WAUKEGAN, IL--(Marketwire - November 10, 2009) - Northern States Financial Corporation (
NASDAQ:
NSFC), holding company for NorStates Bank, an FDIC-insured financial
institution, today reported that several factors contributed to a net loss
for the third quarter of 2009 of $17,742,000, or $4.42 per share. This
compares with a loss for the third quarter of 2008 of $2,781,000, or $.68
per share. The major factors affecting net income were increased
provisions to the allowance for loan and lease losses, write-downs to
securities, FDIC insurance premiums and the creation of a deferred tax
asset valuation allowance.
During the quarter ended September 30, 2009, the Company recorded a
provision to its allowance for loan and lease losses totaling $12.8
million, of which $8.3 million was specifically allocated for a $10.4
million loan relationship consisting of thirteen commercial loans and
leases. This loan relationship was placed on nonaccrual status during the
quarter as the loans and leases payments became past due amid allegations
of possible fraud. The Company also recognized a write-down for impairment
of $2.4 million to its investment in collateralized debt obligations during
the quarter after analyzing credit issues continuing to affect the
underlying financial institutions that issued the debt. To date, the
Company's investment in collateralized debt obligation has been written
down to $779,000 from a book value of $10.9 million.
At September 30, 2009 the Company had a deferred tax asset of $15.1
million. Per accounting rules, the Company was required to create a
deferred tax asset valuation allowance at September 30, 2009 totaling $9.2
million. The effect of this valuation allowance was that the Company's tax
expense increased $9.2 million during the third quarter of 2009 to $3.7
million. This was a noncash event and the Company expects that it will be
able use the entire valuation allowance in the future to lower tax expense.
The Company had 2009 third quarter core earnings before income taxes of
$1.1 million. These core earnings are earnings that were not related to
the provision for loan losses, impairment write-downs to securities or
sales 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.
Year to Date 2009
The Company recognized provisions for loan losses of $18.2 million and a
one-time noncash write-off of goodwill of $9.5 million during the first
nine months of 2009, which contributed to a loss of $31.0 million, or $7.77
per share, compared with a loss of $1.7 million, or $.42 per share, for the
same nine months of 2008. The noncash creation of the $9.2 million
deferred tax asset valuation allowance caused year to date 2009 taxes to
increase by this amount. Impairment write-downs to securities totaled $3.1
million during the nine months ended September 30, 2009. Contributing to
the loss during the first nine months of 2009 were losses of $1.6 million
on the sale of other real estate owned. FDIC insurance expense totaled
$1.1 million during the first nine months of 2009, an increase of $1.0
million compared with the same time period of 2008. Core earnings before
the provision for loan losses, impairment losses to securities, write-down
of goodwill, sales of other real estate owned and income taxes for the
first three quarters of 2009 were $2.5 million. The Company believes "core
earnings" shows the Company's generation of earnings absent asset quality
issues and one-time accounting adjustments.
Total assets were $628.1 million at September 30, 2009, decreasing $12.6
million from total assets of $640.7 million at December 31, 2008 with the
decrease mainly attributable to the $9.2 million deferred tax asset
valuation allowance taken in the third quarter of 2009. Loans totaled
$449.7 million at September 30, 2009, decreasing $31.1 million from loans
of $480.8 million at December 31, 2008 due in part to $23.0 million in
loans that were revalued down by $6.2 million to $16.8 million and
transferred to other real estate owned. The balance of the decrease is due
to lower borrower demands attributed to the poor economy and to stricter
loan underwriting. The Company had increases to securities available for
sale of $20.8 million as the Company sought to increase yields while
maintaining liquidity. Other real estate owned also increased from
year-end 2008 by $10.9 million primarily due to the transfer of $16.8
million from loans.
Deposits totaled $520.1 million at September 30, 2009, increasing $19.3
million 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). Since year-end 2008, the Company has reduced its
wholesale brokered time deposits by $36.6 million and also paid off its
Federal Home Loan Bank advances that had totaled $20.0 million.
Nonperforming loans and leases were $46.6 million at September 30, 2009 as
compared with $37.1 million at year-end 2008, an increase of 26 percent, as
borrowers experienced cash flow difficulties due to the poor economy and
falling real estate values. 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 $49.9 million at September 30, 2009, an increase of
$6.1 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
$14.3 million of its allowance for loan and lease losses allocated to its
impaired loans at September 30, 2009. The Company's allowance for loan and
lease losses to total loans and leases ratio was 5.19 percent at September
30, 2009.
On October 20, 2009, the board of directors of the Northern States
Financial Corporation determined that there would be no cash dividend on
December 1, 2009 due to the reduced earnings of the Company in 2009.
The Company has notified Department of the Treasury of its intent to
suspend its quarterly dividend payments on its Fixed Rate Cumulative
Perpetual Preferred Stock, Series A issued under the U.S. Department of the
Treasury's TARP Capital Purchase Program. During the deferral period, the
Company may not pay any dividends to its common stockholders until all
unpaid dividends on the preferred stock are fully paid.
The Company has also notified the trustee that holds the Company's junior
subordinated debentures relating to its outstanding trust preferred
securities that the Company will defer its regular quarterly interest
payments on the junior subordinated debentures. Under the terms of the
debentures, the Company has the right to defer the payment of interest on
the subordinated debentures at any time, for a period up to 20 consecutive
quarters without default. During the deferral period, the Company may not
pay any dividends on its common or preferred stock.
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)
Sept. 30, Dec. 31,
2009 2008
--------- ---------
Total Assets $628,145 $640,719
Total Loans and Leases 449,669 480,812
Total Deposits 520,153 500,821
Total Stockholders' Equity 48,766 61,614
Nonperforming Loans and Leases 46,590 37,066
Nonperforming Loans and Leases to
Total Loans and Leases 10.36% 7.71%
Impaired Loans and Leases $49,985 $43,756
Book Value per Share $7.75 $15.13
Number of Shares Outstanding 4,072,255 4,072,255
NORTHERN STATES FINANCIAL CORPORATION
KEY PERFORMANCE DATA
($ 000's, except per share data)
Quarter ended September 30: 2009 2008
--------- ---------
Loss ($ 17,742) ($2,781)
Basic Earnings (Loss) Per Share ($4.42) ($ .68)
Return on Average Assets (11.19%) (1.72%)
Return on Average Equity (108.77%) (16.18%)
Efficiency Ratio 133.57% 89.09%
Yield on Interest
Earning Assets 4.91% 5.89%
Cost of Interest
Bearing Liabilities 1.91% 2.50%
Net Interest Spread 3.00% 3.39%
Net Yield on Interest
Earning Assets 3.32% 3.80%
Nine months ended September 30: 2009 2008
--------- ---------
Loss ($31,030) ($1,730)
Basic Earnings (Loss) Per Share ($7.77) ($.42)
Return on Average Assets (6.45%) (.36%)
Return on Average Equity (57.38%) (3.22%)
Efficiency Ratio 190.36% 72.33%
Yield on Interest
Earning Assets 5.00% 6.02%
Cost of Interest
Bearing Liabilities 2.11% 2.75%
Net Interest Spread 2.89% 3.27%
Net Yield on Interest
Earning Assets 3.22% 3.72%
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ 000s) (Unaudited)
September 30, December 31,
2009 2008
------------- -------------
Assets
Cash and due from banks $ 13,538 $ 14,108
Interest bearing deposits in financial
institutions - maturities less than
90 days 949 242
Federal funds sold 21,302 7,518
------------- -------------
Total cash and cash equivalents 35,789 21,868
Securities available for sale 123,962 103,194
Loans and leases 449,669 480,812
Less: Allowance for loan and lease losses (23,345) (10,402)
------------- -------------
Loans and leases, net 426,324 470,410
Federal Home Loan Bank stock 1,801 1,757
Office buildings and equipment, net 9,824 9,916
Other real estate owned 21,461 10,575
Goodwill 0 9,522
Core deposit intangible assets 578 926
Accrued interest receivable and other assets 8,406 12,551
------------- -------------
Total assets $ 628,145 $ 640,719
============= =============
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand - noninterest bearing $ 59,047 $ 57,313
Interest bearing 461,106 443,508
------------- -------------
Total deposits 520,153 500,821
Securities sold under repurchase agreements 42,416 42,574
Federal Home Loan Bank advance 0 20,000
Subordinated debentures 10,000 10,000
Advances from borrowers for taxes and
insurance 444 1,011
Accrued interest payable and other
liabilities 6,366 4,699
------------- -------------
Total liabilities 579,379 579,105
Stockholders' Equity
Common stock 1,789 1,789
Preferred stock 16,611 0
Warrants 681 0
Additional paid-in capital 11,584 11,584
Retained earnings 25,405 56,082
Treasury stock, at cost (9,280) (9,280)
Accumulated other comprehensive income 1,976 1,439
------------- -------------
Total stockholders' equity 48,766 61,614
------------- -------------
Total liabilities and stockholders'
equity $ 628,145 $ 640,719
============= =============
NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three and nine months ended September 30, 2009 and 2008
($ 000s, except per share data) (Unaudited)
Three months ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2009 2008 2009 2008
--------- --------- --------- ---------
Interest income
Loans (including fee income) $ 6,187 $ 7,287 $ 18,620 $ 21,585
Securities
Taxable 1,093 1,544 3,464 5,137
Exempt from federal
income tax 87 121 273 347
Federal funds sold and other 8 8 20 91
--------- --------- --------- ---------
Total interest income 7,375 8,960 22,377 27,160
--------- --------- --------- ---------
Interest expense
Time deposits 1,831 2,263 6,115 7,541
Other deposits 306 396 1,050 1,288
Repurchase agreements and
federal funds purchased 162 279 489 922
Federal Home Loan Bank
advances 4 137 52 289
Subordinated debentures 109 137 349 433
--------- --------- --------- ---------
Total interest expense 2,412 3,212 8,055 10,473
--------- --------- --------- ---------
Net interest income 4,963 5,748 14,322 16,687
Provision for loan and lease
losses 12,825 5,146 18,244 8,129
--------- --------- --------- ---------
Net interest income after
provision for loan and lease
losses (7,862) 602 (3,922) 8,558
--------- --------- --------- ---------
Noninterest income
Service fees on deposits 638 672 1,753 1,953
Trust income 182 188 590 619
Net gains (loss) on sales of
other real estate owned 42 0 (1,594) 0
Impairment loss on
securities (2,424) (2,180) (3,052) (2,180)
Other operating income 320 319 881 863
--------- --------- --------- ---------
Total noninterest income (1,242) (1,001) (1,422) 1,255
--------- --------- --------- ---------
Noninterest expense
Salaries and employee
benefits 2,109 2,127 6,286 6,432
Occupancy and equipment, net 556 580 1,872 1,801
Data processing 472 415 1,345 1,278
FDIC insurance 324 24 1,080 98
Legal 308 144 942 304
Audit and professional 244 260 695 997
Write-down of goodwill 0 0 9,522 0
Amortization of intangibles 116 116 348 348
Other real estate owned
expense 178 27 442 75
Other operating expenses 663 536 2,024 1,645
--------- --------- --------- ---------
Total noninterest expense 4,970 4,229 24,556 12,978
--------- --------- --------- ---------
Income (loss) before income
taxes (14,074) (4,628) (29,900) (3,165)
Provision for income taxes 3,668 (1,847) 1,130 (1,435)
--------- --------- --------- ---------
Net (loss) income $ (17,742) $ (2,781) $ (31,030) $ (1,730)
========= ========= ========= =========
Earnings per share $ (4.42) $ (0.68) $ (7.77) $ (0.42)
Contact Information: For Additional Information, Contact:
Scott Yelvington
Executive Vice President
(847) 244-6000 Ext. 201
Websites: www.nsfc.com
www.nsfc.net