WAUKEGAN, IL--(Marketwire - August 3, 2009) - Northern States Financial Corporation (NASDAQ: NSFC), holding company for NorStates Bank, an FDIC-insured financial
institution, today reports that the continuing faltering economy and the
weakening of financial markets has resulted in a one-time charge of $9.5
million to goodwill. The goodwill write-off occurred as goodwill was
deemed impaired as general market conditions negatively affected bank stock
prices and the Company's earnings. The goodwill write-off was a one-time
accounting, noncash transaction with no affect on regulatory capital or
liquidity and was not tax deductible.
The goodwill had been booked by the Company mainly primarily as a result of
its 2004 acquisition of First State Bank of Round Lake. The goodwill
write-off totally eliminates goodwill from the Company's balance sheet and
did not affect either the Company's liquidity or its regulatory capital.
The capital levels of the Company's subsidiary, NorStates Bank, at June 30,
2009, continued to exceed federal banking agencies' requirements to be
considered "well capitalized." The Bank's Tier 1 capital to total assets
ratio and total capital to assets ratio, on a risk adjusted basis, were
10.92 percent and 14.61 percent, respectively, at June 30, 2009, as
compared with the respective "well capitalized" regulatory minimum levels
of 5.00 percent and 10.00 percent.
The $9.5 million write-off of goodwill combined with a provision for loan
losses of $3.7 million an impairment charge of $628,000 taken on
collateralized debt obligation securities and an additional $304,000
special assessment for FDIC insurance resulted in the Company reporting a
loss of $11.8 million, or $2.97 per share, for the second quarter ended
June 30, 2009 compared with a loss of $150,000, or $.04 per share, for the
like quarter of 2008. Without the combined $9.5 million goodwill
write-off, the $628,000 impairment charge on securities and the $304,000
special FDIC insurance assessment, the Company would have had a loss for
the second quarter of 2009 of $1.7 million or $.49 per share.
For the six months ended June 30, 2009, the Company had a loss of $13.3
million, or $3.35 per share, compared with earnings of $1.1 million, or
$.25 per share, for the first half of 2008. In addition to the one-time
write-off of the goodwill of $9.5 million, the provision for loan losses of
$5.4 million contributed to the loss during the first half of 2009 as
compared with a provision of $3.0 million for the same period of 2008. The
increased provision during the first half of 2009 was attributable to
continued declines in real estate values and the poor economic climate that
continues to affect the Bank's borrowers.
Other factors contributing to the Company's loss for the first half of 2009
were net losses on the sale of other real estate owned that were acquired
through foreclosure, decreases to net interest income, increased FDIC
premiums and impairment charges on securities. The Company had losses on
the sale of other real estate owned during the first half of 2009 totaling
$1.6 million. This was primarily due to the sale of a luxury home for $4.2
million during the six months of 2009 that had a carrying value of $5.9
million at year-end 2008, resulting in a $1.7 million loss on the sale.
Net interest income decreased $1.5 million during the first half of 2009
to $9.4 million as compared with $10.9 million for the same period of 2008.
The decrease to net interest income was attributable to increases to loans
classified on nonaccrual status where loan interest was not recognized as
income. Nonaccrual loans increased to $48.0 million at June 30, 2009, an
increase of $11.4 million from December 31, 2008 nonaccrual loan levels of
$36.6 million. The Company's FDIC premiums for the first six months of
2009 totaled $756,000 and included a special assessment of $304,000 during
the second quarter of 2009. This compares with FDIC premiums of $74,000
during the first six months of 2008. An impairment charge of $628,000 on
collateral debt obligation securities resulted from defaults and deferrals
of payments from the financial institutions backing those securities.
Total assets were $633.3 million at June 30, 2009, decreasing by $7.4
million from total assets of $640.7 million at December 31, 2008. The
majority of the decrease was attributable to the $9.5 million reduction in
goodwill. Federal funds sold increased $23.3 million from year-end as the
Company increased its liquidity. Loans totaled $474.0 million at June 30,
2009, decreasing $6.8 million from loans of $480.8 million at December 31,
2008 due to lower borrower demands attributed to the poor economy. The
Company had decreases to securities available for sale of $8.2 million,
primarily from maturities. Other real estate owned also decreased $4.6
million primarily due to the sale of a luxury home that had a carrying
value of $5.9 million at December 31, 2008.
Deposits totaled $500.7 million at June 30, 2009 and were relatively
unchanged from $500.8 million at December 31, 2008, despite a decrease of
$14.9 million in wholesale brokered time deposits. The Company also
reduced its Federal Home Loan Bank advances to $10.0 million at June 30,
2009 from $20.0 million at December 31, 2008.
Nonperforming loans and leases were $50.3 million at June 30, 2009 as
compared with $37.1 million at year-end 2008, an increase of 35 percent as
borrowers experienced cash flow difficulties due to the poor economy and
fell behind on their payments. Nonperforming loans consist of nonaccrual
loans that no longer earn interest as well as accruing loans that are 90
days or more past due and in the process of collection.
Impaired loans totaled $61.6 million at June 30, 2009, an increase of $17.8
million from $43.8 million at December 31, 2008. The Company considers a
loan to be impaired if it believes that all principal and interest will not
be collected under the contractual terms of the note and includes
nonaccrual loans as well as restructured loans. The Company has $8.7
million of its allowance for loan and lease losses allocated to its
impaired loans at June 30, 2009 as there have been reductions to the values
of the real estate used to secure the impaired loans.
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 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)
Quarter ended June 30: 2009 2008
-------- --------
Loss ($11,831) ($150)
Basic Earnings (Loss) Per Share ($2.97) ($.04)
Return on Average Assets (7.33%) (.09%)
Return on Average Equity (56.83%) (.83%)
Efficiency Ratio 288.85% 64.73%
Yield on Interest Earning Assets 4.85% 5.96%
Cost of Interest Bearing Liabilities 2.10% 2.65%
Net Interest Spread 2.75% 3.31%
Net Yield on Interest Earning Assets 3.09% 3.75%
Six months ended June 30: 2009 2008
-------- --------
Net Income (Loss) ($13,288) $1,051
Basic Earnings Per Share ($3.35) $.25
Return on Average Assets (4.12%) .33%
Return on Average Equity (35.19%) 2.88%
Efficiency Ratio 213.38% 66.31%
Yield on Interest Earning Assets 5.04% 6.09%
Cost of Interest Bearing Liabilities 2.21% 2.88%
Net Interest Spread 2.83% 3.21%
Net Yield on Interest Earning Assets 3.16% 3.68%
NORTHERN STATES FINANCIAL CORPORATION
KEY PERFORMANCE DATA
($ 000's, except per share data)
June 30, Dec. 31,
2009 2008
--------- ---------
Total Assets $633,265 $640,719
Total Loans and Leases 474,044 480,812
Total Deposits 500,709 500,821
Total Stockholders' Equity 64,667 61,614
Nonperforming Loans and Leases 50,032 37,066
Nonperforming Loans and Leases to
Total Loans and Leases 10.55% 7.71%
Impaired Loans and Leases $61,648 $43,756
Book Value per Share $11.65 $15.13
Number of Shares Outstanding 4,072,255 4,072,255
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ 000s) (Unaudited)
June 30, December 31,
2009 2008
------------ ------------
Assets
Cash and due from banks $ 13,148 $ 14,108
Interest bearing deposits in financial
institutions - maturities less than 90 days 1,176 242
Federal funds sold 30,901 7,518
------------ ------------
Total cash and cash equivalents 45,225 21,868
Securities available for sale 94,948 103,194
Loans and leases 474,044 480,812
Less: Allowance for loan and lease losses (14,861) (10,402)
------------ ------------
Loans and leases, net 459,183 470,410
Federal Home Loan Bank stock 1,801 1,757
Office buildings and equipment, net 9,753 9,916
Other real estate owned 6,015 10,575
Goodwill 0 9,522
Core deposit intangible assets 694 926
Accrued interest receivable and other assets 15,646 12,551
------------ ------------
Total assets $ 633,265 $ 640,719
============ ============
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand - noninterest bearing $ 54,359 $ 57,313
Interest bearing 446,350 443,508
------------ ------------
Total deposits 500,709 500,821
Securities sold under repurchase agreements 41,397 42,574
Federal Home Loan Bank advance 10,000 20,000
Subordinated debentures 10,000 10,000
Advances from borrowers for taxes and insurance 847 1,011
Accrued interest payable and other liabilities 5,645 4,699
------------ ------------
Total liabilities 568,598 579,105
Stockholders' Equity
Common stock 1,789 1,789
Preferred stock 16,581 0
Warrants 681 0
Additional paid-in capital 11,584 11,584
Retained earnings 43,392 56,082
Treasury stock, at cost (9,280) (9,280)
Accumulated other comprehensive income (80) 1,439
------------ ------------
Total stockholders' equity 64,667 61,614
------------ ------------
Total liabilities and stockholders'
equity $ 633,265 $ 640,719
============ ============
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended June 30, 2009 and 2008
($ 000s, except per share data) (Unaudited)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
--------- --------- --------- ----------
Interest income
Loans (including fee income) $ 5,999 $ 7,052 $ 12,433 $ 14,298
Securities
Taxable 1,117 1,705 2,371 3,593
Exempt from federal
income tax 88 111 186 226
Federal funds sold and other 9 13 12 83
--------- --------- --------- ----------
Total interest income 7,213 8,881 15,002 18,200
--------- --------- --------- ----------
Interest expense
Time deposits 2,029 2,452 4,284 5,278
Other deposits 324 413 744 892
Repurchase agreements and
federal funds purchased 156 233 327 643
Federal Home Loan Bank
advances 21 90 48 152
Subordinated debentures 117 137 240 296
--------- --------- --------- ----------
Total interest expense 2,647 3,325 5,643 7,261
--------- --------- --------- ----------
Net interest income 4,566 5,556 9,359 10,939
Provision for loan and lease
losses 3,715 2,720 5,419 2,983
--------- --------- --------- ----------
Net interest income after
provision for loan and lease
losses 851 2,836 3,940 7,956
--------- --------- --------- ----------
Noninterest income
Service fees on deposits 577 647 1,115 1,281
Trust income 236 218 408 431
Net gains (loss) on sales of
other real estate owned 37 0 (1,636) 0
Impairment loss on
securities (628) 0 (628) 0
Other operating income 323 251 561 544
--------- --------- --------- ----------
Total noninterest income 545 1,116 (180) 2,256
--------- --------- --------- ----------
Noninterest expense
Salaries and employee
benefits 2,076 2,089 4,177 4,305
Occupancy and equipment, net 584 587 1,316 1,221
Data processing 482 424 873 863
FDIC insurance 604 32 756 74
Legal 395 76 634 160
Audit and professional 180 385 451 737
Write-down of goodwill 9,522 0 9,522 0
Amortization of intangible
assets 116 116 232 232
Other operating expenses 804 610 1,625 1,157
--------- --------- --------- ----------
Total noninterest expense 14,763 4,319 19,586 8,749
--------- --------- --------- ----------
Income (loss) before income
taxes (13,367) (367) (15,826) 1,463
Provision for income taxes (1,536) (217) (2,538) 412
--------- --------- --------- ----------
Net (loss) income $ (11,831) $ (150) $ (13,288) $ 1,051
========= ========= ========= ==========
Contact Information: For Additional Information, Contact:
Scott Yelvington
Executive Vice President
(847) 244-6000 Ext. 201
Websites: www.nsfc.com
www.nsfc.net