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| 8-K - FORM 8-K - NORTHERN STATES FINANCIAL CORP /DE/ | f8k_022410.htm |
EXHIBIT
99.1
Northern
States
Financial
Corporation
1601
North Lewis Avenue
P.O.Box
39
Waukegan,
Illinois 60079-0039
847-244-6000
February
24, 2010
NORTHERN
STATES FINANCIAL REPORTS
2009
FINANCIAL RESULTS
WAUKEGAN,
IL, 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.
NSFC
Press Release
February
24, 2010
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's 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.”
2
NSFC
Press Release
February
24, 2010
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.
3
NSFC
Press Release
February
24, 2010
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 | % | ||||
4
NSFC
Press Release
February
24, 2010
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 | |||||||||
For
Additional Information, Contact:
Scott Yelvington, Executive Vice
President (847) 244-6000 Ext. 201
Websites:
www.NorStatesBank.com
www.nsfc.net
5
NSFC
Press Release
February
24, 2010
NORTHERN STATES FINANCIAL
CORPORATION
CONDENSED CONSOLIDATED
BALANCE SHEETS
($ 000s)
(Unaudited)
|
December
31,
2009
|
December
31,
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
|
1,789 | 1,789 | ||||||
|
shares,
issued 4,472,255 at December 31, 2009 and 2008)
|
||||||||
|
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 | ||||
6
NSFC
Press Release
February
24, 2010
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 | ) | ||||
7