---

---

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

---

FORM 10-QSB

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

For the quarterly period ended March 31, 2001

OR

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission File No. 000-25231

---

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) 388-4855(Issuer's Telephone Number, Including Area Code)

---

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 /x/  No / /

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 March 31, 2001: 427,600

Northern Star Financial, Inc. and Subsidiary

---

---

---



Northern Star Financial, Inc.  Index to Form 10-QSB  March 31, 2001

PART I. FINANCIAL INFORMATION

|Item 1.    |  | Summary Financial Data                                                                                      |  | 3   
|---------- |  | ----------------------------------------------------------------------------------------------------------- |  | ----
|           |  | Consolidated Statements of Financial Condition at March 31, 2001 (unaudited) and June 30, 2000 (audited)    |  | 4   
|           |  | Unaudited Consolidated Statements of Operations for the three and nine months ended March 31, 2001 and 2000 |  | 5   
|           |  | Unaudited Consolidated Statement of Cash Flows for the three and nine months ended March 31, 2001 and 2000  |  | 6-7 
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                            |  | 8-9 
|Item 2.    |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                       |  | 9-18
|PART II.   |  | OTHER INFORMATION                                                                                           |  |     
|Item 1.    |  | Legal Proceedings                                                                                           |  | 19  
|Item 2.    |  | Changes in Securities                                                                                       |  | 19  
|Item 3.    |  | Default upon Senior Securities                                                                              |  | 19  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                         |  | 19  
|Item 5.    |  | Other Information                                                                                           |  | 19  
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                            |  | 19  
|SIGNATURES |  |                                                                                                             |  | 20  

2

---



Northern Star Financial Summary Financial Data

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
months and nine months ended March 31, 2001 and 2000. 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, |         | For the Nine Months
Ended March 31, |  
|---------------------------------------- |  | ------------------------------------ | ------- | ----------------------------------- | -
|
|
|Statement of Income:                     |  |                                      |         |                                     |  
|Interest income                          |  | $                                    | 661,956 |                                     | $
|Interest expense                         |  |                                      | 453,058 |                                     |  
|                                         |  |                                      |         |                                     |  
|Net interest income                      |  |                                      | 208,898 |                                     |  
|Provision for loan losses                |  |                                      | 12,114  |                                     |  
|Other non-interest income                |  |                                      | 79,232  |                                     |  
|Non-interest expense                     |  |                                      | 284,422 |                                     |  
|                                         |  |                                      |         |                                     |  
|Income (loss) before income tax expense  |  |                                      | (8,406  | )                                   |  
|Income tax expense (benefit)             |  |                                      |        |                                     |  
|                                         |  |                                      |         |                                     |  
|Net income (loss)                        |  | $                                    | (8,406  | )                                   | $
|                                         |  |                                      |         |                                     |  
|Balance Sheet:                           |  |                                      |         |                                     |  
|Assets                                   |  |                                      |         |                                     |  
|Allowance for loan losses                |  |                                      |         |                                     |  
|Deposits                                 |  |                                      |         |                                     |  
|Stockholders' equity                     |  |                                      |         |                                     |  
|Per Share Data:                          |  |                                      |         |                                     |  
|Net income (loss)basic                  |  | $                                    | (0.02   | )                                   | $
|Net income (loss)diluted                |  | $                                    | (0.02   | )                                   | $
|Book value                               |  |                                      |         |                                     |  
|Other Data                               |  |                                      |         |                                     |  
|Average shares outstandingbasic         |  |                                      | 427,600 |                                     |  
|Average shares outstandingdiluted       |  |                                      | 427,600 |                                     |  
|Financial Ratios:                        |  |                                      |         |                                     |  
|Equity to assets                         |  |                                      |         |                                     |  
|Return on average assets                 |  |                                      |         |                                     |  
|Return on average stockholders' equity   |  |                                      |         |                                     |  
|Net interest margin                      |  |                                      |         |                                     |  
|Tier 1 leverage ratio                    |  |                                      |         |                                     |  
|Tier 1 capital to risk-weighted assets   |  |                                      |         |                                     |  
|Total capital to risk-weighted assets    |  |                                      |         |                                     |  
|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

---

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

|                                                                                           |                         | March 31, 2001                           |            | June 30, 2000 |           
|------------------------------------------------------------------------------------------ | ----------------------- | ---------------------------------------- | ---------- | ------------- | ----------
|
|ASSETS                                                                                     |                         |                                          |            |              
|Cash and cash equivalents:                                                                 |                         |                                          |            |               |           
|                                                                                           | Cash and due from banks |                                          | $          | 567,650       |           
|                                                                                           | Federal funds sold      |                                          |            | 2,987,000     |           
|                                                                                           |                         |                                          |            |               |           
|                                                                                           |                         | Total cash and cash equivalents          |            |               | 3,554,650 
|Securities available for sale at fair value                                                |                         |                                          | 7,592,133  |               |           
|FHLB stock, at cost                                                                        |                         |                                          | 138,800    |               |           
|Loans held for sale                                                                        |                         |                                          | 1,628,472  |               |           
|Loans receivable, net of allowance for loan and lease losses of $230,337 and $181,500      |                         |                                          | 22,371,462 |               |           
|Accrued interest receivable                                                                |                         |                                          | 389,562    |               |           
|Property and equipment, net of depreciation                                                |                         |                                          | 383,089    |               |           
|Other assets                                                                               |                         |                                          | 309,532    |               |           
|                                                                                           |                         |                                          |            |               |           
|                                                                                           |                         | Total Assets                             |            | $             | 36,367,700
|                                                                                           |                         |                                          |            |               |           
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                       |                         |                                          |            |              
|Liabilites:                                                                                |                         |                                          |            |               |           
|Demand deposits                                                                            |                         | $                                        | 1,755,687  |               | $         
|Savings deposits                                                                           |                         |                                          | 6,645,730  |               |           
|Time deposits                                                                              |                         |                                          | 22,251,987 |               |           
|                                                                                           |                         |                                          |            |               |           
|                                                                                           |                         | Total deposits                           |            |               | 30,653,404
|Borrowed Funds                                                                             |                         |                                          | 2,875,000  |               |           
|Advances from borrowers for taxes and insurance                                            |                         |                                          | 21,031     |               |           
|Other liabilities                                                                          |                         |                                          | 62,686     |               |           
|                                                                                           |                         |                                          |            |               |           
|                                                                                           | Total Liabilities       |                                          |            | 33,612,121    |           
|                                                                                           |                         |                                          |            |               |           
|Shareholders Equity:                                                                       |                         |                                          |            |               |           
|Common Stock, $.01 par value, 15,000,000 shares authorized; 427,600 shares issued          |                         |                                          | 4,276      |               |           
|Undesignated stock, par value $.01per share; 5,000,000 shares authorized, no shares issued |                         |                                          |           |               |           
|Paid in capital                                                                            |                         |                                          | 3,939,557  |               |           
|Accumulated deficit                                                                        |                         |                                          | (1,208,121 | )             |           
|Unearned stock compensation                                                                |                         |                                          | (16,999    | )             |           
|Accumulated comprehensive income (loss)                                                    |                         |                                          | 36,866     |               |           
|                                                                                           |                         |                                          |            |               |           
|                                                                                           |                         | Total Shareholders' Equity               |            |               | 2,755,579 
|                                                                                           |                         |                                          |            |               |           
|                                                                                           |                         | Total Liabilites and Shareholders Equity |            | $             | 36,367,700
|                                                                                           |                         |                                          |            |               |           

See
Notes to Consolidated Financial Statements

4

---



Northern Star Financial, Inc. and SubsidiaryUnaudited Consolidated Statements of Operations

|                                |                                        | For the Three Months
Ended March 31,              |        | For the Nine Months
Ended March 31, |        
|------------------------------- | -------------------------------------- | ------------------------------------------------- | ------ | ----------------------------------- | -------
|
|Interest income                 |                                        |                                                   |        |                                     |        
|                                | Loans receivable                       |                                                   | $      | 528,215                             |        
|                                | Securities available for sale          |                                                   |        | 98,393                              |        
|                                | Federal funds sold                     |                                                   |        | 35,348                              |        
|                                |                                        |                                                   |        |                                     |        
|                                |                                        | Total interest income                             |        |                                     | 661,956
|Interest expense                |                                        |                                                   |        |                                     |        
|                                | Deposits                               |                                                   |        | 407,808                             |        
|                                | Borrowed funds                         |                                                   |        | 45,250                              |        
|                                |                                        |                                                   |        |                                     |        
|                                |                                        | Total interest expense                            |        |                                     | 453,058
|                                | Net interest income                    |                                                   |        | 208,898                             |        
|                                | Provision for loan losses              |                                                   |        | 12,114                              |        
|                                |                                        |                                                   |        |                                     |        
|                                |                                        | Net interest income after provision for loan loss |        |                                     | 196,784
|                                |                                        |                                                   |        |                                     |        
|Noninterest income:             |                                        |                                                   |        |                                     |        
|                                | Other fees and service charges         |                                                   |        | 18,596                              |        
|                                | Gain on sale of securities             |                                                   |        | 33,625                              |        
|                                | Gain on sale of loans                  |                                                   |        | 27,011                              |        
|                                |                                        |                                                   |        |                                     |        
|                                |                                        | Total noninterest income                          |        |                                     | 79,232 
|                                |                                        |                                                   |        |                                     |        
|Noninterest expense             |                                        |                                                   |        |                                     |        
|                                | Compensation and employee benefits     |                                                   |        | 117,275                             |        
|                                | Board fees                             |                                                   |        | 19,500                              |        
|                                | Occupancy                              |                                                   |        | 24,135                              |        
|                                | Legal and accounting                   |                                                   |        | 18,406                              |        
|                                | Printing & supplies                    |                                                   |        | 5,160                               |        
|                                | Property and equipment depreciation    |                                                   |        | 16,900                              |        
|                                | Data processing                        |                                                   |        | 22,085                              |        
|                                | Other                                  |                                                   |        | 60,961                              |        
|                                |                                        |                                                   |        |                                     |        
|                                |                                        | Total noninterest expense                         |        |                                     | 284,422
|                                |                                        |                                                   |        |                                     |        
|Loss Before Income Tax Benefit  |                                        |                                                   |        |                                     |        
|Discontinued Operations         |                                        |                                                   | (8,406 | )                                   |        
|                                | Income Tax Benefit                     |                                                   |        |                                    |        
|                                |                                        |                                                   |        |                                     |        
|Loss from Continuing Operations |                                        |                                                   | (8,406 | )                                   |        
|                                | Loss from Discontinued Operations      |                                                   |        |                                    |        
|                                |                                        |                                                   |        |                                     |        
|Net Loss                        |                                        | $                                                 | (8,406 | )                                   | $      
|                                |                                        |                                                   |        |                                     |        
|Net Loss per Common Share       |                                        |                                                   |        |                                     |        
|                                | Basic from Continuing Operations       |                                                   | $      | (0.02                               | )      
|                                | Basic from Discontinued Operations     |                                                   |        |                                    |        
|                                |                                        |                                                   |        |                                     |        
|                                | Basic (loss) per share of common stock |                                                   | $      | (0.02                               | )      
|                                |                                        |                                                   |        |                                     |        

See Notes to Consolidated Financial Statement

5

---

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

|                                                     |                                                                                     | For the Three Months
Ended March 31,                |            | For the Nine Months
Ended March 31, |           
|---------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------------------------- | ---------- | ----------------------------------- | ----------
|
|Cash flows from operating activities:                |                                                                                     |                                                     |            |                                     |           
|                                                     | Interest received on loans and investments                                          |                                                     | $          | 651,813                             |           
|                                                     | Interest paid                                                                       |                                                     |            | (1,039,658                          | )         
|                                                     | Other fees, commissions, and income received                                        |                                                     |            | 57,045                              |           
|                                                     | Cash paid to suppliers, employees and others                                        |                                                     |            | (333,398                            | )         
|                                                     | Loans originated for sale                                                           |                                                     |            | (3,089,822                          | )         
|                                                     | Proceeds from sale of loans                                                         |                                                     |            | 1,527,706                           |           
|                                                     |                                                                                     |                                                     |            |                                     |           
|                                                     |                                                                                     | Net cash provided by (used in) operating activities |            |                                     | (2,226,314
|                                                     |                                                                                     |                                                     |            |                                     |           
|Cash flows from investing activities:                |                                                                                     |                                                     |            |                                     |           
|                                                     | Purchases of available-for-sale securities                                          |                                                     |            | (6,618,548                          | )         
|                                                     | Proceeds from maturities of available-for-sale securities                           |                                                     |            | 1,807,874                           |           
|                                                     | Proceeds from sales of available-for-sale securities                                |                                                     |            | 2,124,289                           |           
|                                                     | Investment in joint venture                                                         |                                                     |            |                                    |           
|                                                     | Purchases of FHLB stock                                                             |                                                     |            |                                    |           
|                                                     | Loan originations and principal payments on loans, net                              |                                                     |            | (348,140                            | )         
|                                                     | Purchase of property and equipment                                                  |                                                     |            | (909                                | )         
|                                                     |                                                                                     |                                                     |            |                                     |           
|                                                     |                                                                                     | Net cash used in investing activities               |            |                                     | (3,035,434
|Cash flows from financing activities:                |                                                                                     |                                                     |            |                                     |           
|                                                     | Net increase (decrease) in non-interest bearing demand and savings deposit accounts |                                                     |            | (825,773                            | )         
|                                                     | Net (decrease) increase in time deposits                                            |                                                     |            | 4,113,079                           |           
|                                                     | Net (decrease) increase in mortgage escrow funds                                    |                                                     |            | 5,790                               |           
|                                                     | Borrowed Funds                                                                      |                                                     |            | 575,000                             |           
|                                                     | Repayment of Borrowed Funds                                                         |                                                     |            | (475,000                            | )         
|                                                     |                                                                                     |                                                     |            |                                     |           
|                                                     |                                                                                     | Net cash provided by financing activities           |            |                                     | 3,393,096 
|                                                     |                                                                                     |                                                     |            |                                     |           
|Net increase (decrease) in cash and cash equivalents |                                                                                     |                                                     | (1,868,652 | )                                   |           
|Cash and cash equivalents beginning                  |                                                                                     |                                                     | 5,423,302  |                                     |           
|                                                     |                                                                                     |                                                     |            |                                     |           
|Cash and cash equivalents ending                     |                                                                                     | $                                                   | 3,554,650  |                                     | $         
|                                                     |                                                                                     |                                                     |            |                                     |           
|Net loss on joint venture                            |                                                                                     | $                                                   |           |                                     | $         
|                                                     |                                                                                     |                                                     |            |                                     |           

See Notes to Consolidated Financial Statement

6

---

|                                                                         |              | For the Three Months
Ended March 31, |                                           | For the Nine Months
Ended March 31, |        
|------------------------------------------------------------------------ | ------------ | ------------------------------------ | ----------------------------------------- | ----------------------------------- | -------
|
|RECONCILATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES |              |                                      |                                           |                                     |        
|                                                                         | Net loss     |                                      | $                                         | (8,406                              | )      
|                                                                         | Adjustments: |                                      |                                           |                                     |        
|                                                                         |              | Depreciation                         |                                           |                                     | 16,899 
|                                                                         |              | Joint venture loss                   |                                           |                                     |       
|                                                                         |              | Loss on disposition of joint venture |                                           |                                     |       
|                                                                         |              | Provision for loan losses            |                                           |                                     | 12,114 
|                                                                         |              | Premiums accretion on investments    |                                           |                                     | (6,337 
|                                                                         |              | Discount amortization on investments |                                           |                                     | 473    
|                                                                         |              | Deferred loan fees/cost, net         |                                           |                                     | 38,449 
|                                                                         |              | Earned stock compensation            |                                           |                                     | 999    
|                                                                         |              | Gain on sale of investments          |                                           |                                     | (33,626
|                                                                         |              | (Increase) decrease in:              |                                           |                                     |        
|                                                                         |              |                                      | Loans held for sale                       |                                     |        
|                                                                         |              |                                      | Accrued interest receivable               |                                     |        
|                                                                         |              |                                      | Other assets                              |                                     |        
|                                                                         |              | Increase (decrease) in:              |                                           |                                     |        
|                                                                         |              |                                      | Accrued interest payable                  |                                     |        
|                                                                         |              |                                      | Other liabilities                         |                                     |        
|                                                                         |              |                                      |                                           |                                     |        
|                                                                         |              |                                      | Net cash provided by operating activities |                                     | $      
|                                                                         |              |                                      |                                           |                                     |        

See Notes to Consolidated Financial Statements

7

---



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  March 31, 2001 (Unaudited)

Note 1:  PRINCIPLES OF CONSOLIDATION

The unaudited consolidated financial statements as of and for the nine month periods ended March 31, 2001 and 2000, 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 generally accepted accounting principles 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 2000 consolidated financial statements and notes of Northern Star Financial, Inc. and Subsidiary included in their annual report for the year
ended June 30, 2000.

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, 2001 and 2000, are not necessarily indicative of the results that my 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, 2001 and 2000 the weighted average number of shares outstanding for basic and diluted earnings per share computation were 427,600 and 425,600 respectively. There were
104,600 common stock shares from stock options that were not included in the calculation of diluted earnings per share because they were anti-dilutive.

Note 4:  NEW FINANCIAL ACCOUNTING STANDARDS

Statements of Financial Accounting Standards (SFAS) No. 140 was issued September 29, 2000 as a replacement to SFAS No. 125 "Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of Liabilities". Statement 140 is effective for transfers after March 31, 2001. It is effective for disclosures about security
actions and collateral, and for recognition and reclassification of collateral for fiscal year ending June 30, 2001. Adoption will not have a material effect on the financial statement.

8

---

Note 5:  COMPREHENSIVE (LOSS)

|                                                                      |                                                        | For the Three Months
Ended March 31, |   | For the Nine Months
Ended March 31, |  
|--------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------ | - | ----------------------------------- | -
|
|Accumulated comprehensive income (loss) is composed of the following: |                                                        |                                      |   |                                     |  
|Unrealized Gains (Losses) on Securities                               |                                                        |                                      |   |                                     |  
|                                                                      | Beginning Balance                                      |                                      | $ | (25,210                             | )
|                                                                      | Current-period change and reclassifications net of tax |                                      |   | 62,076                              |  
|                                                                      |                                                        |                                      |   |                                     |  
|                                                                      | Ending Balance                                         |                                      | $ | 36,866                              |  
|                                                                      |                                                        |                                      |   |                                     |  
|Comprehensive income (loss) consists of the following:                |                                                        |                                      |   |                                     |  
|                                                                      | Net loss                                               |                                      | $ | (8,406                              | )
|                                                                      | Other comprehensive income (loss)                      |                                      |   | 62,076                              |  
|                                                                      |                                                        |                                      |   |                                     |  
|                                                                      | Comprehensive income (loss)                            |                                      | $ | 53,670                              |  
|                                                                      |                                                        |                                      |   |                                     |  

Note 6:  JOINT VENTURE/DISCONTINUED OPERATIONS

In July 1999, the Company acquired a 49 percent joint venture interest in Homeland Mortgage Company, LLC (Homeland Mortgage), a limited liability
company, in exchange for a total cash consideration of $196,000. The investment in Homeland Mortgage was accounted for using the equity
method. Homeland Mortgage's primary business is originating residential real estate loans that are secured by first and second mortgages and sold into the secondary mortgage market. During the quarter
ended September 30, 2000, the board of directors voted to sell its 49 percent joint venture interest for $67,352. The Company did not retain any interest in the assets or liabilities of
Homeland Mortgage. The Company remains contingently liable for the lease of office real estate, which expires July 1, 2002. The property has been sub-let and management does not
expect a default on the part of the tenant occupying the property.

Note 7:  SECONDARY STOCK OFFERING INITIATED/CLOSED

The Company filed a Registration Statement on Form SB-2 with the Securities and Exchange Commission to register the sale of 50,000 shares at a
minimum to a maximum of 300,000 shares of its common stock. The Registration Statement and Prospectus went effective September 18, 2000. The offering was closed on April 11, 2001 with
the issuance of 51,906 shares of common stock. The Company raised equity of $220,000 net of offering costs.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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, such as changes in competition, market interest
rates, economic conditions and regulations. Although the Company has based its plans and projections on certain assumptions, there

9

---

can be no assurances that its assumptions will be correct, or that its plans and projections can be achieved.

FINANCIAL CONDITION

Assets

Total assets of Northern Star Financial, Inc. at March 31, 2001 were $36.4 million compared to $23.0 million in June 30,
2000, an increase of $13.4 million. Net loans increased to $22.4 million on March 31, 2001 or $5.8 million higher than the fiscal year ending June 30, 2000 total of
$16.6 million. Loans to consumers led the loan growth, increasing $5.0 million to $10.7 million at March 31, 2001. Commercial and agricultural loans increased
$1.5 million in the first nine months of fiscal year 2001 while real estate loans increased $599 thousand to $8.45 million during the nine months ended March 31, 2001.
Loans held for sale increased $1.2 million over the same period of the prior fiscal year. There was a decline in commercial real estate receivables which is reflective of seasonal changes in
construction lending activity while the increase in residential real estate lending is the result of increased home buying activity and refinancing taking place as a result of lower interest rates.

Investment
securities increased $3.4 million from $4.2 million at June 30, 2000 to $7.6 million at March 31, 2001. At March 31, 2001, the
Company had $3.0 million in Federal Funds sold compared to $.3 million at the fiscal year ending June 30, 2000. Total earning assets increased to $34.7 million, or 61%
above the fiscal year ending June 30, 2000 total of $21.6 million.

Liabilities

Total liabilities at March 31, 2001 were $33.6 million compared to $20.2million at June 30, 2000, a $13.4 million increase.
Deposits at March 31, 2001 were $30.7 million compared to $18.2 million at June 30, 2000, an increase of 69% or $12.5 million. During the first nine months of the
fiscal year ending June 30, 2001, non-interest bearing deposits decreased $390 thousand to $1.1 million, while interest bearing deposits increased $12.4 million
to $29.0million. While the total number of non-interest bearing accounts continued to grow during the period, the decrease in non-interest bearing deposit account balances was
attributed to activity in a few accounts that tend to have greater balance fluctuations. The current low interest rate environment has made it more difficult to attract new deposits at favorable
rates. The Bank strives to be competitive in pricing deposits, and continues to offer attractive time deposit rates to fund its high loan growth. The Bank has been successful in retaining the majority
of funds received through certificate campaigns.

At
March 31, 2001 short-term borrowings were $2.9 million, $925 thousand more than the $2.0 million at June 30, 2000.
$2.8 million of this debt was incurred by the Bank through the Federal Home Loan Bank of Des Moines and was utilized to fund interest earning assets.

Non-performing Assets

Non-performing assets of Northern Star Financial, Inc. consist of non-accrual loans, loans past due 90 days or more and
property acquired through foreclosure or repossession. Non-performing assets totaled $53 thousand on March 31, 2001. The Bank did not report any assets in a
non-performing status as of June 30, 2000. On March 31, 2001, non-accrual loans totaled $24 thousand and loans past due 90 days or more were
$29 thousand.

An
allowance for loan losses is maintained by Northern Star Bank at what management considers to be a realistic level consistent with the level and type of loans, and taking into
consideration the non-accrual and past due loans detailed above. Northern Star Bank's allowance for loan losses of $230 thousand was 1.0% of total loans on March 31, 2001
compared with $182 thousand, or 1.08% of total loans, June 30, 2000.

10

---

RESULTS OF OPERATIONS

Net Operating Results

For the quarter ended March 31, 2001, Northern Star's net loss was $8.4 thousand compared with a net loss of $107 thousand for the same
period of 2000. Basic loss per share decreased to $0.02 for the third quarter ending March 31, 2001 from $0.25 for the third quarter ending March 31, 2000. For the nine months ended
March 31, 2001, the basic loss per share was $0.29 compared to $1.16 loss for the same period last year. The improvement in earnings was attributable to increases in net interest income and
non-interest income.

Net Interest Income

Net interest income during the nine months ended March 31, 2001 increased $208 thousand to $640 thousand, up 48% from $433 thousand
in the same period in 2000. Interest income on loans increased 162% to $1.4 million in the first nine months of 2001, an increase of $912 thousand over the comparable period in 2000.
During the first nine months of fiscal year 2001, income on investment securities was $251 thousand compared to $137 thousand during the first nine months of 2000. Interest expense paid
on deposits increased 245% from $305 thousand in the first nine months of 2000 to $1,053 thousand in the same period of time during fiscal year 2001. For the nine months ended
March 31, 2001, interest income on Federal funds sold increased $56 thousand and interest expense on long-term borrowings increased $127 thousand over the comparable
period in fiscal year 2000. The net interest margin was 4.67% during the first nine months of fiscal year 2000 compared to 2.99% in the same period in fiscal year 2001. The change in net interest
margin is due in part to the interest rate earned on variable rate loans repricing downward quicker than interest paid on time deposits. A significant portion of time deposits are expected to reprice
favorably in the next six months if the current interest rate environment remains in its present form.

Provision for Loan Losses

The provision for loan losses during the quarter ended March 31, 2001 was $12 thousand, down $13 thousand, or 108%, from the respective
period in fiscal year 2000. The higher provisions made in the fiscal year 2000 period was related to higher loan volumes.

Non-Interest Income

For the three months ended March 31, 2001, non-interest income was $79 thousand, up $68 thousand, or 585%, compared to the
respective period in 2000. This increase was attributable primarily to a $14 thousand increase in gain on sale of residential mortgage loans, a $34 thousand increase in gain on sale of
securities and a $20 thousand increase in service charges on deposit accounts.

For
the nine months ended March 31, 2001, non-interest income was $139 thousand, an increase of 169% when compared to the same period of 2000. The increase
was partially attributable to a 100% increase in the gain on sale of residential mortgage loans and a 206% increase in service charges on deposit accounts. Service charges on deposit accounts included
an increase in the volume of deposit accounts as well as income from charges for insufficient funds and overdrafts.

Non-Interest Expense

Non-interest expense during the third quarter of 2001increased $25 thousand, or 9.6%, to $284 thousand compared with
$259 thousand during the comparable period of the prior fiscal year. This increase was attributable primarily to a 7.5% increase in salaries and employee benefits. The increase in salaries is a
result of higher salaries along with an increased cost for employee benefits.

11

---

Non-interest expense during the first nine months of fiscal year 2001 increased $40 thousand, or 5.2%, to $818 thousand when compared with the same period of
fiscal year 2000. The increase was attributable primarily to a $24 thousand increase in salaries and employees benefits.

Income Tax

The effective income tax rate for the Company was 0% for the three and nine month periods ending March 31, 2001. The expected future tax benefit of the
net operating loss was approximately $3 and $42 thousand respectively and was reduced by a deferred tax asset valuation allowance in accordance with generally accepted accounting principles.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Interest Sensitivity

Liquidity represents an institution's ability to meet present and future financial obligations through either the sale or maturity of existing assets or the
acquisition of additional funds through liability management. Liquid assets include cash, interest- bearing deposits with banks, federal funds sold, investments, and loans maturing within one year. As
a result of Northern Star Bank's management of liquid assets and the ability to generate liquidity through liability funding, management believes that the Bank maintains overall liquidity sufficient
to satisfy its depositors' requirements and meet its customers' credit needs.

At
March 31, 2001, Northern Star Financial, Inc. had $3.3 million in undisbursed loan commitments and expects to have sufficient funds available to meet both
current and future loan commitments. Funding is expected to be in the normal course of business primarily through loan repayments, prepayments, and deposit growth. As additional funding, Northern Star
Bank holds $7.6 million in investment securities. The entire amount of the investment securities portfolio is classified as available for sale. Approximately $1 million of the investment
securities portfolio will mature in less than one year, with an additional $1.6 million maturing between 1 and 5 years.

Northern
Star Financial, Inc. has established an unsecured $100,000 revolving line of credit from a correspondent bank in Minneapolis, Minnesota. The interest rate to be paid
under the terms of the line of credit is equal to the prime rate of interest plus one-quarter of one percent (1/4) per annum. As of March 31, 2001,
$100 thousand had been advanced on the line.

Capital Resources

Total shareholders' equity amounted to $2.75 million at March 31, 2001 compared to $2.79 million at June 30, 2000. In September of
2000, Northern Star Financial, Inc. undertook an offering of a minimum of 50,000 and a maximum 0f 300,000 shares of common stock. On the closing date of the offering, April 11, 2001, the
Company issued 51,906 shares at a cost of $10.50 per share. Net of expenses of $325 thousand, the offering provided the Company with $220 thousand in additional equity. Following the
close of the offering the Company injected $400,000 of additional capital into the Bank to support its continued growth and development. Northern Star Bank's average tier 1 leverage capital ratio was
7.70%, with a tier 1 risk-based capital ratio of 10.46% and a total risk-based capital ratio of 11.39%, at March 31, 2001. Each of these ratios is above the level
required to be classified for regulatory purposes as "well capitalized".

Quantitative and Qualitative Disclosures about Market Risk

Northern Star Financial, Inc.'s primary market risk is exposure to interest rate risk. Fluctuations in interest rates will impact both the level of
interest income and interest expense and the market value of Northern Star Financial, Inc.'s interest-earning assets and interest-bearing liabilities. Our ability to

12

---

make a profit largely depends on our net interest income, which could be negatively affected by changes in interest rates. Net interest income is the difference between:



In
a rising interest rate environment, an asset-sensitive position (a positive gap ratio) is generally more advantageous since assets re-price sooner than liabilities.
Conversely, in a declining interest rate environment, a liability-sensitive position (a negative gap ratio) is generally more advantageous as interest-bearing liabilities re-price sooner
than earning assets. In our case, an increase in interest rates would result in an increase in net interest income, while a decline in interest rates would result in a decrease in net interest income.
This, however, assumes that all other factors affecting income remain constant.

Fluctuations
in interest rates are not predictable or controllable. We have attempted to structure our asset and liability management strategies to mitigate the impact of changes in
market interest rates on our net interest income. However, there can be no assurance that we will be able to manage interest rate risk so as to avoid significant adverse effects in our net interest
income.

There
were no material changes in Northern Star Bank's market risk management strategy during the nine months ended March 31, 2001. Northern Star Bank is monitoring its
interest rate risk in view of decreases in both short and long-term interest rates. Based on current assessments and the level of changes in interest rates, the effects are not expected to
be material.

13

---

AVERAGE BALANCES, YIELDS AND RATES

The following table sets forth, for the thee months and nine months ended March 31, 2001 and 2000, 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                                                             |                                            |                                    | 2,713,290
|                                                                                 | 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    

|                                                                                 |                                 | 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 liabilties |                                    |           
|                                                                                 |                                 |                                    |           
|                                                                                 |                                 | Total liabilities                  |           
|Stockholders' Equity                                                             |                                 |                                    | 2,793,875 
|                                                                                 |                                 | Total liabilites and stockholders' |           
|equity                                                                           |                                 | $                                  | 30,007,932
|                                                                                 |                                 |                                    |           
|Net Interest Spread                                                              |                                 |                                    |           
|Net Interest Income/Margin                                                       |                                 |                                    |           
|                                                                                 |                                 |                                    |           
|Ratio of average interest-earning assets to average interest-bearing liabilities |                                 |                                    | 1.12X     

14

---

LOAN PORTFOLIO

Total gross loans outstanding at March 31, 2001, including loans held for sale, was $24,230,271.

The
following table summarizes the composition of the loan portfolio as of March 31, 2001 and June 30, 2000:

|                                |  |   |            |   |        | 4June 30, 2000 |  
|------------------------------- |  | - | ---------- | - | ------ | -------------- | -
|
|
|
|Commercial & Agricultural       |  | $ | 4,511,687  |   | 18.73  | %              | $
|Real Estateconstruction        |  |   | 1,947,769  |   | 8.09   | %              |  
|Real Estatemortgages           |  |   | 6,500,142  |   | 26.99  | %              |  
|Consumer Loans                  |  |   | 10,686,461 |   | 44.37  | %              |  
|Lease Financing                 |  |   | 440,230    |   | 1.82   | %              |  
|                                |  |   |            |   |        |                |  
|Total loans                     |  | $ | 24,086,289 |   | 100.00 | %              | $
|                                |  |   |            |   |        |                |  
|Net Deferred Loans fees/(costs) |  |   | 143,982    |   |        |                |  
|Less: Allowance for Loan Loss   |  |   | (230,337   | ) |        |                |  
|                                |  |   |            |   |        |                |  
|Total Net Loans                 |  | $ | 23,999,934 |   |        |                | $
|                                |  |   |            |   |        |                |  

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

15

---

repay obligations with or without prepayment penalties. The following table summarizes loan maturities, by type at March 31, 2001 and June 30, 2000.

|                                   |                         | As of March 31, 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 |                     

|                                   |                         | As of June 31, 2000
|---------------------------------- | ----------------------- | -------------------
|
|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 an appropriate level based on management's analysis of the potential risk in the loan portfolio.

16

---

At March 31, 2001, the allowance for loan losses was $230,337 or 1% of $22,371,462 in loan receivables (net of loans held for sale). The provision for loan losses was made
primarily as a result of management's assessment of general loan loss risk as the Bank's loan portfolio increased.

|                                                                                          |  | Nine Months Ended
March 31, 2001 |         | Year Ended
June 30, 2000 |  
|----------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ------------------------ | -
|Balance at Beginning of Period                                                            |  | $                                | 181,500 |                          | $
|Charge-offs                                                                               |  |                                  | (7,267  | )                        |  
|Recoveries                                                                                |  |                                  | 3,590   |                          |  
|Net Charge Offs                                                                           |  |                                  | (3,677  | )                        |  
|Additions charged to operations                                                           |  | $                                | 52,514  |                          |  
|                                                                                          |  |                                  |         |                          |  
|Balance at End of Period                                                                  |  | $                                | 230,337 |                          | $
|                                                                                          |  |                                  |         |                          |  
|Ratio of net charge-offs during the period to average loans outstanding during the period |  |                                  | 0.02    | %                        |  

At
March 31, 2001 and June 30, 2000 the allowance was allocated as follows:

|                          |  | For the Three Months Ended
March 31, 2001 |         | For the Three Months Ended
June 30, 2000 |       
|------------------------- |  | ----------------------------------------- | ------- | ---------------------------------------- | ------
|
|Commercial & Agricultural |  | $                                         | 19,684  |                                          | 18.73 
|Real Estateconstruction  |  |                                           | 10,996  |                                          | 8.09  
|Real Estatemortgages     |  |                                           | 32,848  |                                          | 26.99 
|Consumer loans            |  |                                           | 59,660  |                                          | 44.37 
|Lease Financing           |  |                                           | 12,968  |                                          | 1.82  
|Unallocated               |  |                                           | 94,181  |                                          |      
|                          |  |                                           |         |                                          |       
|Total                     |  | $                                         | 230,337 |                                          | 100.00
|                          |  |                                           |         |                                          |       

17

---

DEPOSITS

The following is a table of deposits by category at March 31, 2001 and June 30, 2000.

|                                  |  | As of March 31, 2001 |           
|--------------------------------- |  | -------------------- | ----------
|
|Demand Deposit                    |  | $                    | 1,101,394 
|Now                               |  |                      | 653,611   
|Savings                           |  |                      | 6,645,004 
|Time Accounts less than $100,000  |  |                      | 17,760,972
|Time Accounts of $100,000 or more |  |                      | 3,990,865 
|Accrued Interest Payable          |  |                      | 501,558   
|                                  |  |                      |           
|Total Deposits                    |  | $                    | 30,653,404
|                                  |  |                      |           

|                                  |  | As of June 30, 2000 |           
|--------------------------------- |  | ------------------- | ----------
|
|Demand Deposit                    |  | $                   | 1,491,958 
|Now                               |  |                     | 387,797   
|Savings                           |  |                     | 5,786,894 
|Time Accounts less than $100,000  |  |                     | 8,271,953 
|Time Accounts of $100,000 or more |  |                     | 2,129,895 
|Accrued Interest Payable          |  |                     | 125,434   
|                                  |  |                     |           
|Total Deposits                    |  | $                   | 18,193,931
|                                  |  |                     |           

Maturity
distribution of our time deposits is as follows:

|                     |                                   | 3 Months
or Less |   | Over 3
Months thru
12 Months |           | Over 12
Months |           | Total     
|-------------------- | --------------------------------- | ---------------- | - | ---------------------------- | --------- | -------------- | --------- | ----------
|As of March 31, 2001 |                                   |                  |   |                              |           |                |           |           
|                     | Time Accounts less than $100,000  |                  | $ | 3,419,611                    |           | $              | 8,275,081 |           
|                     | Time Accounts of $100,000 or more |                  |   | 1,116,663                    |           |                | 1,855,714 |           
|                     |                                   |                  |   |                              |           |                |           |           
|                     |                                   | Total            |   | $                            | 4,536,274 |                | $         | 10,130,795
|                     |                                   |                  |   |                              |           |                |           |           

|                    |                                   | 3 Months
or Less |   | Over 3
Months thru
12 Months |         | Over 12
Months |           | Total    
|------------------- | --------------------------------- | ---------------- | - | ---------------------------- | ------- | -------------- | --------- | ---------
|As of June 30, 2000 |                                   |                  |   |                              |         |                |           |          
|                    | Time Accounts less than $100,000  |                  | $ | 827,363                      |         | $              | 5,115,132 |          
|                    | Time Accounts of $100,000 or more |                  |   |                             |         |                | 1,409,895 |          
|                    |                                   |                  |   |                              |         |                |           |          
|                    |                                   | Total            |   | $                            | 827,363 |                | $         | 6,525,027
|                    |                                   |                  |   |                              |         |                |           |          

18

---



PART II  OTHER INFORMATION

|Item 1. |  | Legal Proceedings                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |  | There are no pending legal proceedings to which Northern Star Financial, Inc. or its subsidiaries are parties in other than nonmaterial legal proceedings occurring in the ordinary course of business.
|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                                                                                                                                                                                                   
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                                                                                                       
|        |  | a)                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                        
|        |  | b)                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                        

19

---



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 8, 2001 |  | By:                          
|                  |  |                              
|Date: May 8, 2001 |  | By:                          
|                  |  |                              

20

---

QuickLinks