Northern States Financial Reports Improved First Quarter Results

Net Interest Income Increases 35 Percent

WAUKEGAN, Ill., April 17 /PRNewswire-FirstCall/ -- Northern States
Financial Corporation (Nasdaq: NSFC), holding company for NorStates Bank,
today reported earnings for the first quarter of 2008 of $1,201,000, or $.29
per share, compared with $1,529,000, or $.36 per share, for the like quarter
of 2007. The comparable period of 2007 benefited from an addition to net
income from a reduction of $1.4 million to the Company's allowance for loan
and lease losses and the corresponding provision for loan loss expense. This
reduction caused after-tax income to increase by $872,000, or $.21 per share,
raising the reported net income for the first quarter of 2007 to $1,529,000,
or $.36 per share.
The Company's net interest income, the difference from interest earned on
loans and investments and interest paid on deposits and borrowings, increased
35 percent to $5.4 million for the first three months of 2008, an increase of
$1.4 million as compared with $4.0 million for the same quarter of 2007. The
growth to net interest income was attributable to increased interest income
from loan growth while the Company significantly decreased interest expense by
lowering rates paid on deposits and borrowings. The net interest spread
increased to 3.11 percent during the first quarter of 2008 as compared with
1.90 percent during the same quarter of 2007.
Total assets reached $644.8 million at March 31, 2008, increasing
$6.6 million from total assets of $638.2 million at December 31, 2007. Loans
increased during the first quarter of 2008 and totaled $465.4 million at
March 31, 2008 increasing $29.7 million, or 6.8 percent, from loans of
$435.7 million at December 31, 2007. The increase in loans was primarily due
to the marketing efforts of the Company's loan officers and the higher
borrowing demands of its customers. Deposits increased $8.1 million, or
1.7 percent, compared to December 31, 2007. Securities sold under repurchase
agreements declined $19.7 million from December 31, 2007, which the Company
replaced with borrowings of federal funds purchased that totaled $16.9 million
at March 31, 2008.
The Company made a provision for loan and lease losses of $263,000 during
the three months ended March 31, 2008 as compared with the $1.4 million
reduction during the same period last year. Most of the provision during the
first quarter of 2008 was due to the loan growth the Company experienced
during this period.
Nonperforming loans and leases were $12.1 million at March 31, 2008 as
compared with $12.0 million at year-end 2007. Nonperforming loans consist of
nonaccrual loans that no longer earn interest and accruing loans that are 90
days past due and in the process of collection.
At March 31, 2008, the Company's nonaccrual loans totaled $6.7 million, a
reduction of $4.1 million from $10.8 million at December 31, 2007. During the
first quarter of 2008, the Company received payment on a $2.9 million
construction loan after the property was sold. This loan was classified on
nonaccrual status at December 31, 2007. Also during the first quarter of
2008, the Company reached a settlement agreement with RLI Insurance Company on
its remaining nonaccrual lease pools that had been purchased from Commercial
Money Center in 2000 and 2001 and insured by RLI. As a result of the
settlement between the Company and RLI, the $2.0 million in these lease pools
carried on the Company's books have been paid off in full with no net effect
occurring to income from receipt of the proceeds.
Loans 90 days past due but still accruing interest increased to
$5.4 million at March 31, 2008 compared with $1.2 million at December 31,
2007. These loans are in the process of collection. Since March 31, 2008,
payments were received bringing $3.1 million of these loans back to up-to-date
status.
Impaired loans totaled $6.7 million at March 31, 2008, a reduction of
$4.0 million from $10.7 million at December 31, 2007. The Company considers a
loan to be impaired if principal and interest will not be collected under the
contractual terms of the note and includes nonaccrual loans.
On April 15, 2008, the Board of Directors of the Northern States Financial
Corporation declared a semi-annual cash dividend of $.40 per share, increasing
from $.37 per share, the previous dividend paid December 1, 2007. Annualized,
this represents a dividend yield of approximately 4.1 percent based on a stock
price of approximately $19.48 as of April 11, 2008. This dividend is payable
on June 2, 2008 to stockholders of record at May 15, 2008.
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, uncertainty regarding the Company's
ability to ultimately recover on the 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 March 31: 2008 2007

Net Income $1,201 $1,529
Basic Earnings Per Share $ .29 $ .36
Return on Average Assets .75% .89%
Return on Average Equity 6.48% 8.59%
Efficiency Ratio 67.91% 83.88%
Yield on Interest
Earning Assets 6.22% 5.77%
Cost of Interest
Bearing Liabilities 3.11% 3.87%
Net Interest Spread 3.11% 1.90%
Net Yield on Interest
Earning Assets 3.61% 2.47%

NORTHERN STATES FINANCIAL CORPORATION
KEY PERFORMANCE DATA
($ 000's, except per share data)

March 31, Dec. 31,
2008 2007

Total Assets $644,834 $638,156
Total Loans and Leases 465,396 435,734
Total Deposits 489,010 480,959
Total Stockholders' Equity 73,819 73,454
Nonperforming Loans and Leases 12,114 11,982
Nonperforming Loans and Leases to Total Loans
and Leases 2.60% 2.75%
Impaired Loans and Leases $6,728 $10,742
Book Value per Share $17.88 $17.58
Number of Shares Outstanding 4,128,105 4,178,105

NORTHERN STATES FINANCIAL CORPORATION
DIVIDEND HISTORY

June 1 December 1 Total

2003 $.54 $.54 $1.08
2004 .55 .55 1.10
2005 .55 .07 .62
2006 .30 .35 .65
2007 .35 .37 .72
2008 .40

NORTHERN STATES FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 2008 and December 31, 2007 (In thousands of dollars)
(Unaudited)

March 31, December 31,
Assets 2008 2007

Cash and due from banks $12,106 $14,273
Interest bearing deposits in financial
institutions - maturities less than 90 days 119 180
Federal funds sold 2,512 9,181
Total cash and cash equivalents 14,737 23,634
Securities available for sale 139,536 153,277
Loans and leases 465,396 435,734
Less: Allowance for loan and lease losses (4,829) (4,606)
Loans and leases, net 460,567 431,128
Federal Home Loan Bank stock 1,445 1,445
Office buildings and equipment, net 9,175 9,198
Other real estate owned 2,857 2,857
Goodwill 9,522 9,522
Core deposit intangible asset 1,274 1,390
Accrued interest receivable and other assets 5,721 5,705
Total assets $644,834 $638,156
Liabilities and Stockholders' Equity
Liabilities
Deposits
Demand - noninterest bearing $58,671 $60,015
Interest bearing 430,339 420,944
Total deposits 489,010 480,959
Securities sold under repurchase agreements 47,013 66,797
Federal funds purchased 16,900 0
Subordinated debentures 10,000 10,000
Advances from borrowers for taxes and insurance 1,238 1,066
Accrued interest payable and other liabilities 6,854 5,880
Total liabilities 571,015 564,702
Stockholders' Equity
Common stock 1,789 1,789
Additional paid-in capital 11,584 11,584
Retained earnings 68,184 66,983
Accumulated other comprehensive income, net 457 300
Treasury stock, at cost (8,195) (7,202)
Total stockholders' equity 73,819 73,454
Total liabilities and stockholders' equity $644,834 $638,156

NORTHERN STATES FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2008 and 2007
(In thousands of dollars, except per share data)
(Unaudited)

Three months ended
March 31, March 31,
2008 2007

Interest income
Loans (including fee income) $7,246 $6,583
Securities
Taxable 1,888 2,622
Exempt from federal income tax 115 71
Federal funds sold and other 70 90
Total interest income 9,319 9,366
Interest expense
Time deposits 2,826 3,118
Other deposits 479 991
Repurchase agreements and federal funds purchased 410 994
Federal Home Loan Bank advances 62 113
Subordinated debentures 159 166
Total interest expense 3,936 5,382
Net interest income 5,383 3,984
Provision for loan losses 263 (1,425)
Net interest income after provision for loan
losses 5,120 5,409
Noninterest income
Service fees on deposits 634 656
Trust income 213 211
Other operating income 293 299
Total noninterest income 1,140 1,166
Noninterest expense
Salaries and employee benefits 2,216 2,301
Occupancy and equipment, net 634 598
Data processing 439 379
Legal 84 139
Audit and other professional 352 297
Amortization of intangible assets 116 116
Other operating expenses 589 490
Total noninterest expense 4,430 4,320
Income before income taxes 1,830 2,255
Provision for income taxes 629 726
Net income $1,201 $1,529

Basic and diluted earnings per share $0.29 $0.36

SOURCE Northern States Financial Corporation

Fred Abdula, Chairman of the Board of Northern States Financial Corporation,
+1-847-244-6000, ext. 238