Business & Finance
Business and Finance
Business and Finance 
Tue, August 4, 2009
Mon, August 3, 2009
Northern States Financial Corporation: Northern States Financial Corporation Reports Second Quarter Results
WAUKEGAN, IL--(Marketwire - August 3, 2009) - Northern States Financial Corporation (
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 ========= ========= ========= ==========