			$	29,360			$	34,113
Nonperforming loans to total assets				1.70	%			2.52	%			3.02	%			3.18	%			4.97	%
Nonperforming assets to total assets				4.29	%			6.23	%			6.94	%			7.66	%			8.88	%
Nonperforming assets excluding trouble debt restructurings to total assets				3.88	%			5.72	%			6.40	%			6.80	%			8.08	%

NORTHERN STATES FINANCIAL CORPORATION

($000s, except per share data) (Unaudited)

Condensed Consolidated Balance Sheets

				December 31,				September 30,				June 30,				March 31,				December 31,
				2015				2015				2015				2015				2014
	Assets
Cash and due from banks				$	5,834			$	8,092			$	4,817			$	5,258			$	8,258
Interest bearing deposits in financial institutions - maturities less than 90 days					55,380				63,044				60,455				63,768				26,727
	Total cash and cash equivalents				61,214				71,136				65,272				69,026				34,985
Interest bearing deposits in financial institutions - maturities of 90 days or greater					33,786				16,057				6,499				7,739				8,483
Securities available for sale					97,788				106,593				112,353				101,659				121,368
Securities held to maturity					10,564				10,771				10,838				12,069				16,305
Loans and leases, net of deferred fees					237,327				232,847				229,932				217,270				219,049
Less: Allowance for loan and lease losses					(6,011	)			(7,032	)			(7,834	)			(6,153	)			(6,541	)
	Loans and leases, net				231,316				225,815				222,098				211,117				212,508
Federal Home Loan Bank stock					931				931				931				931				931
Office buildings and equipment, net					7,776				6,373				6,845				7,851				7,957
Other real estate owned					12,579				17,173				17,416				19,347				16,514
Accrued interest receivable					1,275				1,211				1,217				1,144				1,158
Other assets					28,118				5,956				1,035				986				1,814
	Total assets			$	485,347			$	462,016			$	444,504			$	431,869			$	422,023
		Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing deposits			$	93,913			$	84,823			$	81,795			$	77,213			$	79,378
	Interest-bearing deposits				301,509				309,432				299,564				287,406				277,352
		Total deposits			395,422				394,255				381,359				364,619				356,730
Securities sold under repurchase agreements					18,994				19,618				14,836				18,231				18,447
Subordinated debentures					10,310				10,310				10,310				10,310				10,310
Advances from borrowers for taxes and insurance					2,195				776				1,904				2,639				1,485
Accrued interest payable and other liabilities					2,753				2,922				2,881				2,958				2,718
		Total liabilities			429,674				427,881				411,290				398,757				389,690
Stockholders' Equity
Common stock					878				878				878				878				878
Additional paid-in capital					32,088				32,088				32,088				32,088				32,088
Retained earnings					27,700				5,657				5,143				4,751				4,571
Treasury stock, at cost					(4,674	)			(4,674	)			(4,674	)			(4,674	)			(4,674	)
Accumulated other comprehensive income (loss), net					(319	)			186				(221	)			69				(530	)
	Total stockholders' equity				55,673				34,135				33,214				33,112				32,333
		Total liabilities and stockholders' equity		$	485,347			$	462,016			$	444,504			$	431,869			$	422,023
Common shares outstanding					87,604,088				87,604,088				87,604,088				87,604,088				87,604,088
Book value per common share				$	0.64			$	0.39			$	0.38			$	0.38			$	0.37

NORTHERN STATES FINANCIAL CORPORATION

($000s, except per share data) (Unaudited)

Condensed Consolidated Statements of Income

For quarter ended					December 31,				September 30,			June 30,				March 31,			December 31,
					2015				2015			2015				2015			2014
Interest income
	Loans (including fee income)				$	3,005			$	2,747		$	2,646			$	2,484		$	2,625
	Securities
		Taxable				491				544			514				678			683
		Exempt from federal income tax				4				4			5				4			6
	Federal funds sold and other					97				52			54				36			40
			Total interest income			3,597				3,347			3,219				3,202			3,354
Interest expense
	Time deposits					79				82			79				71			66
	Other deposits					24				24			21				22			24
	Repurchase agreements and federal funds purchased					1				0			0				1			1
	Subordinated debentures					58				57			55				53			54
			Total interest expense			162				163			155				147			145
Net interest income						3,435				3,184			3,064				3,055			3,209
Provision for loan and lease losses						(789	)			0			0				100			0
Net interest income after provision for loan and lease losses						4,224				3,184			3,064				2,955			3,209
Noninterest income
	Service fees on deposits					319				316			324				321			377
	Gain on sale of securities					0				0			48				122			16
	Net gain (loss) on sale of other assets					18				1,423			(10	)			0			0
	Net gain (loss) on sale of other real estate owned					22				0			209				0			(440	)
	Other operating income					459				442			413				385			400
			Total noninterest income			818				2,181			984				828			353
Noninterest expense
	Salaries and employee benefits					1,940				1,712			1,724				1,703			1,726
	Occupancy and equipment, net					526				527			561				597			492
	Data processing					234				501			376				330			679
	Legal					52				51			117				93			74
	FDIC insurance					98				96			136				141			135
	Audit and other professional					151				143			162				134			94
	Printing and supplies expense					36				42			63				60			49
	Write-down of other real estate owned					1,282				1,264			0				0			26
	Other real estate owned expense					97				136			88				170			27
	Other operating expenses					303				329			414				375			402
			Total noninterest expense			4,719				4,801			3,641				3,603			3,704
Net income (loss) before income taxes						323				564			407				180			(142	)
Income tax expense						(21,720	)			50			15				0			0
Net income (loss)						22,043				514			392				180			(142	)
Average common shares outstanding						87,604,088				87,604,088			87,604,088				87,604,088			87,604,088
Basic income (loss) per average outstanding share					$	0.25			$	0.01		$	0.00			$	0.00		$	(0.00	)
Diluted income (loss) per average outstanding share					$	0.25			$	0.01		$	0.00			$	0.00		$	(0.00	)

NORTHERN STATES FINANCIAL CORPORATION

($000s, except per share data) (Unaudited)

				December 31,				September 30,				June 30,				March 31,				December 31,
				2015				2015				2015				2015				2014
Loans
	Commercial			$	12,144			$	14,019			$	13,687			$	10,522			$	14,239
	Real estate-construction				21,609				15,127				14,300				11,636				11,600
	Real estate-mortgage 1-4 family				28,449				27,977				29,379				30,285				30,546
	Real estate-mortgage 5+ family				39,417				38,971				39,577				36,569				32,968
	Real estate-mortgage commercial				125,978				126,375				123,176				118,589				119,669
	Home equity				8,953				9,526				9,089				8,859				9,131
	Installment				1,047				1,041				943				1,021				1,069
	Deferred loan fees				(270	)			(189	)			(219	)			(211	)			(173	)
		Total loans		$	237,327			$	232,847			$	229,932			$	217,270			$	219,049
				December 31,				September 30,				June 30				March 31				December 31,
				2015				2015				2015				2015				2014
Deposits
	Demand - noninterest bearing			$	93,913			$	84,823			$	81,795			$	77,213			$	79,378
	Demand - interest bearing				67,571				72,612				65,853				57,158				61,313
	Money market accounts				51,797				54,077				53,131				49,453				51,046
	Savings				84,515				83,153				80,884				80,654				77,789
	Time, $100,000 and over				53,093				52,744				49,223				49,655				37,483
	Time, under $100,000				44,283				45,846				47,223				48,236				49,471
	Time, brokered				250				1,000				3,250				2,250				250
		Total deposits		$	395,422			$	394,255			$	381,359			$	364,619			$	356,730

NORTHERN STATES FINANCIAL CORPORATION

($000s, except per share data) (Unaudited)

			4Q 2015					3Q 2015					2Q 2015					1Q 2015					4Q 2014
			Average		Yield/			Average		Yield/			Average		Yield/			Average		Yield/			Average		Yield/
			balance		Rate			balance		Rate			balance		Rate			balance		Rate			balance		Rate
Earning assets
	Loans		$	232,821	5.18	%		$	232,003	4.76	%		$	224,996	4.73	%		$	219,900	4.54	%		$	216,345	4.88	%
	Securities taxable			112,635	1.74				124,301	1.75				119,487	1.72				129,337	2.10				138,741	1.96
	Securities tax-exempt			428	5.61				436	6.42				435	5.52				437	6.41				575	6.30
	Interest-bearing deposits			91,402	0.42				73,330	0.28				68,449	0.32				50,803	0.28				42,000	0.38
	Total earning assets			437,286	3.30	%			430,070	3.13	%			413,367	3.13	%			400,477	3.21	%			397,661	3.39	%
Non interest earning assets				29,467					26,427					26,460					26,670					29,935
Total assets			$	466,753				$	456,497				$	439,827				$	427,147				$	427,596
Interest-bearing liabilities
	Interest-bearing demand deposits		$	71,437	0.08	%		$	68,681	0.09	%		$	61,325	0.08	%		$	58,445	0.10	%		$	67,480	0.09	%
	Money market deposits			53,107	0.05				52,291	0.05				50,062	0.05				50,104	0.05				51,977	0.05
	Savings deposits			83,536	0.01				82,482	0.01				81,353	0.01				78,445	0.01				77,339	0.10
	Time deposits			98,661	0.32				101,783	0.32				99,736	0.32				94,548	0.30				87,923	0.30
	Other borrowings			30,559	0.77				28,085	0.81				25,492	0.86				30,660	0.70				30,328	0.73
	Total interest-bearing liabilities			337,300	0.19	%			333,322	0.20	%			317,968	0.19	%			312,202	0.19	%			315,047	0.18	%
Demand deposits				90,408					85,324					83,126					76,962					76,528
Other liabilities				4,228					4,308					5,610					4,950					3,567
Stockholders' equity				34,817					33,543					33,123					33,033					32,454
Total liabilities and stockholders' equity			$	466,753				$	456,497				$	439,827				$	427,147				$	427,596
Net interest spread					3.11	%				2.93	%				2.94	%				3.02	%				3.21	%
Net interest margin					3.15	%				2.97	%				2.98	%				3.07	%				3.24	%