OREANDA-NEWS. May 11, 2016. Northern States Financial Corporation (OTCQB:NSFC) (the “Company”), holding company for NorStates Bank (the “Bank”), an FDIC insured financial institution, today reported first quarter 2016 pretax income of \\$534 thousand as compared with pretax income of \\$180 thousand for the same quarter of 2015. First quarter 2016 net income after tax was \\$321 thousand while first quarter 2015 net income after tax remained \\$180 thousand due to the Company’s tax position during that quarter. The Company’s per share book value at March 31, 2016 was \\$0.64.

Total assets of the Company were \\$488 million at March 31, 2016, increasing \\$2 million from year-end 2015. Loan volume increased \\$17 million, or 7.25%, during the first quarter of 2016 while deposits increased \\$3 million. The Bank’s first quarter 2016 net interest margin was 3.03% with a cost of funds of 0.12%. The Bank’s leverage capital ratio was 10.98%.

With regard to asset quality, the Company’s non-performing assets (“NPAs”), consisting of nonaccrual loans, ninety days or more past due loans still accruing, loans considered troubled debt restructurings and other real estate owned (“OREO”), were reduced by \\$1.4 million from December 31, 2015 to March 31, 2016. OREO increased slightly during the quarter primarily due to a multifamily property that was foreclosed upon. This property currently has a sales contract that is expected to close during the second quarter of 2016. All other categories of NPAs at March 31, 2016 showed reductions totaling \\$1.9 million from year-end 2015. At March 31, 2016, the allowance for loan and lease losses to total loans and leases ratio was 2.20%.

“We are pleased with our growth in assets and profitability as loan generation remains strong,” stated Scott Yelvington, President and Chief Executive Officer. “Credit quality remains a focus as we look to continue the reduction in NPA’s in coming quarters.”

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

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include, but are not necessarily limited to, fluctuations in interest rates, inflation, government regulations, general economic conditions, competition within the business areas in which the Company conducts its operations including the real estate market in Illinois, and other factors beyond the Company’s control. Such risks and uncertainties could cause actual results for subsequent interim periods or for the entire year to differ materially from those expressed or implied by any forward-looking statement. Readers should not place undue reliance on the forward-looking statements, which reflect management’s beliefs, expectations and assumptions only as of the date hereof. The Company undertakes no obligation to update statements to reflect new information or subsequent events or circumstances.

Websites: www.nsfc.com www.nsfc.net

            
NORTHERN STATES FINANCIAL CORPORATION  
(\\$000s, except per share data) (Unaudited)  
Key Performance Data  
            
  March 31, December 31, September 30, June 30, March 31, 
For the quarter ended 2016   2015   2015   2015   2015  
            
Net income available to common stockholders\\$  321  \\$  22,043  \\$  514  \\$  392  \\$  180  
Basic income per average outstanding share 0.00   0.25   0.01   0.00   0.00  
Diluted income per average outstanding share 0.00   0.25   0.01   0.00   0.00  
Return on average assets 0.26%  18.89%  0.45%  0.36%  0.17% 
Return on average equity 2.28%  253.24%  6.13%  4.73%  2.18% 
Yield on interest earning assets 3.11%  3.30%  3.13%  3.13%  3.21% 
Cost of interest-bearing liabilities 0.19%  0.19%  0.20%  0.19%  0.19% 
Net interest spread 2.92%  3.11%  2.93%  2.94%  3.02% 
Net interest margin 2.96%  3.15%  2.97%  2.98%  3.07% 
Net charged-off loans\\$  418  \\$  231  \\$  803  \\$  (1,681) \\$  488  
Net charged-off loans to average loans (annualized) 0.70%  0.40%  1.38%    (2.99)%   0.89% 
            
            
  March 31, December 31, September 30, June 30, March 31, 
   2016   2015   2015   2015   2015  
            
Total stockholders' equity\\$  56,431  \\$  55,673  \\$  34,135  \\$  33,214  \\$  33,112  
Book value per common share\\$  0.64  \\$  0.64  \\$  0.39  \\$  0.38  \\$  0.38  
Common shares outstanding 87,604,088   87,604,088   87,604,088   87,604,088   87,604,088  
            
            
  March 31, December 31, September 30, June 30, March 31, 
     2016     2015     2015     2015     2015  
Nonperforming assets           
Loans on nonaccrual status\\$  4,504  \\$  5,469  \\$  8,986  \\$  10,820  \\$  9,715  
Loans 90 days or more past due, still accruing 700   787   266   198   298  
Loan troubled debt restructurings 5,477   6,312   2,380   2,400   3,742  
Total nonperforming loans 10,681   12,568   11,632   13,418   13,755  
Other real estate owned 13,100   12,579   17,173   17,416   19,347  
Total nonperforming assets\\$  23,781  \\$  25,147  \\$  28,805  \\$  30,834  \\$  33,102  
            
Nonperforming assets excluding trouble debt restructurings\\$  18,304  \\$  18,835  \\$  26,425  \\$  28,434  \\$  29,360  
Nonperforming loans to total assets 2.19%  2.59%  2.52%  3.02%  3.18% 
Nonperforming assets to total assets 4.88%  5.18%  6.23%  6.94%  7.66% 
Nonperforming assets excluding trouble debt restructurings to total assets 3.75%  3.88%  5.72%  6.40%  6.80% 
            
            
NORTHERN STATES FINANCIAL CORPORATION  
(\\$000s, except per share data) (Unaudited)  
Condensed Consolidated Balance Sheet March 31, December 31, September 30, June 30, March 31, 
   2016   2015   2015   2015   2015  
Assets           
Cash and due from banks\\$  5,539  \\$  5,834  \\$  8,092  \\$  4,817  \\$  5,258  
Interest bearing deposits in financial institutions - maturities less than 90 days 53,004   55,380   63,044   60,455   63,768  
Total cash and cash equivalents 58,543   61,214   71,136   65,272   69,026  
Interest bearing deposits in financial institutions - maturities of 90 days or greater 31,377   33,786   16,057   6,499   7,739  
Securities available for sale 78,416   97,788   106,593   112,353   101,659  
Securities held to maturity 13,496   10,564   10,771   10,838   12,069  
Loans and leases, net of deferred fees 254,545   237,327   232,847   229,932   217,270  
Less: Allowance for loan and lease losses (5,593)  (6,011)  (7,032)  (7,834)  (6,153) 
Loans and leases, net 248,952   231,316   225,815   222,098   211,117  
Federal Home Loan Bank stock 931   931   931   931   931  
Office buildings and equipment, net 8,415   7,776   6,373   6,845   7,851  
Other real estate owned 13,100   12,579   17,173   17,416   19,347  
Accrued interest receivable 1,243   1,275   1,211   1,217   1,144  
Bank owned life insurance 10,358   5,054   5,014   0   0  
Deferred tax asset, net 22,112   21,869   (80)  156   5  
Other assets 746   1,195   1,022   879   981  
Total assets\\$  487,689  \\$  485,347  \\$  462,016  \\$  444,504  \\$  431,869  
Liabilities and Stockholders' Equity           
Liabilities           
Deposits           
Noninterest-bearing deposits\\$  96,829  \\$  93,913  \\$  84,823  \\$  81,795  \\$  77,213  
Interest-bearing  deposits 301,926   301,509   309,432   299,564   287,406  
Total deposits 398,755   395,422   394,255   381,359   364,619  
Securities sold under repurchase agreements 16,052   18,994   19,618   14,836   18,231  
Subordinated debentures 10,310   10,310   10,310   10,310   10,310  
Advances from borrowers for taxes and insurance 3,089   2,195   776   1,904   2,639  
Accrued interest payable and other liabilities 3,052   2,753   2,922   2,881   2,958  
Total liabilities 431,258   429,674   427,881   411,290   398,757  
Stockholders' Equity            
Common stock 878   878   878   878   878  
Additional paid-in capital 32,088   32,088   32,088   32,088   32,088  
Retained earnings 28,021   27,700   5,657   5,143   4,751  
Treasury stock, at cost (4,674)  (4,674)  (4,674)  (4,674)  (4,674) 
Accumulated other comprehensive income (loss), net 118   (319)  186   (221)  69  
Total stockholders' equity 56,431   55,673   34,135   33,214   33,112  
Total liabilities and stockholders' equity\\$  487,689  \\$  485,347  \\$  462,016  \\$  444,504  \\$  431,869  
            
Common shares outstanding 87,604,088   87,604,088   87,604,088   87,604,088   87,604,088  
Book value per common share\\$  0.64  \\$  0.64  \\$  0.39  \\$  0.38  \\$  0.38  
            
            
NORTHERN STATES FINANCIAL CORPORATION  
(\\$000s, except per share data) (Unaudited)  
            
Condensed Consolidated Statement of Income           
For quarter endedMarch 31, December 31, September 30, June 30, March 31, 
     2016     2015     2015     2015     2015  
Interest income            
Loans (including fee income)\\$  2,788  \\$  3,005  \\$  2,747  \\$  2,646  \\$  2,484  
Securities           
Taxable 420   491   544   514   678  
Exempt from federal income tax 3   4   4   5   4  
Federal funds sold and other 144   97   52   54   36  
Total interest income 3,355   3,597   3,347   3,219   3,202  
Interest expense           
Time deposits 74   79   82   79   71  
Other deposits 23   24   24   21   22  
Repurchase agreements and federal funds purchased 1   1   0   0   1  
Subordinated debentures 63   58   57   55   53  
Total interest expense 161   162   163   155   147  
Net interest income 3,194   3,435   3,184   3,064   3,055  
Provision for loan and lease losses 0   (789)  0   0   100  
Net interest income after provision for loan and lease losses 3,194   4,224   3,184   3,064   2,955  
Noninterest income           
Service fees on deposits 320   319   316   324   321  
Gain on sale of securities 117   0   0   48   122  
Net gain (loss) on sale of other assets 0   18   1,423   (10)  0  
Net gain (loss) on sale of other real estate owned 13   22   0   209   0  
Bank owned life insurance income 53   40   14   0   0  
Other operating income 381   419   428   413   385  
Total noninterest income 884   818   2,181   984   828  
Noninterest expense           
Salaries and employee benefits 1,822   1,940   1,712   1,724   1,703  
Occupancy and equipment, net 502   526   527   561   597  
Data processing 459   234   501   376   330  
Legal 19   52   51   117   93  
FDIC insurance 101   98   96   136   141  
Audit and other professional 168   151   143   162   134  
Printing and supplies expense 37   36   42   63   60  
Write-down of other real estate owned 0   1,282   1,264   0   0  
Other real estate owned expense 131   97   136   88   170  
Other operating expenses 305   303   329   414   375  
Total noninterest expense 3,544   4,719   4,801   3,641   3,603  
Net income (loss) before income taxes 534   323   564   407   180  
Income tax expense 213   (21,720)  50   15   0  
Net income (loss) 321   22,043   514   392   180  
            
Average common shares outstanding   87,604,088     87,604,088     87,604,088     87,604,088     87,604,088  
Basic income (loss) per average outstanding share\\$  0.00  \\$  0.25  \\$  0.01  \\$  0.00  \\$  0.00  
Diluted income (loss) per average outstanding share\\$  0.00  \\$  0.25  \\$  0.01  \\$  0.00  \\$  0.00  
            
            
NORTHERN STATES FINANCIAL CORPORATION  
(\\$000s, except per share data) (Unaudited)  
            
  March 31, December 31, September 30, June 30, March 31, 
   2016   2015   2015   2015   2015  
Loans           
Commercial\\$  11,883  \\$  12,144  \\$  14,019  \\$  13,687  \\$  10,522  
Real estate-construction 15,369   21,609   15,127   14,300   11,636  
Real estate-mortgage 1-4 family 41,499   28,449   27,977   29,379   30,285  
Real estate-mortgage 5+ family 46,458   39,417   38,971   39,577   36,569  
Real estate-mortgage commercial 129,042   125,978   126,375   123,176   118,589  
Home equity 9,671   8,953   9,526   9,089   8,859  
Installment 904   1,047   1,041   943   1,021  
Deferred loan fees (281)  (270)  (189)  (219)  (211) 
Total loans\\$  254,545  \\$  237,327  \\$  232,847  \\$  229,932  \\$  217,270  
            
            
  March 31, December 31, September 30, June 30 March 31 
   2016   2015   2015   2015   2015  
Deposits           
Demand - noninterest bearing\\$  96,829  \\$  93,913  \\$  84,823  \\$  81,795  \\$  77,213  
Demand - interest bearing 67,678   67,571   72,612   65,853   57,158  
Money market accounts 52,032   51,797   54,077   53,131   49,453  
Savings 88,826   84,515   83,153   80,884   80,654  
Time, \\$100,000 and over 50,442   53,093   52,744   49,223   49,655  
Time, under \\$100,000 42,948   44,283   45,846   47,223   48,236  
Time, brokered 0   250   1,000   3,250   2,250  
Total deposits\\$  398,755  \\$  395,422  \\$  394,255  \\$  381,359  \\$  364,619  
            
                
NORTHERN STATES FINANCIAL CORPORATION 
(\\$000s, except per share data) (Unaudited) 
                
 1Q 2016 4Q 2015 3Q 2015 2Q 2015 1Q 2015 
 AverageYield/ AverageYield/ AverageYield/ AverageYield/ AverageYield/ 
 balanceRate balanceRate balanceRate balanceRate balanceRate 
Earning assets               
Loans\\$ 238,327 4.69%\\$ 232,821 5.18%\\$ 232,003 4.76%\\$224,996 4.73%\\$ 219,900 4.54%
Securities taxable 98,630 1.70  112,635 1.74  124,301 1.75  119,487 1.72  129,337 2.10 
Securities tax-exempt 295 6.78  428 5.61  436 6.42  435 5.52  437 6.41 
Interest-bearing deposits 95,565 0.60  91,402 0.42  73,330 0.28  68,449 0.32  50,803 0.28 
Total earning assets 432,817 3.11% 437,286 3.30% 430,070 3.13% 413,367 3.13% 400,477 3.21%
Non interest earning assets 51,891    29,467    26,427    26,460    26,670   
Total assets\\$484,708   \\$466,753   \\$456,497   \\$439,827   \\$427,147   
                
Interest-bearing liabilities               
Interest-bearing demand deposits\\$  67,804 0.08%\\$  71,437 0.08%\\$  68,681 0.09%\\$  61,325 0.08%\\$  58,445 0.10%
Money market deposits 52,205 0.05  53,107 0.05  52,291 0.05  50,062 0.05  50,104 0.05 
Savings deposits 86,031 0.01  83,536 0.01  82,482 0.01  81,353 0.01  78,445 0.01 
Time deposits 96,323 0.31  98,661 0.32  101,783 0.32  99,736 0.32  94,548 0.30 
Other borrowings 28,338 0.90  30,559 0.77  28,085 0.81  25,492 0.86  30,660 0.70 
Total interest-bearing liabilities 330,701 0.19% 337,300 0.19% 333,322 0.20% 317,968 0.19% 312,202 0.19%
Demand deposits 92,377    90,408    85,324    83,126    76,962   
Other liabilities 5,406    4,228    4,308    5,610    4,950   
Stockholders' equity 56,224    34,817    33,543    33,123    33,033   
Total liabilities and stockholders' equity\\$  484,708   \\$  466,753   \\$  456,497   \\$  439,827   \\$  427,147   
                
Net interest spread   2.92%3.11%2.93%2.94%3.02%
Net interest margin   2.96%3.15%2.97%2.98%3.07%