Northern States Financial Corporation Reports Second Quarter 2015 Earnings

WAUKEGAN, IL--(Marketwired - Jul 21, 2015) - Northern States Financial Corporation (OTCQB: NSFC) (the "Company"), holding company for NorStates Bank (the "Bank"), an FDIC insured financial institution, today reported second quarter 2015 net income of $392,000 as compared with first quarter net income of $180,000. Per share book value at June 30, 2015 was $0.38.

The financial results of the Bank showed earnings of $501,000 for the second quarter of 2015. Assets of the Company totaled $444.5 million at June 30, 2015, an increase 5.3% from December 31, 2014. The Company increased its loans and leases, net of deferred fees, and total investment securities by $12.7 million and $9.5 million, respectively, between March 31, 2015 and June 30, 2015. Total deposits also increased from $364.6 million at March 31, 2015 to $381.4 million at June 30, 2015.

With regard to asset quality, the Company's 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 $6.7 million between December 31, 2014 and June 30, 2015.

"We are pleased to report steady progress in the reduction of NPAs and a solid increase in earnings," stated Scott Yelvington, President and Chief Executive Officer of the Company. "In addition to robust credit opportunities, we were also able to post approximately $2.0 million in recoveries on loans, which boosted our reserves. Our focus will remain on the reduction of NPAs and the further increase in profitability through loan generation and short-term investments while reducing expenses."

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
For quarter ended			June 30, 2015				March 31, 2015			December 31, 2014				September 30, 2014			June 30, 2014
Net income (loss) available to common stockholders			$	392			$	180		$	(142	)		$	283		$	16,100
Basic income (loss) per average outstanding share				0.00				0.00			(0.00	)			0.00			0.26
Diluted income (loss) per average outstanding share				0.00				0.00			(0.00	)			0.00			0.26
Return on average assets				0.36	%			0.17	%		-0.13	%			0.27	%		15.99	%
Return on average equity				4.73	%			2.18	%		-1.75	%			3.50	%		237.95	%
Yield on interest earning assets				3.13	%			3.21	%		3.39	%			3.10	%		3.13	%
Cost of interest-bearing liabilities				0.19	%			0.19	%		0.18	%			0.18	%		0.20	%
Net interest spread				2.94	%			3.02	%		3.21	%			2.92	%		2.93	%
Net interest margin				2.98	%			3.07	%		3.24	%			2.96	%		2.97	%
Net charged-off loans			$	(1,681	)		$	488		$	1,866			$	163		$	641
Net charged-off loans to average loans (annualized)				-2.99	%			0.89	%		3.45	%			0.30	%		1.17	%
			June 30, 2015				March 31, 2015			December 31, 2014				September 30, 2014			June 30, 2014
Total stockholders' equity			$	33,214			$	33,112		$	32,333			$	32,060		$	32,016
Deferred tax asset				25,339				25,188			25,566				26,709			26,539
Deferred tax asset valuation allowance				(25,183	)			(25,183	)		(25,183	)			(26,070	)		(26,053	)
Book value per common share			$	0.38			$	0.38		$	0.37			$	0.37		$	0.17
Common shares outstanding				87,604,088				87,604,088			87,604,088				87,604,088			87,604,088
			June 30, 2015				March 31, 2015			December 31, 2014				September 30, 2014			June 30, 2014
Nonperforming assets
Loans on nonaccrual status			$	10,820			$	9,715		$	16,551			$	23,576		$	15,242
Loans 90 days or more past due, still accruing				198				298			1,048				610			283
Loan troubled debt restructurings				2,400				3,742			3,376				5,851			6,531
	Total nonperforming loans			13,418				13,755			20,975				30,037			22,056
Other real estate owned				17,416				19,347			16,514				18,933			19,012
	Total nonperforming assets		$	30,834			$	33,102		$	37,489			$	48,970		$	41,068
Nonperforming assets excluding trouble debt restructurings				$ 28,434				$ 29,360			$ 34,113				$ 43,119			$ 34,537
Nonperforming loans to total assets excluding trouble debt				3.02	%			3.18	%		4.97	%			7.10	%		5.41	%
Nonperforming assets to total assets excluding trouble debt				6.94	%			7.66	%		8.88	%			11.57	%		10.07	%
Nonperforming assets excluding trouble debt restructurings to total assets				6.40	%			6.80	%		8.08	%			10.19	%		8.47	%

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Balance Sheets				June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
	Assets
Cash and due from banks				$	4,817		$	5,258		$	8,258		$	4,272		$	5,627
Interest bearing deposits in financial institutions - maturities less than 90 days					60,455			63,768			26,727			40,908			33,162
	Total cash and cash equivalents				65,272			69,026			34,985			45,180			38,789
Interest bearing deposits in financial institutions - maturities of 90 days or greater					6,499			7,739			8,483			9,971			8,483
Securities available for sale					112,353			101,659			121,368			117,447			116,363
Securities held to maturity					10,838			12,069			16,305			14,968			7,001
Loans and leases, net of deferred fees					229,932			217,270			219,049			213,031			215,307
Less: Allowance for loan and lease losses					(7,834	)		(6,153	)		(6,541	)		(8,407	)		(8,570	)
	Loans and leases, net				222,098			211,117			212,508			204,624			206,737
Federal Home Loan Bank stock					931			931			931			931			931
Office buildings and equipment, net					6,845			7,851			7,957			8,041			8,021
Other real estate owned					17,416			19,347			16,514			18,933			19,012
Accrued interest receivable					1,217			1,144			1,158			1,196			1,147
Other assets					1,035			986			1,814			1,931			1,435
	Total assets			$	444,504		$	431,869		$	422,023		$	423,222		$	407,919
		Liabilities and Stockholders' Equity
Liabilities
Deposits
	Noninterest-bearing deposits			$	81,795		$	77,213		$	79,378		$	71,285		$	71,318
	Interest- bearing deposits				299,564			287,406			277,352			286,520			273,608
		Total deposits			381,359			364,619			356,730			357,805			344,926
Securities sold under repurchase agreements					14,836			18,231			18,447			20,100			16,601
Subordinated debentures					10,310			10,310			10,310			10,310			10,310
Advances from borrowers for taxes and insurance					1,904			2,639			1,485			445			1,328
Accrued interest payable and other liabilities					2,881			2,958			2,718			2,502			2,738
	Total liabilities				411,290			398,757			389,690			391,162			375,903
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					5,143			4,751			4,571			4,713			4,430
Treasury stock, at cost					(4,674	)		(4,674	)		(4,674	)		(4,674	)		(4,674	)
Accumulated other comprehensive income (loss), net					(221	)		69			(530	)		(945	)		(706	)
	Total stockholders' equity				33,214			33,112			32,333			32,060			32,016
		Total liabilities and stockholders' equity		$	444,504		$	431,869		$	422,023		$	423,222		$	407,919
Common shares outstanding					87,604,088			87,604,088			87,604,088			87,604,088			87,604,088
Book value per common share				$	0.38		$	0.38		$	0.37		$	0.37		$	0.17

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
Condensed Consolidated Statements of Operations
For quarter ended					June 30, 2015			March 31, 2015			December 31, 2014				September 30, 2014			June 30, 2014
Interest income
	Loans (including fee income)				$	2,646		$	2,484		$	2,625			$	2,319		$	2,427
	Securities
		Taxable				514			678			683				619			488
		Exempt from federal income tax				5			4			6				5			6
	Federal funds sold and other					54			36			40				36			44
			Total interest income			3,219			3,202			3,354				2,979			2,965
Interest expense
	Time deposits					79			71			66				63			66
	Other deposits					21			22			24				23			21
	Repurchase agreements and federal funds purchased					0			1			1				0			1
	Subordinated debentures					55			53			54				54			58
		Total interest expense				155			147			145				140			146
Net interest income						3,064			3,055			3,209				2,839			2,819
Provision for loan and lease losses						0			100			0				0			0
Net interest income after provision for loan and lease losses						3,064			2,955			3,209				2,839			2,819
Noninterest income
	Service fees on deposits					324			321			377				408			403
	Gain on sale of securities					48			122			16				0			0
	Net gain (loss) on sale of other real estate owned					209			0			(440	)			4			373
	Other operating income					403			385			400				438			434
		Total noninterest income				984			828			353				850			1,210
Noninterest expense
	Salaries and employee benefits					1,724			1,703			1,726				1,566			1,495
	Occupancy and equipment, net					561			597			492				537			477
	Data processing					376			330			679				528			451
	Legal					117			93			74				49			42
	FDIC insurance					136			141			135				131			205
	Audit and other professional					162			134			94				126			97
	Printing and supplies expense					63			60			49				40			43
	Write-down of other real estate owned					0			0			26				82			158
	Other real estate owned expense					88			170			27				117			181
	Other operating expenses					414			375			402				230			513
		Total noninterest expense				3,641			3,603			3,704				3,406			3,662
Net income (loss) before income taxes						407			180			(142	)			283			367
Income tax expense						15			0			0				0			0
Net income (loss)						392			180			(142	)			283			367
	Discount on redemption of preferred stock					0			0			0				0			(15,883	)
	Dividends to preferred stockholders					0			0			0				0			150
	Accretion of discount on preferred stock					0			0			0				0			0
Net income (loss) available to common stockholders					$	392		$	180		$	(142	)		$	283		$	16,100
Average common shares outstanding					87,604,088			87,604,088			87,604,088				87,604,088			61,047,312
Basic income (loss) per average outstanding share					$	0.00		$	0.00		$	(0.00	)		$	0.00		$	0.26
Diluted income (loss) per average outstanding share					$	0.00		$	0.00		$	(0.00	)		$	0.00		$	0.26

NORTHERN STATES FINANCIAL CORPORATION
($000s, except per share data) (Unaudited)
			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014			June 30, 2014
Loans
	Commercial		$	13,687		$	10,522		$	14,239		$	12,355		$	13,127
	Real estate-construction			14,300			11,636			11,600			12,300			12,333
	Real estate-mortgage 1-4 family			29,379			30,285			30,546			30,322			30,381
	Real estate-mortgage 5+ family			39,577			36,569			32,968			30,592			30,769
	Real estate-mortgage commercial			123,176			118,589			119,669			116,933			117,621
	Home equity			9,089			8,859			9,131			9,327			10,031
	Installment			943			1,021			1,069			1,380			1,230
	Deferred loan fees			(219	)		(211	)		(173	)		(178	)		(185	)
		Total loans	$	229,932		$	217,270		$	219,049		$	213,031		$	215,307
			June 30 2015			March 31 2015			December 31, 2014			September 30, 2014			June 30, 2014
Deposits
	Demand - noninterest bearing		$	81,795		$	77,213		$	79,378		$	71,285		$	71,318
	Demand - interest bearing			65,853			57,158			61,313			66,673			62,287
	Money market accounts			53,131			49,453			51,046			52,935			51,220
	Savings			80,884			80,654			77,789			77,651			77,092
	Time, $100,000 and over			49,223			49,655			37,483			38,517			31,202
	Time, under $100,000			47,223			48,236			49,471			50,494			51,807
	Time, brokered			3,250			2,250			250			250			0
		Total deposits	$	381,359		$	364,619		$	356,730		$	357,805		$	344,926

NORTHERN STATES FINANCIAL CORPORATION

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

			2Q 2015						1Q 2015						4Q 2014						31Q 2014						2Q 2014
			Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/
			balance			Rate			balance			Rate			balance			Rate			balance			Rate			balance			Rate
Earning assets
	Loans		$	224,996		4.73	%		$	219,900		4.54	%		$	216,345		4.88	%		$	214,261		4.36	%		$	218,419		4.47	%
	Securities taxable			119,487		1.72				129,337		2.10				138,741		1.96				128,029		1.92				108,473		1.77
	Securities tax-exempt			435		5.52				437		6.41				575		6.30				561		5.68				560		6.36
	Interest-bearing deposits			68,449		0.32				50,803		0.28				42,000		0.38				42,558		0.34				52,801		0.33
	Total earning assets			413,367		3.13	%			400,477		3.21	%			397,661		3.39	%			385,409		3.10	%			380,253		3.13	%
Non interest earning assets				26,460						26,670						29,935						27,115						22,543
Total assets			$	439,827					$	427,147					$	427,596					$	412,524					$	402,796
Interest-bearing liabilities
	Interest-bearing demand deposits		$	61,325		0.08	%		$	58,445		0.10	%		$	67,480		0.09	%		$	63,434		0.09	%		$	62,418		0.08	%
	Money market deposits			50,062		0.05				50,104		0.05				51,977		0.05				52,223		0.05				49,747		0.05
	Savings deposits			81,353		0.01				78,445		0.01				77,339		0.10				77,733		0.01				77,795		0.01
	Time deposits			99,736		0.32				94,548		0.30				87,923		0.30				81,835		0.31				84,621		0.31
	Other borrowings			25,492		0.86				30,660		0.70				30,328		0.73				27,780		0.78				24,865		0.95
	Total interest-bearing liabilities			317,968		0.19	%			312,202		0.19	%			315,047		0.18	%			303,005		0.18	%			299,446		0.20	%
Demand deposits				83,126						76,962						76,528						73,580						70,776
Other liabilities				5,610						4,950						3,567						3,619						5,509
Stockholders' equity				33,123						33,033						32,454						32,320						27,065
Total liabilities and stockholders' equity			$	439,827					$	427,147					$	427,596					$	412,524					$	402,796
Net interest spread						2.94	%					3.02	%					3.21	%					2.92	%					2.93	%
Net interest margin						2.98	%					3.07	%					3.24	%					2.96	%					2.97	%