WAUKEGAN, IL--(Marketwire - February 24, 2010) - Northern States Financial Corporation (
NASDAQ:
NSFC), holding company for NorStates Bank, an FDIC-insured financial
institution, reported a net loss for 2009 of $33,823,000, or $8.52 per
share, compared with a net loss for 2008 of $9,273,000 or $2.26 per share.
The Company reported a fourth quarter 2009 net loss of $2,793,000, or $0.75
per share, compared with a fourth quarter 2008 net loss of $7,543,000, or
$1.85 per share.
Despite these losses, the capital levels of NorStates Bank at December 31,
2009, continue to exceed federal banking agencies' requirements. The
Bank's leverage ratio of Tier 1 capital to average assets was 8.3 percent.
The Company's pretax core earnings for fourth quarter 2009 were $2.1
million, improving from $1.5 million for the fourth quarter of 2008,
reflecting the increased net interest spread of 3.01 percent as compared
with 2.46 percent. Core earnings were earnings that were not related to
the provision for loan losses, impairment write-downs to securities, gains
(losses) on sales of securities or other real estate owned, and write-downs
of goodwill or of other real estate owned. The Company believes "core
earnings" illustrates the Company's ability to generate earnings absent of
asset quality issues and one-time accounting adjustments or transactions.
The Company's net loss for 2009 of $33.8 million was due in part to asset
quality issues resulting from continuing weak economic factors such as
falling real estate values and local unemployment rates in excess of 10
percent. During 2009, the Company had provisions for loan and lease losses
of $22.8 million and write-downs to other real estate owned of $1.7
million. Falling real estate prices caused the Company to recognize $1.4
million in losses on sales of other real estate owned in 2009. The Company
also had write-downs to its securities portfolio during 2009 of $3.1
million due to credit issues affecting the underlying entities issuing the
securities. Asset quality problems also contributed to legal expenses
increasing to $1.3 million for 2009, $815,000 higher than in 2008.
Other items affecting 2009's net loss were the one-time noncash write-off
of $9.5 million of goodwill. During 2009, the Company also created a
deferred tax asset valuation allowance of $11.9 million that increased 2009
income tax expense by that amount. The deferred tax allowance was a
noncash event based on uncertainties as to the Company realizing tax
benefits. Management believes that with improvement to the overall economy
and stabilization of future earnings that it may be able to realize these
tax benefits in the future.
During 2009, the Company had gains of $3.9 million on sales of its
securities as the Company managed its capital position. Salary and
employee expenses were reduced by $343,000, or 4.2 percent, in 2009 as
staff levels were carefully managed and no bonuses were paid. The Company
expects salaries expense to decline approximately 10 percent in 2010 as
executive compensation and directors' fees have been reduced significantly.
The Company had 2009 core earnings before income taxes of $4.6 million.
These core earnings are earnings that were not related to the provision for
loan losses, impairment write-downs to securities, gains (losses) on sales
of securities or other real estate owned, and write-downs of goodwill or of
other real estate owned.
Management's strategy of repositioning NorStates Bank balance sheet
resulted in the reduction of total assets by $16.7 million to $624.0
million at December 31, 2009 as compared with total assets of $640.7
million at December 31, 2008. Loans totaled $431.3 million at December 31,
2009, decreasing $49.5 million from loans of $480.8 million at December 31,
2008. Loan charge-offs, transfers of loans to other real estate owned and
lower borrower demand attributed to the weak economy and to stricter loan
underwriting also contributed to the decrease in loans during 2009.
Securities available for sale increased $30.2 million during 2009 as the
Company sought to increase yields while maintaining liquidity.
Deposits totaled $517.2 million at December 31, 2009, increasing $16.4
million, or 3.3 percent from $500.8 million at December 31, 2008 due to
growth to core NOW accounts and CDARs time deposits (a reciprocal agreement
where NorStates Bank places certain customers' larger time deposits with
other independent financial institutions allowing the Bank's customers to
maximize FDIC insurance coverage). During 2009, the Company reduced its
wholesale brokered time deposits by $42.0 million and also paid off its
$20.0 million Federal Home Loan Bank advances.
Nonperforming loans and leases were $41.6 million at December 31, 2009 as
compared with $37.1 million at year-end 2008, an increase of 12 percent, as
borrowers experienced cash flow difficulties due to the weak economy and
falling real estate values. Nonperforming loans consisted of nonaccrual
loans that no longer earn interest as well as accruing loans that were 90
days or more past due and in the process of collection. Nonperforming
loans were the major component of impaired loans, which totaled $56.3
million at December 31, 2009.
For the three months ended December 31, 2009, the Company showed a net loss
of $2,793,000, or $0.75 per share, compared with a loss of $7,543,000, or
$1.85 per share for the fourth quarter of 2008. During the fourth quarter
of 2009, the Company realized gains of $3.9 million on the sale of $70.4
million of securities and a gain of $162,000 on the sale of other real
estate owned. Offsetting the gains on the sales of securities and other
real estate owned during the fourth quarter were a provision for loan
losses of $4.5 million, a $2.7 million increase to the deferred tax asset
valuation allowance that increased income tax expense and a write-down to
other real estate owned of $1.7 million.
On February 10, 2010, Kenneth W. Balza and James A. Hollensteiner, two
long-time directors of Northern States Financial Corporation and NorStates
Bank, notified the Company's Board of Directors of their decision to serve
the remainder of their current terms and retire from the Board of Directors
of the Company and the Bank immediately following the Company's 2010 annual
meeting of stockholders. Accordingly, Messrs. Balza and Hollensteiner will
not be nominated for reelection at the annual meeting. Chairman of the
Board, Fred Abdula stated, "We thank Mr. Balza and Mr. Hollensteiner for
their many years of service and contributions while serving on the Board of
Directors and wish them well with their retirement. They will be missed."
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
Statements contained in this news release that are not historical facts may
constitute forward-looking statements (within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended), which involve significant
risks and uncertainties. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of
1995, and is including this statement for purposes of invoking these safe
harbor provisions. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by the use of the words "believe,"
"expect," "intend," "anticipate," "estimate," "project," "plan," or similar
expressions. The Company's ability to predict results or the actual effect
of future plans or strategies is inherently uncertain and actual results
may differ from those predicted. The Company undertakes no obligation to
update these forward-looking statements in the future. Factors that could
have a material adverse effect on the Company's operations and could affect
the outlook or future prospects of the Company and its subsidiaries
include, but are not limited to, the potential for further deterioration in
the credit quality of the Company's loan and lease portfolios, a continued
increase in nonperforming loans, uncertainty regarding the Company's
ability to ultimately recover on loans currently on nonaccrual status,
unanticipated changes in interest rates, general economic conditions,
increasing regulatory compliance burdens or potential
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the Company's loan or investment
portfolios, deposit flows, competition, demand for loan products and
financial services in the Company's market area, and changes in accounting
principles, policies and guidelines. These risks and uncertainties should
be considered in evaluating forward-looking statements.
NORTHERN STATES FINANCIAL CORPORATION
KEY PERFORMANCE DATA
($ 000's, except per share data)
Year ended December 31: 2009 2008
------- ------
Net Income ($33,823) ($9,273)
Basic Earnings Per Share ($8.52) ($2.26)
Return on Average Assets -5.28% -1.43%
Return on Average Equity -50.88% -13.09%
Yield on Interest Earning Assets 4.91% 5.74%
Cost of Interest Bearing Liabilities 1.99% 2.68%
Net Interest Spread 2.92% 3.06%
Net Yield on Interest Earning Assets 3.22% 3.49%
Quarter ended December 31: 2009 2008
------ ------
Net Income ($2,793) ($7,543)
Basic Earnings Per Share ($ .75) ($1.85)
Return on Average Assets -1.75% -4.49%
Return on Average Equity -22.51% -43.96%
Yield on Interest Earning Assets 4.65% 4.93%
Cost of Interest Bearing Liabilities 1.64% 2.47%
Net Interest Spread 3.01% 2.46%
Net Yield on Interest Earning Assets 3.24% 2.82%
NORTHERN STATES FINANCIAL CORPORATION
KEY PERFORMANCE DATA
($ 000's, except per share data)
Dec. 31, Dec. 31,
2009 2008
--------- ---------
Total Assets $624,025 $640,719
Total Loans and Leases 431,286 480,812
Total Deposits 517,236 500,821
Total Stockholders' Equity 42,036 61,614
Nonperforming Loans and Leases 41,619 37,066
Impaired Loans 56,254 43,756
Nonperforming Loans and Leases to
Total Loans and Leases 9.65% 7.71%
Other Real Estate Owned 19,198 10,575
Book Value per Share $6.10 $15.13
Number of Common Shares Outstanding 4,072,255 4,072,255
NORTHERN STATES FINANCIAL CORPORATION
DIVIDEND HISTORY
June 1 December 1 Total
------ ---------- -----
2004 $ .55 $ .55 $1.10
2005 .55 .07 .62
2006 .30 .35 .65
2007 .35 .37 .72
2008 .40 .00 .40
2009 .00 .00 .00
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ 000s) (Unaudited)
December 31, December 31,
2009 2008
----------- -----------
Assets
Cash and due from banks $ 10,646 $ 14,108
Interest bearing deposits in financial
institutions - maturities less than 90 days 2,760 242
Federal funds sold 20,788 7,518
----------- -----------
Total cash and cash equivalents 34,194 21,868
Securities available for sale 133,421 103,194
Loans and leases 431,286 480,812
Less: Allowance for loan and lease losses (18,027) (10,402)
----------- -----------
Loans and leases, net 413,259 470,410
Federal Home Loan Bank stock 1,801 1,757
Office buildings and equipment, net 9,719 9,916
Other real estate owned 19,198 10,575
Goodwill 0 9,522
Core deposit intangible assets 462 926
Accrued interest receivable and other assets 11,971 12,551
----------- -----------
Total assets $ 624,025 $ 640,719
=========== ===========
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand - noninterest bearing $ 58,001 $ 57,313
Interest bearing 459,235 443,508
----------- -----------
Total deposits 517,236 500,821
Securities sold under repurchase agreements 49,364 42,574
Federal Home Loan Bank advance 0 20,000
Subordinated debentures 10,000 10,000
Advances from borrowers for taxes and insurance 898 1,011
Accrued interest payable and other liabilities 4,491 4,699
----------- -----------
Total liabilities 581,989 579,105
Stockholders' Equity
Common stock (Par value $.40 per share, authorized
6,500,000 shares, issued 4,472,255 at December 31,
2009 and 2008) 1,789 1,789
Preferred stock (Par value $.40 per share,
authorized 1,000,000 shares, issued 17,211 shares
with liquidation amounts of $1,000.00 per share at
December 31, 2009) 16,641 0
Warrants (584,084 issued and outstanding at
December 31, 2009) 681 0
Additional paid-in capital 11,584 11,584
Retained earnings 22,367 56,082
Treasury stock, at cost (400,000 shares at
December 31, 2009 and 2008) (9,280) (9,280)
Accumulated other comprehensive income (1,746) 1,439
----------- -----------
Total stockholders' equity 42,036 61,614
----------- -----------
Total liabilities and stockholders' equity $ 624,025 $ 640,719
=========== ===========
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Twelve and three months ended December 31, 2009 and 2008
($ 000s, except per share data) (Unaudited)
Twelve months ended Three months ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2009 2008 2009 2008
--------- --------- --------- ---------
Interest income
Loans (including fee income) $ 24,409 $ 27,820 $ 5,789 $ 6,235
Securities
Taxable 4,541 6,490 1,077 1,353
Exempt from federal income
tax 357 452 84 105
Federal funds sold and other 31 112 11 21
--------- --------- --------- ---------
Total interest income 29,338 34,874 6,961 7,714
--------- --------- --------- ---------
Interest expense
Time deposits 7,739 10,081 1,624 2,540
Other deposits 1,348 1,687 298 399
Repurchase agreements and
federal funds purchased 593 1,110 104 188
Federal Home Loan Bank advances 52 347 0 58
Subordinated debentures 455 570 106 137
--------- --------- --------- ---------
Total interest expense 10,187 13,795 2,132 3,322
--------- --------- --------- ---------
Net interest income 19,151 21,079 4,829 4,392
Provision for loan and lease
losses 22,778 13,663 4,534 5,534
--------- --------- --------- ---------
Net interest income after
provision for loan and lease
losses (3,627) 7,416 295 (1,142)
--------- --------- --------- ---------
Noninterest income
Service fees on deposits 2,395 2,571 642 618
Trust income 760 798 170 179
Net gains (loss) on sales of
other real estate owned (1,432) 0 162 0
Net gains on sales of
securities 3,908 40 3,908 0
Impairment loss on securities (3,052) (10,541) 0 (8,361)
Other operating income 1,205 1,087 324 264
--------- --------- --------- ---------
Total noninterest income 3,784 (6,045) 5,206 (7,300)
--------- --------- --------- ---------
Noninterest expense
Salaries and employee benefits 7,739 8,082 1,453 1,650
Occupancy and equipment, net 2,330 2,433 458 632
Data processing 1,847 1,705 502 427
FDIC insurance 1,376 222 296 124
Legal 1,278 463 336 159
Audit and professional 883 1,263 188 266
Write-down of goodwill 9,522 0 0 0
Amortization of intangibles 464 464 116 116
Write-down of other real
estate owned 1,722 44 1,722 44
Other operating expenses 2,992 2,253 526 533
--------- --------- --------- ---------
Total noninterest expense 30,153 16,929 5,597 3,951
--------- --------- --------- ---------
Income before income taxes (29,996) (15,558) (96) (12,393)
Provision for income taxes 3,827 (6,285) 2,697 (4,850)
--------- --------- --------- ---------
Net (loss) income $ (33,823) $ (9,273) $ (2,793) $ (7,543)
========= ========= ========= =========
Earnings per share $ (8.52) $ (2.26) $ (0.75) $ (1.85)
Contact Information: For Additional Information, Contact:
Scott Yelvington
Executive Vice President
(847) 244-6000 Ext. 201
Websites: www.NorStatesBank.com
www.nsfc.net