SOURCE: Northern States Financial Corporation

Northern States Financial Corporation

August 01, 2014 14:19 ET

Northern States Financial Corporation Reports Income After Recapitalization

WAUKEGAN, IL--(Marketwired - Aug 1, 2014) - Northern States Financial Corporation (OTCQB: NSFC) today reported net income of $367,000 for the second quarter of 2014. Highlighting the quarter was a successful $25 million recapitalization of the Company, which was completed on April 30, 2014, through which the Company was able to retire its TARP obligations with the United States Department of the Treasury and to pay the deferred interest relating to its outstanding trust preferred securities. Consolidated income available to common stockholders of the Company for the three months ended June 30, 2014 totaled $16.1 million, or $0.18 per share based on 87,604,088 outstanding shares of the Company as of June 30, 2014. The amount of consolidated income available to common stockholders was due primarily to the Company's accounting for the recapitalization transaction, as well as earnings from the Company's wholly owned banking subsidiary, NorStates Bank. Stockholders' equity at June 30, 2014 was approximately $32 million, or $0.37 per share. The Company also continued to carry approximately $26 million in a valuation allowance on its deferred tax assets.

The results of operations for the quarter ended June 30, 2014 of NorStates Bank were highlighted by net income of $391,000. The Bank's core earnings were approximately $100,000 per month following the recapitalization, an increase accomplished primarily by deploying the increased available liquidity from the recapitalization. A net gain on the sale of bank owned properties also contributed to net income for the second quarter. The Bank's cost of funds was 10 basis points for the second quarter of 2014.

Total assets of NorStates Bank were $408 million at the end of the second quarter. The Bank's leveraged capital ratio as of June 30, 2014 was 10.39%. Asset quality, as represented by the Bank's non-performing asset ratio, improved from 111% as of March 31, 2014 to 81% as of June 30, 2014. The allowance for loan and lease losses as a percent of total loans and leases of NorStates Bank stood at 3.98% as of June 30, 2014, and no provision for loan losses was made in the second quarter of 2014.

"The successful recapitalization effort completed in April has allowed us to deploy excess liquidity into increasing our securities investments and loan generation, which has had an immediate impact on earnings," stated President and Chief Executive Officer, Scott Yelvington. "Further reduction in expenses related to the recapitalization and lower non-performing assets have had an additional positive impact on earnings, and we expect that to continue. This has been a seminal quarter in our Company's history, and we are excited about the future. A healthy, profitable NorStates Bank will help enhance economic growth in the communities we serve."

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.

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 Bank conducts its operations, including the real estate market in Illinois, and other factors beyond the Bank'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 and statement to reflect new information or subsequent events or circumstances.

             
             
NORTHERN STATES FINANCIAL CORPORATION  
CONDENSED CONSOLIDATED BALANCE SHEETS  
June 30, 2014 and December 31, 2013  
(In thousands of dollars) (Unaudited)  
             
    June 30,     December 31,  
    2014     2013  
  Assets                
Cash and due from banks   $ 5,627     $ 5,235  
Interest bearing deposits in financial institutions - maturities less than 90 days     33,162       42,350  
  Total cash and cash equivalents     38,789       47,585  
Interest bearing deposits in financial institutions - maturities of 90 days or greater     8,483       9,227  
Securities available for sale     116,363       92,407  
Securities held to maturity (fair value $7,017 at June 30, 2014)     7,001       0  
Loans and leases, net of deferred fees     215,307       225,295  
Less: Allowance for loan and lease losses     (8,570 )     (9,130 )
  Loans and leases, net     206,737       216,165  
Federal Home Loan Bank stock     931       931  
Office buildings and equipment, net     8,021       8,262  
Other real estate owned     19,012       14,357  
Accrued interest receivable     1,147       1,101  
Other assets     1,435       2,377  
  Total assets   $ 407,919     $ 392,412  
    Liabilities and Stockholders' Equity                
Liabilities                
Deposits                
  Demand - noninterest bearing   $ 71,318     $ 71,970  
  Interest bearing     273,608       275,159  
    Total deposits     344,926       347,129  
Securities sold under repurchase agreements     16,601       16,213  
Subordinated debentures     10,310       10,310  
Advances from borrowers for taxes and insurance     1,328       1,119  
Accrued interest payable and other liabilities     2,738       7,987  
    Total liabilities     375,903       382,758  
Stockholders' Equity                
Common stock     878       1,789  
Preferred stock     0       17,198  
Warrants (584,084 issued and outstanding at December 31, 2013)     0       681  
Additional paid-in capital     32,088       7,326  
(Accumulated deficit) retained earnings     4,430       (10,993 )
Treasury stock, at cost     (4,674 )     (4,674 )
Accumulated other comprehensive income, net     (706 )     (1,673 )
  Total stockholders' equity     32,016       9,654  
    Total liabilities and stockholders' equity   $ 407,919     $ 392,412  
                 
                         
                         
NORTHERN STATES FINANCIAL CORPORATION  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
Three and six months ended June 30, 2014 and 2013             
(In thousands of dollars, except per share data) (Unaudited)             
   
    Three months ended     Six months ended  
    June 30,     June 30,     June 30,     June 30,  
    2014     2013     2014     2013  
Interest income                                
  Loans (including fee income)   $ 2,427     $ 3,132     $ 4,911     $ 6,313  
  Securities                                
    Taxable     488       287       748       720  
    Exempt from federal income tax     6       23       17       48  
  Federal funds sold and other     44       44       82       79  
    Total interest income     2,965       3,486       5,758       7,160  
Interest expense                                
  Time deposits     66       85       133       182  
  Other deposits     21       23       44       44  
  Repurchase agreements and federal funds purchased     1       0       1       1  
  Subordinated debentures     58       60       117       119  
    Total interest expense     146       168       295       346  
Net interest income     2,819       3,318       5,463       6,814  
Provision for loan and lease losses     0       1,600       0       2,000  
Net interest income after provision for loan and lease losses     2,819       1,718       5,463       4,814  
Noninterest income                                
  Service fees on deposits     403       404       790       781  
  Gain on sale of securities     0       411       78       1,749  
  Net gain on sale of other real estate owned     373       83       385       93  
  Other operating income     434       415       819       787  
    Total noninterest income     1,210       1,313       2,072       3,410  
Noninterest expense                                
  Salaries and employee benefits     1,495       1,374       2,934       2,794  
  Occupancy and equipment, net     477       628       1,116       1,215  
  Data processing     451       476       929       936  
  Legal     42       168       180       303  
  FDIC insurance     205       214       427       439  
  Audit and other professional     97       138       226       358  
  Prinitng and supplies expense     43       46       76       103  
  Write-down of other real estate owned     158       0       151       1,425  
  Other real estate owned expense     181       183       488       222  
  Loan and collection     113       (75 )     116       (6 )
  Other operating expenses     400       423       823       859  
    Total noninterest expense     3,662       3,575       7,466       8,648  
Net income (loss) before income taxes     367       (544 )     69       (424 )
Income tax expense     0       0       0       0  
Net income (loss)     367       (544 )     69       (424 )
  Discount on redemption of preferred stock     (15,733 )     0       (15,733 )     0  
  Dividends to preferred stockholders     0       258       366       512  
  Accretion of discount on preferred stock     0       38       13       75  
Net income (loss) available to common stockholders   $ 16,100     $ (840 )   $ 15,423     $ (1,011 )
                                 
Basic income (loss) per average outstanding share   $ 0.26     $ (0.20 )   $ 0.47     $ (0.24 )
Diluted income (loss) per average outstanding share   $ 0.26     $ (0.20 )   $ 0.47     $ (0.24 )
                                 
Basic income (loss) per end of period share   $ 0.18     $ (0.20 )   $ 0.18     $ (0.24 )

Contact Information

  • For Additional Information, Contact:
    Scott Yelvington
    President and Chief Executive Officer
    (847) 244-6000 Ext. 201
    Websites: www.nsfc.comwww.nsfc.net