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U.S. Securities and Exchange CommissionWashington, D.C. 20549

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FORM 10-QSB

|ý | QUARTERLY REPORT UNDER SECTION 13 OF 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

For the quarterly period ended March 31, 2002

OR

|o | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
|- | --------------------------------------------------------------------------

For the transition period from  to

Commission File No. 000-25231

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Northern Star Financial, Inc.(Exact name of registrant as specified in its charter)

Minnesota(State of Incorporation)

41-1912467(IRS Employer ID #)


1650 Madison Avenue
Mankato, MN 56001(Address of Principal Executive Offices)

507-387-2265(Issuer's Telephone Number, Including Area Code)

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Check
whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

.
        State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date.

Class: Common Stock, par value $.01 per share
Outstanding shares at May 1, 2002: 479,506

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Northern Star Financial, Inc. and Subsidiary    Northern Star Financial, Inc.  Index to Form 10-QSB  March 31, 2002

|PART I. FINANCIAL INFORMATION
|-----------------------------
|                             
|                             
|                             
|                             
|                             
|                             
|PART II. OTHER INFORMATION   
|                             
|                             
|                             
|                             
|                             
|                             
|SIGNATURES                   

2

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Northern Star Financial, Inc. Financial Data Summary

The following table summarizes certain historical financial data of Northern Star Financial and its subsidiary on a consolidated basis as of and for the three and
nine months ended March 31, 2002 and 2001. You should read this table in conjunction with our financial statements and related notes appearing elsewhere in this document.

|                                                                    |  | For The Three Months
Ended March 31, |          | As of and For The Nine Months
Ended March 31, |  
|------------------------------------------------------------------- |  | ------------------------------------ | -------- | --------------------------------------------- | -
|
|
|Statement of Income:                                                |  |                                      |          |                                               |  
|Interest income                                                     |  | $                                    | 682,265  |                                               | $
|Interest expense                                                    |  |                                      | 420,420  |                                               |  
|                                                                    |  |                                      |          |                                               |  
|Net interest income                                                 |  |                                      | 261,845  |                                               |  
|Provision for loan losses                                           |  |                                      | 18,000   |                                               |  
|Other non-interest income                                           |  |                                      | 73,512   |                                               |  
|Non-interest expense                                                |  |                                      | 429,078  |                                               |  
|                                                                    |  |                                      |          |                                               |  
|Income (loss) before income tax expense                             |  |                                      | (111,721 | )                                             |  
|Income tax expense (benefit)                                        |  |                                      |         |                                               |  
|                                                                    |  |                                      |          |                                               |  
|Net income (loss)                                                   |  | $                                    | (111,721 | )                                             | $
|                                                                    |  |                                      |          |                                               |  
|Balance Sheet:                                                      |  |                                      |          |                                               |  
|Assets                                                              |  |                                      |          |                                               |  
|Allowance for loan losses                                           |  |                                      |          |                                               |  
|Deposits                                                            |  |                                      |          |                                               |  
|Stockholders' equity                                                |  |                                      |          |                                               |  
|Per Share Data:                                                     |  |                                      |          |                                               |  
|Net income (loss)basic                                             |  | $                                    | (0.23    | )                                             | $
|Net income (loss)diluted                                           |  | $                                    | (0.23    | )                                             | $
|Book value                                                          |  |                                      |          |                                               |  
|Other Data                                                          |  |                                      |          |                                               |  
|Average shares outstandingbasic                                    |  |                                      | 479,506  |                                               |  
|Average shares outstandingdiluted                                  |  |                                      | 479,506  |                                               |  
|Financial Ratios:                                                   |  |                                      |          |                                               |  
|Equity to assets                                                    |  |                                      |          |                                               |  
|Return on average assets                                            |  |                                      |          |                                               |  
|Return on average stockholders' equity                              |  |                                      |          |                                               |  
|Net interest margin                                                 |  |                                      |          |                                               |  
|Tier 1 leverage ratio (Bank only)                                   |  |                                      |          |                                               |  
|Tier 1 capital to risk-weighted assets (Bank only)                  |  |                                      |          |                                               |  
|Total capital to risk-weighted assets (Bank only)                   |  |                                      |          |                                               |  
|Asset Quality Ratios:                                               |  |                                      |          |                                               |  
|Nonperforming assets to total assets                                |  |                                      |          |                                               |  
|Nonperforming assets to total loans and and other real estate owned |  |                                      |          |                                               |  
|Allowance for loan losses to total loans                            |  |                                      |          |                                               |  

3

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Northern Star Financial, Inc. and Subsidiary  Consolidated Statements of Financial Condition

|                                                                                                  |                   | March 31, 2002                             |            | June 30, 2001 |           
|------------------------------------------------------------------------------------------------- | ----------------- | ------------------------------------------ | ---------- | ------------- | ----------
|
|ASSETS                                                                                            |                  
|Cash and due from banks                                                                           |                   | $                                          | 929,995    |               | $         
|Federal funds sold                                                                                |                   |                                            | 1,671,000  |               |           
|Securities available for sale, at fair value                                                      |                   |                                            | 9,269,833  |               |           
|Federal Home Loan Bank stock, at cost                                                             |                   |                                            | 238,800    |               |           
|Loans held for sale                                                                               |                   |                                            | 275,400    |               |           
|Loans receivable, net of allowance for loan and lease losses of $571,191 and $234,989             |                   |                                            | 30,468,318 |               |           
|Accrued interest receivable                                                                       |                   |                                            | 338,776    |               |           
|Property and equipment, net of depreciation                                                       |                   |                                            | 554,027    |               |           
|Other assets                                                                                      |                   |                                            | 88,721     |               |           
|                                                                                                  |                   |                                            |            |               |           
|                                                                                                  |                   | Total Assets                               |            | $             | 43,834,870
|                                                                                                  |                   |                                            |            |               |           
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                              |                  
|Liabilities:                                                                                      |                   |                                            |            |               |           
|Demand deposits                                                                                   |                   | $                                          | 2,929,357  |               | $         
|NOW accounts                                                                                      |                   |                                            | 1,294,020  |               |           
|Savings and money market                                                                          |                   |                                            | 9,873,559  |               |           
|Time deposits                                                                                     |                   |                                            | 20,728,537 |               |           
|                                                                                                  |                   |                                            |            |               |           
|                                                                                                  | Total deposits    |                                            |            | 34,825,473    |           
|Notes Payable and other borrowings                                                                |                   |                                            | 5,275,000  |               |           
|Convertible subordinated notes payable                                                            |                   |                                            | 1,000,000  |               |           
|Accrued interest payable and other                                                                |                   |                                            | 397,178    |               |           
|                                                                                                  |                   |                                            |            |               |           
|                                                                                                  | Total Liabilities |                                            |            | 41,497,651    |           
|                                                                                                  |                   |                                            |            |               |           
|Shareholders' Equity:                                                                             |                   |                                            |            |               |           
|Common Stock, $.01 par value, 15,000,000 shares authorized; 479,506 shares issued and outstanding |                   |                                            | 4,795      |               |           
|Undesignated stock, par value $.01per share; 5,000,000 shares authorized, no shares issued        |                   |                                            |           |               |           
|Additional paid in capital                                                                        |                   |                                            | 4,158,504  |               |           
|Accumulated deficit                                                                               |                   |                                            | (1,761,269 | )             |           
|Unearned stock compensation                                                                       |                   |                                            | (13,003    | )             |           
|Accumulated other comprehensive income (loss)                                                     |                   |                                            | (51,808    | )             |           
|                                                                                                  |                   |                                            |            |               |           
|                                                                                                  |                   | Total Shareholders' Equity                 |            |               | 2,337,219 
|                                                                                                  |                   |                                            |            |               |           
|                                                                                                  |                   | Total Liabilities and Shareholders' Equity |            | $             | 43,834,870
|                                                                                                  |                   |                                            |            |               |           

See
Notes to Consolidated Financial Statement

4

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Northern Star Financial, Inc. and Subsidiary  Unaudited Consolidated Statements of Operations

|                                                           |                                        | For the Three Months
Ended March 31,              |          | For the Nine Months
Ended March 31, |        
|---------------------------------------------------------- | -------------------------------------- | ------------------------------------------------- | -------- | ----------------------------------- | -------
|
|Interest income                                            |                                        |                                                   |          |                                     |        
|                                                           | Loans receivable                       |                                                   | $        | 546,094                             |        
|                                                           | Securities available for sale          |                                                   |          | 133,355                             |        
|                                                           | Federal funds sold                     |                                                   |          | 2,816                               |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           |                                        | Total interest income                             |          |                                     | 682,265
|                                                           |                                        |                                                   |          |                                     |        
|Interest expense                                           |                                        |                                                   |          |                                     |        
|                                                           | Deposits                               |                                                   |          | 340,522                             |        
|                                                           | Borrowed funds                         |                                                   |          | 79,898                              |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           |                                        | Total interest expense                            |          |                                     | 420,420
|                                                           |                                        |                                                   |          |                                     |        
|                                                           | Net interest income                    |                                                   |          | 261,845                             |        
|                                                           | Provision for loan losses              |                                                   |          | 18,000                              |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           |                                        | Net interest income after provision for loan loss |          |                                     | 243,845
|                                                           |                                        |                                                   |          |                                     |        
|Noninterest income                                         |                                        |                                                   |          |                                     |        
|                                                           | Other fees and service charges         |                                                   |          | 30,636                              |        
|                                                           | Gain on sale of securities             |                                                   |          |                                    |        
|                                                           | Gain on sale of loans                  |                                                   |          | 42,876                              |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           |                                        | Total noninterest income                          |          |                                     | 73,512 
|                                                           |                                        |                                                   |          |                                     |        
|Noninterest expense                                        |                                        |                                                   |          |                                     |        
|                                                           | Compensation and employee benefits     |                                                   |          | 215,473                             |        
|                                                           | Board fees                             |                                                   |          | 21,000                              |        
|                                                           | Occupancy                              |                                                   |          | 39,823                              |        
|                                                           | Legal and accounting                   |                                                   |          | 9,904                               |        
|                                                           | Printing & supplies                    |                                                   |          | 21,214                              |        
|                                                           | Property and equipment depreciation    |                                                   |          | 19,441                              |        
|                                                           | Data processing                        |                                                   |          | 31,780                              |        
|                                                           | Other                                  |                                                   |          | 70,443                              |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           |                                        | Total noninterest expense                         |          |                                     | 429,078
|                                                           |                                        |                                                   |          |                                     |        
|Loss Before Income Tax Benefit and Discontinued Operations |                                        |                                                   | (111,721 | )                                   |        
|                                                           | Income Tax Benefit                     |                                                   |          |                                    |        
|                                                           |                                        |                                                   |          |                                     |        
|Loss from Continuing Operations                            |                                        |                                                   | (111,721 | )                                   |        
|                                                           | Loss from Discontinued Operations      |                                                   |          |                                    |        
|                                                           |                                        |                                                   |          |                                     |        
|Net Loss                                                   |                                        | $                                                 | (111,721 | )                                   | $      
|                                                           |                                        |                                                   |          |                                     |        
|Net Loss per Common Share                                  |                                        |                                                   |          |                                     |        
|                                                           | Basic from Continuing Operations       |                                                   | $        | (0.23                               | )      
|                                                           | Basic from Discontinued Operations     |                                                   |          |                                    |        
|                                                           |                                        |                                                   |          |                                     |        
|                                                           | Basic (loss) per share of common stock |                                                   | $        | (0.23                               | )      
|                                                           |                                        |                                                   |          |                                     |        

See
Notes to Consolidated Financial Statements

5

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Northern Star Financial, Inc. and Subsidiary  Unaudited Consolidated Statements of Cash Flows

|                                                     |                                                                                           | For the Three Months
Ended March 31,                    |                                                | For the Nine Months
Ended March 31, |           
|---------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------- | ----------------------------------- | ----------
|
|Cash flows from operating activities:                |                                                                                           |                                                         |                                                |                                     |           
|                                                     | Net (loss)                                                                                |                                                         | $                                              | (111,721                            | )         
|                                                     | Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |                                                         |                                                |                                     |           
|                                                     |                                                                                           | Depreciation                                            |                                                |                                     | 22,566    
|                                                     |                                                                                           | Loss on disposition of joint venture                    |                                                |                                     |          
|                                                     |                                                                                           | Provision for loan losses                               |                                                |                                     | 18,000    
|                                                     |                                                                                           | Net amortization and accretion of premium and discounts |                                                |                                     | 22,735    
|                                                     |                                                                                           | Deferred loan fees and costs, net                       |                                                |                                     | (14,836   
|                                                     |                                                                                           | Earned stock compensation                               |                                                |                                     | 999       
|                                                     |                                                                                           | Gain on sale of available for sale securities           |                                                |                                     |          
|                                                     |                                                                                           | (Increase) decrease in:                                 |                                                |                                     |           
|                                                     |                                                                                           |                                                         | Loans held for sale                            |                                     |           
|                                                     |                                                                                           |                                                         | Accrued interest receivable                    |                                     |           
|                                                     |                                                                                           |                                                         | Other assets                                   |                                     |           
|                                                     |                                                                                           | Increase (decrease) in:                                 |                                                |                                     |           
|                                                     |                                                                                           |                                                         | Accrued interest payable and other liabilities |                                     |           
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|                                                     |                                                                                           | Net cash provided by (used in) operating activities     |                                                |                                     | 512,132   
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|Cash flows from investing activities:                |                                                                                           |                                                         |                                                |                                     |           
|                                                     | Purchases of available-for-sale securities                                                |                                                         |                                                | (495,781                            | )         
|                                                     | Proceeds from maturities of available-for-sale securities                                 |                                                         |                                                | 621,360                             |           
|                                                     | Proceeds from sales of available-for-sale securities                                      |                                                         |                                                | 500,000                             |           
|                                                     | Purchase of FHLB stock                                                                    |                                                         |                                                |                                    |           
|                                                     | Net (increase) decrease in Federal Funds sold                                             |                                                         |                                                | (750,000                            | )         
|                                                     | Loan origination's and principal payments on loans, net                                   |                                                         |                                                | 306,799                             |           
|                                                     | Purchase of property and equipment                                                        |                                                         |                                                | (3,809                              | )         
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|                                                     |                                                                                           | Net cash provided by (used in) investing activities     |                                                |                                     | 178,569   
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|Cash flows from financing activities:                |                                                                                           |                                                         |                                                |                                     |           
|                                                     | Net increase in non-interest bearing demand and savings deposit accounts                  |                                                         |                                                | 666,215                             |           
|                                                     | Net (decrease) increase in time deposits                                                  |                                                         |                                                | (1,744,946                          | )         
|                                                     | Proceeds from borrowings                                                                  |                                                         |                                                |                                    |           
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|                                                     |                                                                                           | Net cash provided by (used in) financing activities     |                                                |                                     | (1,078,731
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|Net increase (decrease) in cash and cash equivalents |                                                                                           |                                                         | (388,030                                       | )                                   |           
|Cash and cash equivalents, beginning                 |                                                                                           |                                                         | 1,318,025                                      |                                     |           
|                                                     |                                                                                           |                                                         |                                                |                                     |           
|Cash and cash equivalents, ending                    |                                                                                           | $                                                       | 929,995                                        |                                     | $         
|                                                     |                                                                                           |                                                         |                                                |                                     |           

See Notes to Consolidated Financial Statements

6

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  MARCH 31, 2002 (Unaudited)

Note 1: PRINCIPLES OF CONSOLIDATION

The unaudited consolidated financial statements as of and for the nine month periods ended March 31, 2002 and 2001 include the accounts of Northern Star
Financial, Inc. (the "Company") and its wholly owned subsidiary Northern Star Bank (the "Bank"). All significant inter-company accounts and transactions have been eliminated in consolidation.

Note 2: BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information. Accordingly, they do not include all information and disclosures required by generally accepted accounting principles for complete financial
statements. The accompanying consolidated financial statements do not purport to contain all the necessary financial disclosures required by generally accepted accounting principles that might
otherwise be necessary in the circumstances and should be read with the fiscal 2001 consolidated financial statements and notes of Northern Star Financial, Inc. and Subsidiary included in their
annual report as of and for the year ended June 30, 2001.

In
the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentations have been included. The results of operations for the
three and nine month periods ended March 31, 2002 and 2001, are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

Note 3: EARNINGS PER SHARE

The earnings per share amounts were computed using the weighted average number of shares outstanding during the periods presented. For the three and nine month
periods ended March 31, 2002 the weighted average number of shares outstanding for both basic and diluted earnings per share computation were 479,506. For the three and nine month periods ended
March 31, 2001 the weighted average number of shares outstanding for both basic and diluted earnings per share computation were 427,600. Potential common shares related to stock options,
warrants, and convertible subordinated notes payable were not included in the calculation of diluted earnings per share because they were anti-dilutive.

7

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Note 4: COMPREHENSIVE (LOSS)

For the Nine Months
Ended March 31,2002

2001Accumulated other comprehensive (loss) is composed of the following:Unrealized Gains (Losses) on SecuritiesBeginning Balance

$
26,328

$
(34,401
)Current-period change net of tax


(78,136
)

71,267Ending Balance

$
(51,808
)
$
36,866Comprehensive (Loss) consists of the following:Net loss

$
(569,226
)
$
(107,093
)Other comprehensive income


(78,136
)

71,267Comprehensive (loss)

$
(647,362
)
$
(35,826
)


Note 5: LEGAL MATTERS

The Company and the Bank are defendants in civil actions arising out of transactions associated with various business interests of former Director, Frank Gazzola.
The Company and the Bank deny any wrong doing and intend to aggressively defend themselves against the allegations. An estimate of the potential loss under these lawsuits can not be made at this time
and no accrual has been recorded on the books of the Company or of the Bank. (See Part IIOther Information, Item 1. Legal Proceedings).

8

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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Northern Star Financial, Inc. is the bank holding company of Northern Star Bank (the "Bank"). Since the principal business of the Company is the Bank, the
following discussion pertains mainly to the Bank. This report contains "forward-looking statements" as defined in section 27A of the Securities Act of 1933, as amended, and section 21E
of the Securities Exchange Act of 1934, as amended, which includes statements such as projections, plans and objectives and assumptions about the future, and such forward looking statements are
subject to the safe harbor created by these sections. Many factors could cause the actual results, amounts or events to differ materially from those the Company expects to achieve or occur.

Taking
into account the foregoing, such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the
interest rate environment; general economic conditions, either nationally or regionally becoming less favorable than expected and resulting in, among other things, a deterioration in credit quality
and an increase in the provision for possible loan losses; changes in the regulatory environment; changes in business conditions; volatility of rate sensitive deposits; operational risks, including
data processing system failures, litigation costs and exposure or fraud; asset/liability matching risks and liquidity risks; and changes in the securities markets.

The
factors identified in this cautionary statement are important factors (but not necessarily all important factors) that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the Company. Although the Company has based
its plans and projections on certain assumptions, there can be no assurances that its assumptions will be correct, or that its plans and projections can be achieved.

The
following discussion addresses information pertaining to the financial condition and results of operations of the Company that may not be otherwise apparent from a review of the
consolidated financial statements and related footnotes. It should be read in conjunction with those statements and notes as well as other information presented throughout this report.

Changes in Financial Condition

Consolidated total assets at March 31, 2002 were approximately $43.8 million, which represents an increase of $4.7 million, or 12.0%, above
the comparable level at the fiscal year ended June 30, 2001. The increase in total assets was directly attributable to a $2.0 million, or 6.1%, increase in total deposits combined with a
$2.4 million, or 83.5%, increase in short term borrowings as compared to June 30, 2001, and a $1 million increase from debentures. The growth in deposits is primarily the result
of a $1.5 million, or 99.4%, increase in demand deposit accounts, $2.3 million, or 29.9% increase in savings accounts and a $2.4 million, or 10.2% increase in Certificates of
Deposit from June 30, 2001 to March 31, 2002, respectively.

Total
gross loans increased $6.8 million, or 27.9%, from the fiscal year ended June 30, 2001 to March 31, 2002. The net increase in gross loans is primarily the
result of increases of $105 thousand, or 2.1%, $5.1 million, or 60.5%, and $1.6 million, or 15.5%, in commercial loans, real estate loans and consumer loans, respectively,
combined with a decrease of $99 thousand, or 23.2% in lease financing.

The
allowance for loan losses (the allowance) is established through a provision for loan losses charged to expense. The allowance for loan losses was 1.83% of total loans at
March 31, 2002 versus .97% at June 30, 2001. The allowance at March 31, 2002 was in excess of the fiscal year end June 30, 2001 allowance by $336 thousand, or
143.0%, as a result of a provision for $351 thousand and net charge offs totaling $15 thousand. This compares to a provision of $53 thousand for the first nine months of 2001. The
increased provision is a result of the general growth of the loan portfolio during the first nine months of fiscal year 2002 of $6.8 million, or 27.9%; and an increase in impaired loans.

9

---

At
March 31, 2002, nonperforming loans were $767 thousand, or 2.5% of gross loans outstanding. This compares to $63 thousand or .3% of gross loans outstanding at
fiscal year end June 30, 2001. The allowance to nonperforming loan coverage ratio decreased to 74.5% at March 31, 2002 from 374% at June 30, 2001. The Bank's total loan portfolio
delinquency ratio at March 31, 2002 was 3.3%, compared to 1.3% at June 30, 2001. Excluding the nonperforming loans, total portfolio delinquency at March 31,
2002 was $251 thousand, or .8% of gross loans, compared to $248 thousand, or 1.0% of gross loans at the fiscal year ended June 30, 2001.

Management
continues to actively work to resolve the nonperforming loans. Of the $767 thousand in non-performing loans, $715 thousand or, 93.6% are attributable
to two borrowers. Management believes that the allowance at March 31, 2002 is adequate to absorb known and reasonably estimated loan losses. However, there can be no assurances that future
economic events will not negatively impact the Bank's borrowers, thereby causing loan losses to exceed the current allowance.

Interest
forgone on non-accrual loans during the first nine months of the fiscal year ending June 30, 2001 totaled approximately $2 thousand. During the first
nine months of the fiscal year ending June 30, 2002, interest forgone on non-accrual loans totaled $50.1 thousand. The majority of the loans placed on nonaccrual were
internally identified as classified assets as of March 31, 2002 and specific reserves for possible losses were established within the allowance as of March 31, 2002. Management continues
to actively monitor the status of these nonperforming loans.

Investments

Investment securities decreased $354 thousand, or 3.7%, from June 30, 2001 to March 31, 2002. In addition federal funds sold decreased
$1.8 million, or 51.4% from fiscal year end June 30, 2001 to March 31, 2002. The decrease in investment securities and federal funds sold occurred as a result of increases in
loans outpacing the increase in deposits during the first nine months of the fiscal year ending June 30, 2002.

Equity

Consolidated equity decreased $644 thousand from fiscal year end June 30, 2001 to March 31, 2002. Consolidated equity represented 5.3% and
7.6% of consolidated assets at March 31, 2002 and June 30, 2001, respectively. In addition to the net loss of $569 thousand, equity capital decreased by $78 thousand to
reflect the decrease in the after-tax change in market value of the available-for-sale investment securities portfolio. The decrease in the investment security
portfolio's market value reflects the market's higher expectation for an increase in the level of market interest rates as of March 31, 2002 compared to expectations of interest rates as of
June 30, 2001. The total risk-based capital ratio for the Company's wholly owned subsidiary, Northern Star Bank, was 12.9% at March 31, 2002 compared to 12.25% at
June 30, 2001. The Bank's leverage capital ratio was 8.77% at March 31, 2002 versus 8.0% at the fiscal year end June 30, 2001. The Bank's capital ratios are in excess of the
regulatory minimums for a well-capitalized bank.

The
Company reported a net loss of $112 thousand ($0.23 per share, diluted) for the three months ended March 31, 2002, compared to a net loss of $8 thousand ($.02
per share, diluted) for the same
period in fiscal year 2001. Net loss for the nine months ended March 31, 2002 was $569 thousand ($1.19 per share, diluted) compared to a net loss of $107 thousand ($.25 per share,
diluted) for the same period in fiscal year 2001. The increase in net income (loss) for the third quarter in fiscal year ending June 30, 2002 when compared to the same period one year ago is
due to an increase of $53 thousand in net interest income, an increase of $6 thousand in the provision for loan losses, a decrease of $6 thousand in non-interest
income, and an increase of $145 thousand in non-interest expense. The decrease in net income during the first nine months of fiscal year 2002, when compared to the same period in
2001, is due to an increase of $30 thousand in net interest income, an increase of

10

---

$299 thousand in the provision for loan losses, a decrease of $203 thousand in non-interest income, and an increase of $409 thousand in non-interest
expense.

Net Interest Income

Interest income for the third quarter of fiscal year 2002 increased by $20 thousand, or 3.1%, over the same quarter of fiscal year 2001. For the first nine
months of fiscal year 2002, interest income increased by $242 thousand, or 13.2%, over the same period one year ago. Improvement in interest income was the result of the higher volume of loans
combined with an increase in total earning assets. Conversely, the decline in the net interest margin resulted primarily from the impact of increases in deposits being invested in loans, securities
and federal funds sold during a lower interest rate environment than that which existed during the third quarter and first nine months of fiscal year 2001. This caused the net interest margin to
decrease to 2.48% and 2.16% for the three and nine months ended March 31, 2002 versus 2.58% and 2.99% for the three and nine months ended March 31, 2001.

Average
loans for the three months ended March 31, 2002 increased by $7.8 million, or 32.8% compared to the prior year's quarter. For the first nine months of fiscal year
2002, average loans increased $7.1 million, or 33.6%, compared to the first nine months of fiscal year 2001. This increase has been the result of the Bank's efforts to increase total loans.
Average interest bearing deposits for the three months ended March 31, 2002 increased by $5.9 million, or 21.8%, compared to the prior fiscal year quarter. The average rate paid on
savings, money market and NOW accounts decreased from 3.90% for the third quarter of the fiscal year ended June 30, 2001 to 2.70% for the third quarter of the fiscal year ending June 30,
2002. The average rate paid on certificates of deposits decreased, from 6.92% for the third quarter of fiscal year 2001 to 5.78% for the same quarter of fiscal year 2002.

Average
non-interest bearing deposits have kept pace with the growth in interest bearing deposits from a year ago and now make up 6.1% of average total deposits as of the end
of the third quarter of the fiscal year ending June 30, 2002 as compared to 5.2% at June 30, 2001. This has contributed to a lower cost of funding earning assets. Average certificates of
deposit for the first nine months of fiscal year 2002 were 64.9% of average deposits, respectively, compared to 69.3% for the same periods of fiscal year 2001.

Provision for Loan Losses

The provision for loan losses for the three and nine months ended March 31, 2002 was $18 thousand and $351 thousand compared with
$12 thousand and $53 thousand for the three and nine months ended March 31, 2001. The year-to-date increase is consistent with the increase in the growth
rate of gross loans during the first nine months of 2002 as compared to the first nine months of 2001. Also see Allowance for Loan Losses contained herein.

Non-interest Income

Non-interest income for the third quarter of the fiscal year ending June 30, 2002 decreased by $6 thousand, or 7.2%, over the same
period in the prior fiscal year. For the first nine months of the fiscal year ending June 30, 2002, non-interest income increased $203 thousand, or 146.0%, as compared to the
first nine months of fiscal year 2001.

Service
charge income for the third quarter of fiscal year 2002 increased by $12 thousand, or 64.7%, compared to the same quarter of fiscal year 2001. For the first nine months of
fiscal year 2002, service charge income increased $43 thousand, or 76.8%, compared to the first nine months of fiscal year 2001. The increases are consistent with the growth in the number of
interest bearing demand deposits and savings accounts combined with initiatives regarding pricing and services which were implemented during the first half of fiscal year 2002.

11

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Income
from the premiums and fees from residential mortgage loan origination increased $16 thousand, or 58.7% during the third quarter of fiscal year 2002 as compared to the third
quarter of the prior fiscal year. For the first nine months of the fiscal year ending June 30, 2002, premiums and fees from residential mortgage loan origination increased $135 thousand,
or 275.4%, compared to the first nine months of fiscal year 2001. The increase in income is a result of increases in total volumes of residential loans generated and sold servicing released into the
secondary mortgage market. The increase in mortgage loan activity is attributable to the decline in mortgage loan interest rates causing an increase in the number of origination of new loans and
refinancing activity of existing loans.

Non-interest Expenses

Non-interest expenses for the three months ended March 31, 2002 increased by $145 thousand, or 50.9%, compared to the same quarter of
the prior fiscal year. For the first nine months of the fiscal year ending June 30, 2002, non-interest expense increased $409 thousand, or 50.0%, compared to the first nine
months of the fiscal year ending June 30, 2001. The increase in non-interest expense results primarily from increases in the number of employees and occupancy and equipment
associated with our expansion into the St. Cloud market.

For
the third quarter, salary and employee benefits expense increased $98 thousand, or 83.7%, occupancy expense increased $16 thousand, or 65.0%, printing and supply
expense increased $16 thousand, or 311.1% while data processing expenses increased $10 thousand, or 43.9%, when compared to the same time period during the prior fiscal year.

Year
to date, salary and employee benefits expense increased $243 thousand, or 72.4%, occupancy expense increased $49 thousand, or 73.5%, printing and supply expense
increased $45 thousand, or 247.7%, while data processing expenses increased $11 thousand, or 16.8%, when compared to the nine months ended March 31, 2001.

Salary
and employee benefits expense increased as a result of the addition of certain staffing positions combined with general merit increases in salaries and increased employee benefit
costs. The increase in occupancy and printing and supply expenses occurred primarily as a result of the addition of the St. Cloud office combined with other general upgrades in equipment and
technology. The data processing expenses relate to the Bank's expansion into the St. Cloud market and to the growth of our customer base.

Liquidity

The Company's primary sources of liquidity are cash on hand, advances on established lines of credit at correspondent banks and dividends from the Bank. The
Company's primary uses of liquidity are associated with interest payments on Company debt obligations, and operating expenses.

The
Bank's liquidity is managed on a daily basis by maintaining cash, federal funds sold, and short-term investments at levels commensurate with the estimated requirements
for loan demand and fluctuations in deposits. Loan demand and deposit fluctuations are affected by a number of factors, including economic conditions, seasonality of the borrowing and deposit bases,
and the general level of interest rates. The Bank maintains lines of credit with a correspondent bank as a supplemental source of short-term liquidity in the event that saleable investment
securities and loans or available new deposits are not adequate to meet liquidity needs. In addition, the Bank may also borrow on a short-term basis from the Federal Home Loan Bank in the
event other liquidity sources are not adequate. The Company and its wholly-owned subsidiary bank, Northern Star Bank, are defendants in civil actions referred to in Note 5.

At
March 31, 2002 liquidity was considered adequate, and funds available in the local deposit market and scheduled maturities of investments are considered sufficient to meet
long-term liquidity

12

---

needs. Compared to the third quarter of fiscal year 2001 liquidity decreased in fiscal year 2002 as a result of a reduction in the rate of the growth in our deposit portfolio.

Maturities
on notes payable and other borrowings are summarized by year in the following table.

2002


3,150,0002003


750,0002004


1,575,0002205 and after


2,800,000$
6,275,000


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

While there are several varieties of market risks, the market risk material to the Company and the Bank is interest rate risk. Within the context of interest rate
risk, market risk is the risk of loss due to changes in market interest rates that have an adverse effect on net interest income, earnings, capital or the fair value of financial instruments. Exposure
to this type of risk is a regular part of a financial institution's operations. The fundamental activities of making loans, purchasing investment securities, and accepting deposits inherently involve
exposure to interest rate risk. The Company monitors the repricing differences between assets and liabilities on a regular basis and estimates exposure to net interest income, net income, and capital
based upon assumed changes in the market yield curve.

The
New York prime rate of interest changed eleven (11) times since January 1, 2001, declining a total of 425 basis points. During the first three-quarters of the fiscal
year ending June 30, 2002, the yield on the Bank's loan portfolio declined from 9.26% during the nine month period ended March 31, 2001 to 7.42% during the nine month period ended
March 31, 2002. At the same time the cost of interest bearing deposits decreased from 6.16% to 4.83% for the nine months ended March 31, 2002. While the yield on earning assets decreased
184 basis points from 8.55% at fiscal year end 2001 to 6.71% at the nine month period ending March 31, 2002, the cost of interest bearing liabilities decreased 130 basis points from 6.23% at
fiscal year end 2001 to 4.93% for the nine month period ending March 31, 2002.
This resulted in a decrease in the Bank's net interest margin from 2.99% at fiscal year end 2001 to 2.16% for the nine-month period ending March 31, 2002. Interest expense as a
percentage of average earning assets decreased from 4.17% during the nine month period ended March 31, 2001 to 3.41% at the nine-month period ending March 31, 2002.

As
of and for the three months ended March 31, 2002, there were no material changes in the market risk profile of the Company or the Bank.

13

---

AVERAGE BALANCES, YIELDS AND RATES

The following table sets forth, for the three and nine months ended March 31, 2002 and 2001, the weighted average yields earned, the weighted average rates
paid, the interest rate spread and the net yield on earning assets and interest-bearing liabilities, on an annualized basis.

|                                                                                 |                                  | For the Three Months Ended                 |          
|-------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------ | ---------
|
|
|Assets                                                                           |                                  |                                            |          
|                                                                                 | Loans receivable                 |                                            | $        
|                                                                                 | Investment securities            |                                            |          
|                                                                                 | Federal funds sold               |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total interest-earning assets              |          
|                                                                                 | Non-interest-earning assets      |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total assets                               |          
|                                                                                 |                                  |                                            |          
|Liabilities and Stockholders' Equity                                             |                                  |                                            |          
|                                                                                 | Interest Bearing Deposits        |                                            | $        
|                                                                                 | Other liabilities                |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total interest-bearing liabilities         |          
|                                                                                 |                                  |                                            |          
|                                                                                 | Non-interest-bearing liabilities |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total liabilities                          |          
|Stockholders' Equity                                                             |                                  |                                            | 1,967,491
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total liabilities and stockholders' equity |          
|                                                                                 |                                  |                                            |          
|Net Interest Spread                                                              |                                  |                                            |          
|Net Interest Income/Margin                                                       |                                  |                                            |          
|                                                                                 |                                  |                                            |          
|Ratio of average interest-earning assets to average interest-bearing liabilities |                                  |                                            | 1.08x    

14

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|                                                                                 |                                  | For the Nine Months Ended                  |          
|-------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------ | ---------
|
|
|Assets                                                                           |                                  |                                            |          
|                                                                                 | Loans receivable                 |                                            | $        
|                                                                                 | Investment securities            |                                            |          
|                                                                                 | Federal funds sold               |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total interest-earning assets              |          
|                                                                                 | Non-interest-earning assets      |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total assets                               |          
|                                                                                 |                                  |                                            |          
|Liabilities and Stockholders' Equity                                             |                                  |                                            |          
|                                                                                 | Interest Bearing Deposits        |                                            | $        
|                                                                                 | Other liabilities                |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total interest-bearing liabilities         |          
|                                                                                 |                                  |                                            |          
|                                                                                 | Non-interest-bearing liabilities |                                            |          
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total liabilities                          |          
|Stockholders' Equity                                                             |                                  |                                            | 2,591,159
|                                                                                 |                                  |                                            |          
|                                                                                 |                                  | Total liabilities and stockholders' equity |          
|                                                                                 |                                  |                                            |          
|Net Interest Spread                                                              |                                  |                                            |          
|Net Interest Income/Margin                                                       |                                  |                                            |          
|                                                                                 |                                  |                                            |          
|Ratio of average interest-earning assets to average interest-bearing liabilities |                                  |                                            | 1.09x    

INVESTMENT PORTFOLIO

Contractual maturities and yields on our investments (all available for sale) are summarized in the following table. Expected maturities may differ from
contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

|                  |  | March 31, 2002 |  
|----------------- |  | -------------- | -
|
|US Agencies & MBS |  | $              | 
|Corporate Bonds   |  |                | 
|                  |  |                |  
|                  |  | $              | 
|                  |  |                |  

15

---

LOAN PORTFOLIO

Total gross loans outstanding at March 31, 2002, including loans held for sale, were $31,128,204. The following table summarized the composition of the
loan portfolio as of March 31, 2002 and June 30, 2001.

|                                |  | March 31, 2002 |            | June 30, 2001 |       
|------------------------------- |  | -------------- | ---------- | ------------- | ------
|
|Commercial & Agricultural       |  | $              | 5,009,150  |               | 16.09 
|Real Estateconstruction        |  |                | 1,393,206  |               | 4.48  
|Real Estatemortgages           |  |                | 12,161,938 |               | 39.07 
|Consumer                        |  |                | 12,234,948 |               | 39.31 
|Lease Financing                 |  |                | 328,962    |               | 1.05  
|                                |  |                |            |               |       
|Total loans                     |  | $              | 31,128,204 |               | 100.00
|                                |  |                |            |               |       
|Net Deferred Loans (fees)/costs |  |                | 186,705    |               |       
|Less: Allowance for Loan Loss   |  |                | (571,191   | )             |       
|                                |  |                |            |               |       
|Total Net Loans                 |  | $              | 30,743,718 |               |       
|                                |  |                |            |               |       

MATURITIES AND SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES

The information in the following table is based on the contractual maturities of individual loans, including loans which may be subject to renewal at their
contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon their maturity. Actual repayments of loans may differ from maturities
reflected below because borrowers have the right to

16

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repay obligations with or without prepayment penalties. The following table summarizes loan maturities, by type at March 31, 2002 and June 30, 2001.

|                                   |                         | As of March 31, 2002
|---------------------------------- | ----------------------- | --------------------
|
|Commercial & Agricultural          |                         | $                   
|Real Estateconstruction           |                         |                     
|Real Estatemortgages              |                         |                     
|Consumer Loans                     |                         |                     
|Lease Financing                    |                         |                     
|                                   |                         |                     
|Total                              |                         | $                   
|                                   |                         |                     
|Loans maturing after one year with |                         |                     
|                                   | Fixed Interest Rate     |                     
|                                   | Floating Interest Rates |                     

|                                   |                         | As of June 30, 2001
|---------------------------------- | ----------------------- | -------------------
|
|Commercial & Agricultural          |                         | $                  
|Real Estateconstruction           |                         |                    
|Real Estatemortgages              |                         |                    
|Consumer loans                     |                         |                    
|Lease Financing                    |                         |                    
|                                   |                         |                    
|Total                              |                         | $                  
|                                   |                         |                    
|Loans maturing after one year with |                         |                    
|                                   | Fixed Interest Rate     |                    
|                                   | Floating Interest Rates |                    

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The Company has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential credit
problems. Additions to the allowance for loan losses will be made periodically to maintain the allowance at the appropriate level based on management's analysis of the potential risk in the loan
portfolio.

At
March 31, 2002, the allowance for loan losses was $571,191 or 1.85% of $30,852,804 in loan receivables (excluding loans held for sale). The provision for loan losses was made
primarily as a result of management's assessment of impaired loans and general loan loss risk as the Bank's loan portfolio increases.

Nine Months Ended
March 31, 2002

Year Ended
June 30, 2001Balance at Beginning of Period

$
234,989

$
181,500Charge-offs


(15,955
)

(8,615
)Recoveries


857


4,590Net Charge-offs


(15,098
)

(4,025
)Provision charged to operations


351,300


57,514Balance at End of Period

$
571,191

$
234,989Ratio of net charge-offs during the period to average loans outstanding during the period


0.05
%

0.02
%


17

---

At
March 31, 2002 and June 30, 2001 the allowance was allocated as follows:

|                          |  | March 31, 2002 |         | June 30, 2001 |       
|------------------------- |  | -------------- | ------- | ------------- | ------
|
|Commercial & Agricultural |  | $              | 70,156  |               | 16.09 
|Real Estateconstruction  |  |                | 10,449  |               | 4.48  
|Real Estatemortgages     |  |                | 85,300  |               | 39.07 
|Consumer loans            |  |                | 413,628 |               | 39.31 
|Lease Financing           |  |                | 2,658   |               | 1.05  
|                          |  |                |         |               |       
|Total                     |  | $              | 571,191 |               | 100.00
|                          |  |                |         |               |       

DEPOSITS

The following is a table of deposits by category at March 31, 2002 and June 30, 2001.

|                                  |  | March 31, 2002 |           
|--------------------------------- |  | -------------- | ----------
|
|Demand Deposit                    |  | $              | 2,929,357 
|Now                               |  |                | 1,294,020 
|Savings                           |  |                | 9,873,559 
|Time Accounts less than $100,000  |  |                | 17,209,770
|Time Accounts of $100,000 or more |  |                | 3,518,767 
|                                  |  |                |           
|Total Deposits                    |  | $              | 34,825,473
|                                  |  |                |           

|                                  |  | As of June 30, 2001 |           
|--------------------------------- |  | ------------------- | ----------
|
|Demand Deposit                    |  | $                   | 1,468,846 
|Now                               |  |                     | 657,420   
|Savings                           |  |                     | 7,603,740 
|Time Accounts less than $100,000  |  |                     | 19,202,472
|Time Accounts of $100,000 or more |  |                     | 3,884,586 
|                                  |  |                     |           
|Total Deposits                    |  | $                   | 32,817,064
|                                  |  |                     |           

Maturity
distribution of time deposits of $100,000 and over are as follows:

|                                  |  | As of March 31, 2002
|--------------------------------- |  | --------------------
|
|Time Accounts of $100,000 or more |  | $                   
|                                  |  |                     

18

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PART II  OTHER INFORMATION

Item 1.    Legal Proceedings

The
Company and its wholly-owned subsidiary bank, Northern Star Bank, are defendants in civil actions.

The
Company is a defendant in a complaint filed on March 22, 2002 in the United States District Court for the Western District of Wisconsin by Catalytic Combustion Corporation
401(k) Profit Sharing Plan and Catalytic Combustion Corporation ("Plaintiffs"). According to the complaint, Plaintiffs seek to rescind its purchase of 30,000 shares of Company common stock it
purchased in connection with the Company's initial public offering in 1998 and 1999. Plaintiffs allege that the Company sold the shares to Catalytic Combustion Corporation 401(k) Profit Sharing Plan
in violation of Wisconsin securities laws, and therefore, Plaintiffs are entitled to rescind the purchase according to Wisconsin securities laws. The Plaintiffs seek damages in the amount of
approximately $211,000, plus interest from March 23, 1999 and all actual and reasonable attorney's fees. The Company denies the allegations in the complaint. The Company intends to aggressively
defend itself in this action.

Northern
Star Bank is also a defendant in a complaint filed on February 23, 2002 in United States District Court, District of South Dakota Southern Division by Bridge Lenders,
LLC; Jim Perry; Larry Ticknor; Doug English; Rollyn H. Samp; Courtney Anderson; Henry Carlson, Jr.; Michael M. Samp; Ernest Olson; Don Davis; Jerry Landerville; Allen Lewis; Gary Viger; Glen Jamtgaard
and Steve Herman ("Plaintiffs"). The complaint arose out of a series of loans that Northern Star Bank made to Plaintiffs in 2000. Plaintiffs used the proceeds of the loans to make an investment in
Bridge Lenders, LLC, and Bridge Lenders, LLC in turn used the funds to make an investment in Phenix Biocomposites, which has defaulted in its obligations to Plaintiffs. Northern Star Bank is a
Plaintiff in this action due to the fact that its former director, Frank Gazzola, was also a director of Phenix Biocomposites. The
Plaintiffs allege that Mr. Gazzola failed to inform the Plaintiffs that their investment in Phenix Biocomposites was not secured. The Plaintiffs claim that Northern Star Bank had a fiduciary
duty to the Plaintiffs because of Mr. Gazzola's dual role as a director of both Northern Star Bank and Phenix Biocomposites, that Northern Star Bank violated this fiduciary duty and a separate
implied covenant of good faith and fair dealing when Mr. Gazzola allegedly provided false information to Plaintiffs, and that the false information allegedly provided by Mr. Gazzola
constituted intentional or unintentional fraud by Northern Star Bank. Plaintiffs seek compensatory, general, special and punitive damages. Northern Star Bank denies the Plaintiffs' allegations and
intends to vigorously defend itself in this action.

Item 2.    Changes in Securities

None

Item 3.    Default Upon Senior Securities

None

Item 4.    Submission of Matters to a Vote of Security Holders.

None

Item 5.    Other Information

None

19

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Item 6.    Exhibits and Reports on Form 8-K

a)    Exhibits

Exhibit 99.1
Press Release dated May 13, 2002

b)    Reports

None

20

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|                   |  | NORTHERN STAR FINANCIAL, INC.
|------------------ |  | -----------------------------
|Date: May 13, 2002 |  | By                           
|Date: May 13, 2002 |  | By                           

21

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EXHIBIT INDEX

|Item No. |  | Description                    
|-------- |  | -------------------------------
|         |  |                                
|99.1     |  | Press release date May 13, 2002

22

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