The year 2005 proved to be a year
of change and challenge for Northern States Financial Corporation.
The Company completed the merger of its subsidiaries, Bank
of Waukegan and First State Bank of Round Lake, on November
10, 2005. The new bank was named NorStates Bank. The Company
had long ago expanded beyond the borders of the City of
Waukegan itself and, with the acquisition of the First State
Bank of Round Lake offices, it became apparent that our
expansion throughout Lake County, Illinois and southeastern
Wisconsin warranted a name change. It was a big decision
for us – but one that reflects our commitment to grow and
evolve in our highly competitive market. The merger of the
subsidiaries and name change should continue to enhance
future stockholder value.
Our financial results for 2005 reflect
the challenges of our highly competitive commercial lending
market, a rising rate environment, and an increase to the
provision for loan and lease losses caused by the current
level of impaired loans and leases. At the close of business
December 31, 2005 total assets were $722.5 million. Total
loans and leases were $400.5 million, while deposits were
$554.4 million.
The increased levels of impaired loans
and leases caused the Company to make a provision for loan
and lease losses of $3,428,000 during 2005, a decrease of
$1,197,000 from $4,625,000 in 2004. Impaired loans and leases
at year-end 2005 totaled $32.1 million. We have worked diligently
to identify and resolve many of our impaired loan issues
and expect impaired levels and provision expense to drop
significantly in 2006.
Because of the the decrease in loans,
which negatively impacted net interest income, along with
high levels of impaired loans and leases, 2005 earnings
were reduced to $.49 per share from $.93 per share in 2004.
The lower earnings necessitated a decrease in the Company’s
dividend in 2005 to $.62 per share from $1.10 in 2004.
The Company issued $10 million in
trust-preferred securities in 2005 for liquidity purposes
and to strengthen the long-term capital position of the
Bank.
