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United StatesSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-Q

|                |  |                                                                                        
|--------------- |  | ---------------------------------------------------------------------------------------
|X IN BALLOT BOX |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ending June 30, 2002

OR

|                |  |                                                                                         
|--------------- |  | ----------------------------------------------------------------------------------------
|OPEN BALLOT BOX |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
 to



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NORTHERN STATES FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)

|                                  |  |                                  |  |                                                
|--------------------------------- |  | -------------------------------- |  | -----------------------------------------------
|Delaware
(State of Incorporation) |  | 0-19300
(Commission
File Number) |  | 36-3449727
(I.R.S. Employer
Identification No.)

1601 North Lewis Avenue
Waukegan, Illinois 60085
(847) 244-6000
(Address, including zip code, and telephone number, including
area code, of principal executive office)



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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for 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:     XXX
                
NO:

4,368,255 shares of common stock were outstanding
as of June 30, 2002



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TABLE OF CONTENTS



|                              |                                                                                               |                                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | INDEPENDENT ACCOUNTANTS REPORT                      
|                              |                                                                                               | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDS                                                                       
|                              | ITEM 2. CHANGES IN SECURITIES AND USE PROCEEDS                                               
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|                              | SIGNATURES                                                                                   



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NORTHERN STATES FINANCIAL CORPORATION AND SUBSIDIARY
FORM 10-Q
JUNE 30, 2002
INDEX

|                              |                                                                                               |                                                       |  |             |   | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  | ----------- | - | 
|                              |                                                                                               |                                                       |  | Page Number
|                              |                                                                                               |                                                       |  |            
|PART I. FINANCIAL INFORMATION |                                                                                               |                                                       |  |            
|                             
|                              | Item 1. Financial Statements                                                                  |                                                       |  |             |  
|                             
|                              |                                                                                               | Independent Accountants Report                       |  |             | 2 | 
|                             
|                              |                                                                                               | Condensed Consolidated Financial Statements and Notes |  |             | 3 | 
|                             
|                              | Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                       |  | 8           |  
|                             
|                              | Item 7A. Quantitative and Qualitative Disclosures
About Market Risk                           |                                                       |  | 17          |  
|                             
|                             
|PART II. OTHER INFORMATION    |                                                                                               |                                                       |  |            
|                             
|                              | Item 1. Legal Proceeds                                                                        |                                                       |  | 19          |  
|                             
|                              | Item 2. Changes in Securities and Use Proceeds                                                |                                                       |  | 19          |  
|                             
|                              | Item 3. Defaults 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          |  

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NORTHERN STATES FINANCIAL CORPORATION
FORM 10-Q
JUNE 30, 2002












INDEPENDENT ACCOUNTANTS REPORT

Board of Directors and Stockholders
Northern States Financial Corporation
Waukegan, Illinois

We have reviewed the condensed consolidated balance sheet of NORTHERN
STATES FINANCIAL CORPORATION as of June 30, 2002 and the condensed consolidated
statements of income for the three and six month periods ended June 30, 2002
and 2001 and the condensed consolidated statements of cash flows for the six
month periods ended June 30, 2002 and 2001. These financial statements are the
responsibility of the Companys management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States
of America, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America.

/s/   Crowe, Chizek and Company LLP

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Oak Brook, Illinois
July 19, 2002

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NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2002 and December 31, 2001
(In thousands of dollars) (Unaudited)

|                                                                                   |                                 |                                            |         |          |         |   |              |         |         | 
|---------------------------------------------------------------------------------- | ------------------------------- | ------------------------------------------ | ------- | -------- | ------- | - | ------------ | ------- | ------- | 
|                                                                                   |                                 |                                            |         | June 30, |         |   | December 31, |        
|                                                                                   |                                 |                                            |         | 2002     |         |   | 2001         |        
|                                                                                   |                                 |                                            |         |          |         |   |              |        
|                                                                                   |                                 | Assets                                     |         |          |         |   |              |         |         | 
|Cash and due from banks                                                            |                                 | $                                          | 16,297  |          |         | $ | 18,172       |        
|Interest bearing deposits in financial institutions -
maturities less than 90 days |                                 |                                            | 128     |          |         |   | 143          |        
|Federal funds sold                                                                 |                                 |                                            | 28,879  |          |         |   | 16,000       |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   | Total cash and cash equivalents |                                            |         | 45,304   |         |   |              | 34,315  |        
|Securities available for sale                                                      |                                 |                                            | 201,041 |          |         |   | 213,982      |        
|Loans and leases                                                                   |                                 |                                            | 334,210 |          |         |   | 326,680      |        
|Less: Allowance for loan losses                                                    |                                 |                                            | (3,664  | )        |         |   | (3,822       | )      
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   | Loans, net                      |                                            |         | 330,546  |         |   |              | 322,858 |        
|Federal Home Loan Bank stock                                                       |                                 |                                            | 1,691   |          |         |   | 1,647        |        
|Office buildings and equipment, net                                                |                                 |                                            | 5,496   |          |         |   | 5,576        |        
|Other real estate owned                                                            |                                 |                                            | 2,022   |          |         |   | 2,022        |        
|Accrued interest receivable and other assets                                       |                                 |                                            | 5,557   |          |         |   | 6,838        |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   | Total assets                    |                                            | $       | 591,657  |         |   | $            | 587,238 |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   |                                 | Liabilities and Stockholders Equity       |         |          |         |   |              |         |         | 
|Liabilities                                                                        |                                 |                                            |         |          |         |   |              |        
|Deposits                                                                           |                                 |                                            |         |          |         |   |              |        
|                                                                                   | Demand  noninterest bearing    |                                            | $       | 46,190   |         |   | $            | 48,092  |        
|                                                                                   | Interest bearing                |                                            |         | 379,761  |         |   |              | 358,940 |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   |                                 | Total deposits                             |         |          | 425,951 |   |              |         | 407,032 | 
|Securities sold under repurchase agreements
and other short-term borrowings        |                                 |                                            | 78,806  |          |         |   | 86,170       |        
|Federal Home Loan Bank advances                                                    |                                 |                                            | 5,000   |          |         |   | 10,000       |        
|Advances from borrowers for taxes and insurance                                    |                                 |                                            | 589     |          |         |   | 743          |        
|Accrued interest payable and other liabilities                                     |                                 |                                            | 4,844   |          |         |   | 6,964        |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   |                                 | Total liabilities                          |         |          | 515,190 |   |              |         | 510,909 | 
|Stockholders Equity                                                               |                                 |                                            |         |          |         |   |              |        
|Common stock                                                                       |                                 |                                            | 1,789   |          |         |   | 1,788        |        
|Additional paid-in capital                                                         |                                 |                                            | 11,584  |          |         |   | 11,551       |        
|Retained earnings                                                                  |                                 |                                            | 64,834  |          |         |   | 63,110       |        
|Accumulated
other comprehensive income (loss), net                                 |                                 |                                            | 985     |          |         |   | (120         | )      
|Treasury stock, at cost                                                            |                                 |                                            | (2,725  | )        |         |   | 0            |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   | Total stockholders equity      |                                            |         | 76,467   |         |   |              | 76,329  |        
|                                                                                   |                                 |                                            |         |          |         |  
|                                                                                   |                                 | Total liabilities and stockholders equity |         | $        | 591,657 |   |              | $       | 587,238 | 
|                                                                                   |                                 |                                            |         |          |         |  

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three months and six months ended June 30, 2002 and 2001
(In thousands of dollars, except per share data) (Unaudited)

|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |        |       |        | 
|--------------------------------------------------- | --------------------------------------------------- | ------------------------------ | ------------------------- | ----- | ------------------ | ----- | ----- | ---------------- | ----- | ----- | -------- | ------ | ----- | -------- | ----- | ------ | ----- | ------ | 
|                                                    |                                                     |                                |                           |       | Three months ended |       |       | Six months ended |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |      
|                                                    |                                                     |                                |                           |       | June 30,           |       |       | June 30,         |       |       | June 30, |        |       | June 30, |      
|                                                    |                                                     |                                |                           |       | 2002               |       |       | 2001             |       |       | 2002     |        |       | 2001     |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |      
|Interest income                                     |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |       
|                                                    | Loans (including fee income)                        |                                | $                         | 5,590 |                    |       | $     | 6,420            |       |       | $        | 11,020 |       |          | $     | 13,100 |      
|                                                    | Securities                                          |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |        |      
|                                                    |                                                     | Taxable                        |                           |       | 2,204              |       |       |                  | 2,529 |       |          |        | 4,613 |          |       |        | 5,057 |       
|                                                    |                                                     | Exempt from federal income tax |                           |       | 110                |       |       |                  | 162   |       |          |        | 232   |          |       |        | 331   |       
|                                                    | Interest bearing deposits in financial institutions |                                |                           | 1     |                    |       |       | 1                |       |       |          | 2      |       |          |       | 3      |      
|                                                    | Federal funds sold                                  |                                |                           | 59    |                    |       |       | 226              |       |       |          | 108    |       |          |       | 530    |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|                                                    |                                                     |                                | Total interest income     |       |                    | 7,964 |       |                  |       | 9,338 |          |        |       | 15,975   |       |        |       | 19,021 | 
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Interest expense                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |       
|                                                    | Time deposits                                       |                                |                           | 1,731 |                    |       |       | 3,001            |       |       |          | 3,655  |       |          |       | 6,161  |      
|                                                    | Other deposits                                      |                                |                           | 495   |                    |       |       | 804              |       |       |          | 999    |       |          |       | 1,736  |      
|                                                    | Other borrowings                                    |                                |                           | 581   |                    |       |       | 1,095            |       |       |          | 1,250  |       |          |       | 2,340  |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|                                                    |                                                     |                                | Total interest expense    |       |                    | 2,807 |       |                  |       | 4,900 |          |        |       | 5,904    |       |        |       | 10,237 | 
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Net interest income                                 |                                                     |                                | 5,157                     |       |                    |       | 4,438 |                  |       |       | 10,071   |        |       |          | 8,784 |       
|Provision for loan losses                           |                                                     |                                | 75                        |       |                    |       | 0     |                  |       |       | 150      |        |       |          | 0     |       
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Net interest income after provision for
loan losses |                                                     |                                | 5,082                     |       |                    |       | 4,438 |                  |       |       | 9,921    |        |       |          | 8,784 |       
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Noninterest income                                  |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |       
|                                                    | Service fees on deposits                            |                                |                           | 518   |                    |       |       | 409              |       |       |          | 996    |       |          |       | 749    |      
|                                                    | Trust income                                        |                                |                           | 183   |                    |       |       | 196              |       |       |          | 363    |       |          |       | 365    |      
|                                                    | Net gains on sales of securities                    |                                |                           | 0     |                    |       |       | 314              |       |       |          | 8      |       |          |       | 314    |      
|                                                    | Mortgage banking income                             |                                |                           | 43    |                    |       |       | 48               |       |       |          | 129    |       |          |       | 93     |      
|                                                    | Other operating income                              |                                |                           | 183   |                    |       |       | 163              |       |       |          | 343    |       |          |       | 320    |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|                                                    |                                                     |                                | Total noninterest income  |       |                    | 927   |       |                  |       | 1,130 |          |        |       | 1,839    |       |        |       | 1,841  | 
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Noninterest expense                                 |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |        |       |          |       |       
|                                                    | Salaries and employee benefits                      |                                |                           | 1,676 |                    |       |       | 1,611            |       |       |          | 3,318  |       |          |       | 3,126  |      
|                                                    | Occupancy and equipment, net                        |                                |                           | 331   |                    |       |       | 323              |       |       |          | 678    |       |          |       | 704    |      
|                                                    | Data processing                                     |                                |                           | 147   |                    |       |       | 141              |       |       |          | 305    |       |          |       | 273    |      
|                                                    | Other operating expenses                            |                                |                           | 663   |                    |       |       | 529              |       |       |          | 1,250  |       |          |       | 1,132  |      
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|                                                    |                                                     |                                | Total noninterest expense |       |                    | 2,817 |       |                  |       | 2,604 |          |        |       | 5,551    |       |        |       | 5,235  | 
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Income before income taxes                          |                                                     |                                | 3,192                     |       |                    |       | 2,964 |                  |       |       | 6,209    |        |       |          | 5,390 |       
|Provision for income taxes                          |                                                     |                                | 1,098                     |       |                    |       | 983   |                  |       |       | 2,115    |        |       |          | 1,753 |       
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|Net income                                          |                                                     | $                              | 2,094                     |       |                    | $     | 1,981 |                  |       | $     | 4,094    |        |       | $        | 3,637 |       
|                                                    |                                                     |                                |                           |       |                    |       |       |                  |       |       |          |       
|                                                   
|Basic earnings per share                            |                                                     | $                              | 0.47                      |       |                    | $     | 0.44  |                  |       | $     | 0.92     |        |       | $        | 0.82  |       
|                                                   
|Diluted earnings per share                          |                                                     | $                              | 0.47                      |       |                    | $     | 0.44  |                  |       | $     | 0.92     |        |       | $        | 0.81  |       
|                                                   
|Comprehensive income                                |                                                     | $                              | 4,094                     |       |                    | $     | 2,215 |                  |       | $     | 5,199    |        |       | $        | 4,874 |       

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NORTHERN STATES FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2002 and 2001
(In thousands of dollars)(Unaudited)

|                                                 |                                                                            |                                                                     |                                                                             |       |                  |        |        |          |          |         |  
|------------------------------------------------ | -------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------------------------------- | ----- | ---------------- | ------ | ------ | -------- | -------- | ------- | -
|                                                 |                                                                            |                                                                     |                                                                             |       | Six months ended |       
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|                                                 |                                                                            |                                                                     |                                                                             |       | June 30,         |        |        | June 30, |         
|                                                 |                                                                            |                                                                     |                                                                             |       | 2002             |        |        | 2001     |         
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |        |        |          |         
|Cash flows from operating activities             |                                                                            |                                                                     |                                                                             |       |                  |        |        |         
|                                                 | Net income                                                                 |                                                                     | $                                                                           | 4,094 |                  |        | $      | 3,637    |         
|                                                 | Adjustments to reconcile net income to net cash from
operating activities: |                                                                     |                                                                             |       |                  |        |        |          |         
|                                                 |                                                                            | Depreciation                                                        |                                                                             |       | 188              |        |        |          | 230      |        
|                                                 |                                                                            | Net gains on sales of securities                                    |                                                                             |       | (8               | )      |        |          | (314     | )      
|                                                 |                                                                            | Federal Home Loan Bank dividends                                    |                                                                             |       | (44              | )      |        |          | (58      | )      
|                                                 |                                                                            | Provision for loan losses                                           |                                                                             |       | 150              |        |        |          | 0        |        
|                                                 |                                                                            | Deferred loan fees                                                  |                                                                             |       | 199              |        |        |          | (4       | )      
|                                                 |                                                                            | Amortization of mortgage servicing rights                           |                                                                             |       | 12               |        |        |          | 20       |        
|                                                 |                                                                            | Net change in interest receivable                                   |                                                                             |       | 578              |        |        |          | 806      |        
|                                                 |                                                                            | Net change in interest payable                                      |                                                                             |       | (2,049           | )      |        |          | (75      | )      
|                                                 |                                                                            | Net change in other assets                                          |                                                                             |       | (7               | )      |        |          | (71      | )      
|                                                 |                                                                            | Net change in other liabilities                                     |                                                                             |       | (58              | )      |        |          | 22       |        
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|                                                 |                                                                            |                                                                     | Net cash from operating activities                                          |       |                  | 3,055  |        |          |          | 4,193   |  
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|Cash flows from investing activities             |                                                                            |                                                                     |                                                                             |       |                  |        |        |         
|                                                 |                                                                            | Proceeds from maturities and calls of securities available for sale |                                                                             |       | 173,135          |        |        |          | 275,268  |        
|                                                 |                                                                            | Proceeds from sales of securities available for sale                |                                                                             |       | 4,436            |        |        |          | 314      |        
|                                                 |                                                                            | Purchases of securities available for sale                          |                                                                             |       | (162,819         | )      |        |          | (281,135 | )      
|                                                 |                                                                            | Change in loans made to customers                                   |                                                                             |       | (8,037           | )      |        |          | (10,669  | )      
|                                                 |                                                                            | Property and equipment expenditures                                 |                                                                             |       | (108             | )      |        |          | (48      | )      
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|                                                 |                                                                            |                                                                     | Net cash from investing activities                                          |       |                  | 6,607  |        |          |          | (16,270 | )
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|Cash flows from financing activities             |                                                                            |                                                                     |                                                                             |       |                  |        |        |         
|                                                 |                                                                            | Net increase (decrease) in:                                         |                                                                             |       |                  |        |        |          |          |        
|                                                 |                                                                            |                                                                     | Deposits                                                                    |       |                  | 18,919 |        |          |          | 23,594  |  
|                                                 |                                                                            |                                                                     | Securities sold under repurchase agreements
and other short-term borrowings |       |                  | (7,364 | )      |          |          | (6,017  | )
|                                                 |                                                                            |                                                                     | Advances from borrowers for taxes and insurance                             |       |                  | (154   | )      |          |          | (159    | )
|                                                 |                                                                            | Federal Home Loan Bank advances                                     |                                                                             |       | 0                |        |        |          | 10,000   |        
|                                                 |                                                                            | Repayment of Federal Home Loan Bank advances                        |                                                                             |       | (5,000           | )      |        |          | (10,000  | )      
|                                                 |                                                                            | Net proceeds from exercise of stock options                         |                                                                             |       | 21               |        |        |          | 8        |        
|                                                 |                                                                            | Purchases of treasury stock                                         |                                                                             |       | (2,725           | )      |        |          | 0        |        
|                                                 |                                                                            | Dividends paid                                                      |                                                                             |       | (2,370           | )      |        |          | (2,142   | )      
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|                                                 |                                                                            |                                                                     | Net cash from financing activities                                          |       |                  | 1,327  |        |          |          | 15,284  |  
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|Net change in cash and cash equivalents          |                                                                            |                                                                     | 10,989                                                                      |       |                  |        | 3,207  |         
|Cash and cash equivalents at beginning of period |                                                                            |                                                                     | 34,315                                                                      |       |                  |        | 31,187 |         
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       
|Cash and cash equivalents at end of period       |                                                                            | $                                                                   | 45,304                                                                      |       |                  | $      | 34,394 |         
|                                                 |                                                                            |                                                                     |                                                                             |       |                  |       

The accompanying notes are an integral part of these condensed consolidated financial statements.

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NORTHERN STATES FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2002

(Dollar amounts in thousands, except per share data)

(Unaudited)

Note 1  Basis of Presentation

The accompanying interim condensed consolidated financial statements are
prepared without audit and reflect all adjustments which are of a normal and
recurring nature and, in the opinion of management, are necessary to present
interim financial statements of Northern States Financial Corporation (the
Company) in accordance with accounting principles generally accepted in the
United States of America. The interim financial statements do not purport to
contain all the necessary financial disclosures covered by accounting principles
generally accepted in the United States of America that might otherwise be
necessary for complete financial statements.

To prepare financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and future results could differ. The allowance for loan losses and
status of contingencies are particularly subject to change.

The condensed consolidated balance sheets are as of June 30, 2002 and
December 31, 2001. The condensed consolidated statements of income are for the
three and six months ended June 30, 2002 and 2001. The condensed consolidated
statements of cash flows are for the six months ended June 30, 2002 and 2001.

The interim condensed financial statements should be read in conjunction
with the audited financial statements and accompanying notes (or notes
thereto) of the Company for the years ended December 31, 2001, 2000 and 1999.

The results of operations for the three and six month periods ended June
30, 2002, are not necessarily indicative of the results to be expected for the
full year.

Net income was utilized to calculate both basic and diluted earnings per
share for all periods presented. Information regarding weighted average shares
utilized in computing basic and diluted earnings per share is as follows:

|                                                          |  |                    |           |  |                  |  |           |          |  |  |           |  |  |  |           | 
|--------------------------------------------------------- |  | ------------------ | --------- |  | ---------------- |  | --------- | -------- |  |  | --------- |  |  |  | --------- | 
|                                                          |  | Three months ended |           |  | Six months ended | 
|                                                          |  |                    |           |  |                  | 
|                                                          |  | June 30,           |           |  | June 30,         |  |           | June 30, |  |  | June 30,  | 
|                                                          |  | 2002               |           |  | 2001             |  |           | 2002     |  |  | 2001      | 
|                                                          |  |                    |           |  |                  |  |           |          |  |  |           | 
|Average outstanding common shares                         |  |                    | 4,430,728 |  |                  |  | 4,461,755 |          |  |  | 4,451,363 |  |  |  | 4,461,755 | 
|Effect of stock options                                   |  |                    | 0         |  |                  |  | 6,152     |          |  |  | 0         |  |  |  | 5,970     | 
|                                                          |  |                    |           |  |                  |  |           |          |  |  |           | 
|Average outstanding shares for
diluted earnings per share |  |                    | 4,430,728 |  |                  |  | 4,467,907 |          |  |  | 4,451,363 |  |  |  | 4,467,725 | 
|                                                          |  |                    |           |  |                  |  |           |          |  |  |           | 

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NORTHERN STATES FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2002

(Dollar amounts in thousands, except per share data)

(Unaudited)

On April 17, 2002 it was announced that the Northern States Financial
Corporations Board of Directors had approved a stock repurchase program that
allows the Company to purchase up to 200,000 shares of Northern States Financial
Corporation stock either in open market or private transactions. At June 30,
2002, 104,000 shares of treasury stock been purchased that the Company carries
at cost.

Information related to stockholders equity was as follows:

|                              |  |          |           |  |              |   |           | 
|----------------------------- |  | -------- | --------- |  | ------------ | - | --------- | 
|                              |  | June 30, |           |  | December 31, |  
|                              |  | 2002     |           |  | 2001         |  
|                              |  |          |           |  |              |  
|Par value per share           |  | $        | 0.40      |  |              | $ | 0.40      | 
|Authorized shares             |  |          | 6,500,000 |  |              |   | 6,500,000 | 
|Issued and outstanding shares |  |          | 4,368,255 |  |              |   | 4,469,755 | 

Note 2  Commitments, Off-Balance Sheet Risk and Contingencies

At June 30, 2002 and December 31, 2001, the contract amount of the
Companys off-balance sheet commitments were as follows:

|                                                      |               |       |       |          |         |   |              |        |         | 
|----------------------------------------------------- | ------------- | ----- | ----- | -------- | ------- | - | ------------ | ------ | ------- | 
|                                                      |               |       |       | June 30, |         |   | December 31, |       
|                                                      |               |       |       | 2002     |         |   | 2001         |       
|                                                      |               |       |       |          |         |   |              |       
|Unused lines of credit and commitments to make loans: |               |       |       |          |         |   |              |       
|                                                      | Fixed rate    |       | $     | 38,318   |         |   | $            | 10,446 |        
|                                                      | Variable rate |       |       | 83,092   |         |   |              | 89,831 |        
|                                                      |               |       |       |          |         |  
|                                                      |               | Total |       | $        | 121,410 |   |              | $      | 100,277 | 
|                                                      |               |       |       |          |         |  
|Standby letters of credit                             |               | $     | 3,831 |          |         | $ | 4,730        |       

Since many commitments to make loans expire without being used, the amounts
above do not necessarily represent future cash commitments. Collateral obtained
upon exercise of the commitments is determined using managements credit
evaluation of the borrower, and may include commercial and residential real
estate and other business and consumer assets.

The Company also has Community Reinvestment Act (CRA) investment
commitments outstanding of $1,000. The commitment is to be funded over seven
years.

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NORTHERN STATES FINANCIAL CORPORATION




MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion focuses on the consolidated financial condition
of the Northern States Financial Corporation (the Company) at June 30, 2002
and the consolidated results of operations for the three and six month periods
ended June 30, 2002, compared to the same periods of 2001. The purpose of this
discussion is to provide a better understanding of the condensed consolidated
financial statements and the operations of its subsidiary, the Bank of Waukegan
(the Bank). This discussion should be read in conjunction with the interim
condensed consolidated financial statements and notes thereto included herein.

The statements contained in this managements discussion and analysis that
are not historical facts are forward-looking statements subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company cautions readers of this report that a number of important factors
could cause the Companys actual results subsequent to June 30, 2002 to differ
materially from those expressed in any such forward-looking statements.

FINANCIAL CONDITION

The consolidated total assets for the Company were $591.7 million at June
30, 2002, increasing $4.4 million from the Companys year-end, December 31,
2001.

The Company had $28.9 million in federal fund sold at June 30, 2002, as
compared to $16.0 at December 31, 2001. The Company on a daily basis invests
excess cash into federal funds sold. Federal funds sold is a source of
liquidity to the Company and will fluctuate from day to day.

The carrying value of securities available for sale at June 30, 2002 was
$201.0 million decreasing by $12.9 million from the previous year-end. During
the first six months of 2002 market conditions caused the fair value of the
securities to increase $1.8 million. The statement of cash flows, however,
shows that during the six months ended June 30, 2002 $173.1 million in
securities were called or matured while only $162.8 million in securities were
purchased causing the securities portfolio to decrease. Also contributing to
the decrease in securities were sales of securities that occurred during the
first quarter of 2002. The Company sold $4.4 million of securities classified
as available for sale and realized gains of $8,000. Most of the Companys
mortgage-backed securities, consisting of many small issues that were no longer
cost effective to administer, were sold. A U.S. Government agency security
with an amortized cost of $1.0 million was also sold at a small gain. The
funds derived from the sale of the agency security were used to purchase a like
security without call provisions that earned a better yield. Much of the net
proceeds from securities activity during the first half of 2002 were used to
fund loan growth.

The Companys loan and lease portfolio at June 30, 2002 was $334.2
million, an increase of $7.5 million from December 31, 2001. Real
estate-construction loans continued to grow and were $4.8 million greater than
at the previous year-end. Home equity loans increased by $3.4 million and
remain popular with consumers as the interest paid on the home equity loan may
be used as a tax deduction. A decline in commercial loans of $9.7 million was
offset by an increase to real estate loans of $9.8 million.

At June 30, 2002 deposits at the Company increased $18.9 million from
December 31, 2001. The increase was in time deposits $100,000 and over, which
increased $22.4 million from year-end. Most of

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

the growth in time deposits, $100,000 and over was from public entities. The
Company is located in the county seat and accepts deposits from local
municipalities. The first half of property taxes were paid in early
June 2002
and resulted in public depositors investing their funds into time deposits.

Securities sold under repurchase agreements (repurchase agreements) and
other short-term borrowings at the Company decreased $7.4 million from December
31, 2001 to $78.8 million at June 30, 2002. These funds mainly consist of
repurchase agreements that are offered through an overnight repurchase
agreement product and a term product with maturities from 7 days to one year.
Commercial customers have increasingly placed their funds into repurchase
agreements as repurchase agreements provide the commercial customer with added
security for their funds in the form of an investment that is pledged by the
Company. Repurchase agreements also provide a source of funds to the Company
that do not increase reserve requirements with the Federal Reserve Bank or
create an expense relating to FDIC insurance and, therefore, are less costly to
the Company. At June 30, 2002 securities sold under repurchase agreements to
related parties totaled $49.6 million.

On June 30, 2002 the Company had a term advances from the Federal Home
Loan Bank in the amount of $5.0 million declining from $10.0 million at
December 31, 2001. During the first quarter of 2002, $5.0 million was paid
down on the advances.

Total stockholders equity increased $138,000 during the six months ended
June 30, 2002. Stockholders equity increased by net income of $4,094,000, plus
the adjustment in the valuation allowance for the market value of securities
available for sale, net of tax, of $1,105,000, plus $21,000 due to the exercise
of 2,500 stock options pursuant to the Omnibus Incentive Plan, plus $13,000
derived from the tax benefit from the exercise of the 2,500 stock options. At
June 30, 2002 no stock options remained outstanding. These increases were
partially offset by the repurchase of 104,000 shares of the Companys common
stock as treasury stock for $2,725,000 and payment of cash dividends of
$2,370,000 on June 1, 2002.

The tier 1 capital to average asset ratio at June 30, 2002 was 13.65% and
the total capital to asset ratio, on a risk adjusted basis, amounted to 19.72%,
exceeding the minimum required to be capitalized under prompt corrective action
regulations, which minimums are 5.00% and 10.00%. Book value per share, was
$17.51 at June 30, 2002 as compared to $17.08 at December 31, 2001. On June
30, 2002, the Company and its subsidiary were in compliance with all applicable
regulatory capital requirements.

RESULTS OF OPERATIONS

NET INCOME

The consolidated net income for the quarter ended June 30, 2002 was
$2,094,000, an increase of $113,000 compared to net income of $1,981,000 for
the same period the previous year. The annualized return on average assets was
1.47% for the quarter, an increase from a return on average assets for the same
quarter the previous year of 1.44%. The consolidated net income for the six
months ended June 30, 2002 was $4,094,000, an increase of $457,000 over the
first half of 2001. The annualized return on average assets for the first six
months of 2002 was 1.43%, increasing from the return on average assets for the
same period the previous year of 1.34%.

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

During 2001s second quarter, the Company sold an equity investment that
resulted in a gain of $314,000. When comparing the second quarter 2002 to the
same quarter of 2001after discounting this one-time event, net income for the
three months ended June 30, 2002 would have been $305,000 or 17.05% greater
than the same three months last year.

NET INTEREST INCOME

Net interest income, the difference between interest income earned on
average interest earning assets and interest expense on average interest
bearing liabilities, increased $719,000 or 16.20% during the three months ended
June 30, 2002 compared to the same three months in 2001.

One of the major factors affecting net interest income is change to
interest rates. Interest rates during the second quarter of 2002 remained
stable as evidenced by the prime lending rate that remained at 4.75% during the
quarter. This contrasts to the second quarter of 2001 when interest rates
declined as the prime lending rate began the quarter at 8.00% and because of
changes to the federal discount rate moved downward three times ending the
quarter at 6.75%, a decline of 125 basis points.

When comparing the three months ended June 30, 2002 to the same period
last year, rates on deposits and borrowings declined faster than rates earned
on interest earning assets. This had a positive effect on the second quarter
2002 net interest income compared to last year. Table 1, Analysis of Average
Balance and Tax Equivalent Rates for the Three Months ended June 30, 2002 and
2001 shows that during the second quarter of 2002, yields on interest earning
assets were 128 basis points lower than for the same period last year. Rates
paid on deposits and borrowings, however, were 211 basis points lower in the
second quarter of 2002 compared to the same quarter of 2001.

For both the second quarters of 2002 and 2001 more than half of the Banks
loan portfolio had variable rates. The stable rate environment in 2002 has
kept rates earned on these loans constant. In the meantime, time deposits that
were opened one to two years ago, when rates were higher, and matured during
2002 renewed at the lower rates contributing to deposit rates declining to a
greater extent than interest earning asset rates.

For similar reasons net interest income for the six months ended June 30,
2002 increased $1,287,000 compared to the same period of 2001. Interest rates
during the first 6 months of 2002 remained stable with the prime rate remaining
at 4.75% during the period. During the first six months of 2001 the prime rate
fell 275 basis points, starting out the year at 9.50% and ending at June 30,
2001 at 6.75%. Table 2, Analysis of Average Balance and Tax Equivalent Rates
for the Six Months ended June 30, 2001 and 2000 shows that yields on interest
earning assets declined 151 basis points during the first half of 2002 compared
to last year. Table 2 shows that rates paid on interest bearing liabilities
decreased to a greater extent, declining 227 basis points during the first six
months of 2002 compared to the same six months of 2001. This development had a
positive effect on net interest income.

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NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

TABLE 1
NORTHERN STATES FINANCIAL CORPORATION
ANALYSIS OF AVERAGE BALANCE AND TAX EQUIVALENT RATES
For the Three Months Ended June 30, 2002 and 2001  Rates are Annualized
($ 000s)

|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  |  |  |       |   | 
|------------------------------------ | ---------------------------------------------------- |  | - | ------- |  |  | -------- | ----- |  | ---- |  | ----- | ------- |  | ------- | -------- |  |  | ---- | ----- |  |  |  | ----- | - | 
|                                     |                                                      |  |   | 2002    |  |  | 2001     |      
|                                     |                                                      |  |   |         |  |  |          |      
|                                     |                                                      |  |   | Average |  |  |          |       |  |      |  |       |         |  | Average |          |  |  |      |       |  |  |  |      
|                                     |                                                      |  |   | Balance |  |  | Interest |       |  | Rate |  |       | Balance |  |         | Interest |  |  | Rate |      
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |      
|Assets                               |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  |  |  |      
|                                     | Loans (1)(2)(3)                                      |  | $ | 329,824 |  |  | $        | 5,603 |  |      |  | 6.80  | %       |  | $       | 310,624  |  |  | $    | 6,437 |  |  |  | 8.29  | %
|                                     | Taxable securities                                   |  |   | 190,090 |  |  |          | 2,204 |  |      |  | 4.63  | %       |  |         | 181,746  |  |  |      | 2,529 |  |  |  | 5.59  | %
|                                     | Securities exempt from
taxes (2)                     |  |   | 9,635   |  |  |          | 167   |  |      |  | 7.07  | %       |  |         | 13,693   |  |  |      | 245   |  |  |  | 7.25  | %
|                                     | Interest bearing deposits in banks                   |  |   | 168     |  |  |          | 1     |  |      |  | 2.38  | %       |  |         | 167      |  |  |      | 1     |  |  |  | 2.40  | %
|                                     | Federal funds sold                                   |  |   | 14,651  |  |  |          | 59    |  |      |  | 1.61  | %       |  |         | 20,794   |  |  |      | 226   |  |  |  | 4.35  | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |      
|                                     | Interest earning assets                              |  |   | 544,368 |  |  |          | 8,034 |  |      |  | 5.90  | %       |  |         | 527,024  |  |  |      | 9,438 |  |  |  | 7.18  | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Noninterest earning assets                           |  |   | 26,261  |  |  |          |       |  |      |  |       |         |  |         | 23,068   |  |  |      |       |  |  |  |       |  
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Average assets                                       |  | $ | 570,629 |  |  |          |       |  |      |  |       |         |  | $       | 550,092  |  |  |      |       |  |  |  |       |  
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|Liabilities and stockholders equity |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  |  |  |      
|                                     | NOW deposits                                         |  | $ | 46,529  |  |  | $        | 109   |  |      |  | .94   | %       |  | $       | 46,234   |  |  | $    | 219   |  |  |  | 1.89  | %
|                                     | Money market deposits                                |  |   | 47,776  |  |  |          | 208   |  |      |  | 1.74  | %       |  |         | 41,462   |  |  |      | 364   |  |  |  | 3.51  | %
|                                     | Savings deposits                                     |  |   | 47,940  |  |  |          | 178   |  |      |  | 1.49  | %       |  |         | 43,609   |  |  |      | 221   |  |  |  | 2.03  | %
|                                     | Time deposits                                        |  |   | 210,630 |  |  |          | 1,731 |  |      |  | 3.29  | %       |  |         | 209,232  |  |  |      | 3,001 |  |  |  | 5.74  | %
|                                     | Other borrowings                                     |  |   | 87,370  |  |  |          | 581   |  |      |  | 2.66  | %       |  |         | 80,379   |  |  |      | 1,095 |  |  |  | 5.45  | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |      
|                                     | Interest bearing
liabilities                         |  |   | 440,245 |  |  |          | 2,807 |  |      |  | 2.55  | %       |  |         | 420,916  |  |  |      | 4,900 |  |  |  | 4.66  | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Demand deposits                                      |  |   | 46,348  |  |  |          |       |  |      |  |       |         |  |         | 44,677   |  |  |      |       |  |  |  |       |  
|                                     | Other noninterest bearing liabilities                |  |   | 7,492   |  |  |          |       |  |      |  |       |         |  |         | 10,470   |  |  |      |       |  |  |  |       |  
|                                     | Stockholders equity                                 |  |   | 76,544  |  |  |          |       |  |      |  |       |         |  |         | 74,029   |  |  |      |       |  |  |  |       |  
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Average liabilities and
stockholders equity         |  | $ | 570,629 |  |  |          |       |  |      |  |       |         |  | $       | 550,092  |  |  |      |       |  |  |  |       |  
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Net interest income                                  |  |   |         |  |  | $        | 5,227 |  |      |  |       |         |  |         |          |  |  | $    | 4,538 |  |  |  |       |  
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Net yield on interest
earning assets                 |  |   |         |  |  |          |       |  |      |  | 3.84  | %       |  |         |          |  |  |      |       |  |  |  | 3.45  | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 
|                                     | Interest bearing liabilities to
earning ratio assets |  |   |         |  |  |          |       |  |      |  | 80.84 | %       |  |         |          |  |  |      |       |  |  |  | 80.00 | %
|                                     |                                                      |  |   |         |  |  |          |       |  |      |  |       |         |  |         |          |  |  |      |       |  | 



|(1) |  | - Interest income on loans includes loan origination fees of $106 and $110 for the three months ended June 30, 2002
and 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | - Tax-exempt income is reflected on a fully tax equivalent basis utilizing a 34% rate.                                       
|   
|(3) |  | - Non-accrual loans are included in average loans.                                                                           

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NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

TABLE 2
NORTHERN STATES FINANCIAL CORPORATION
ANALYSIS OF AVERAGE BALANCE AND TAX EQUIVALENT RATES
For the Six Months Ended June 30, 2002 and 2001  Rates are Annualized
($ 000s)

|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  |  |  |       |  
|------------------------------------ | ---------------------------------------------------- |  | ------- | ------- |  | -------- | - | ------ | ---- |  |  | ------- | - | ------- | -------- | ------- |  | ---- | - | ------ |  |  |  | ----- | -
|                                     |                                                      |  | 2002    |         |  | 2001     |  
|                                     |                                                      |  |         |         |  |          |  
|                                     |                                                      |  | Average |         |  |          |   |        |      |  |  |         |   | Average |          |         |  |      |   |        |  |  | 
|                                     |                                                      |  | Balance |         |  | Interest |   |        | Rate |  |  | Balance |   |         | Interest |         |  | Rate |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |  
|Assets                               |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  |  |  |      
|                                     | Loans (1)(2)(3)                                      |  | $       | 328,239 |  |          | $ | 11,046 |      |  |  | 6.73    | % |         | $        | 308,213 |  |      | $ | 13,135 |  |  |  | 8.52  | %
|                                     | Taxable securities                                   |  |         | 193,832 |  |          |   | 4,613  |      |  |  | 4.76    | % |         |          | 174,627 |  |      |   | 5,057  |  |  |  | 5.80  | %
|                                     | Securities exempt from
federal income taxes (2)      |  |         | 10,133  |  |          |   | 352    |      |  |  | 7.10    | % |         |          | 13,925  |  |      |   | 502    |  |  |  | 7.29  | %
|                                     | Interest bearing deposits in banks                   |  |         | 180     |  |          |   | 2      |      |  |  | 2.22    | % |         |          | 161     |  |      |   | 3      |  |  |  | 3.73  | %
|                                     | Federal funds sold                                   |  |         | 13,438  |  |          |   | 108    |      |  |  | 1.61    | % |         |          | 21,592  |  |      |   | 530    |  |  |  | 4.91  | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |       
|                                     | Interest earning assets                              |  |         | 545,822 |  |          |   | 16,121 |      |  |  | 5.91    | % |         |          | 518,518 |  |      |   | 19,227 |  |  |  | 7.42  | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Noninterest earning assets                           |  |         | 26,359  |  |          |   |        |      |  |  |         |   |         |          | 23,317  |  |      |   |        |  |  |  |       |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Average assets                                       |  | $       | 572,181 |  |          |   |        |      |  |  |         |   |         | $        | 541,835 |  |      |   |        |  |  |  |       |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|Liabilities and stockholders equity |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  |  |  |      
|                                     | NOW deposits                                         |  | $       | 45,712  |  |          | $ | 215    |      |  |  | .94     | % |         | $        | 45,509  |  |      | $ | 502    |  |  |  | 2.21  | %
|                                     | Money market deposits                                |  |         | 49,271  |  |          |   | 438    |      |  |  | 1.78    | % |         |          | 39,556  |  |      |   | 742    |  |  |  | 3.75  | %
|                                     | Savings deposits                                     |  |         | 46,853  |  |          |   | 346    |      |  |  | 1.48    | % |         |          | 43,453  |  |      |   | 492    |  |  |  | 2.26  | %
|                                     | Time deposits                                        |  |         | 211,114 |  |          |   | 3,655  |      |  |  | 3.46    | % |         |          | 205,739 |  |      |   | 6,161  |  |  |  | 5.99  | %
|                                     | Other borrowings                                     |  |         | 88,537  |  |          |   | 1,250  |      |  |  | 2.82    | % |         |          | 80,370  |  |      |   | 2,340  |  |  |  | 5.82  | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |       
|                                     | Interest bearing liabilities                         |  |         | 441,487 |  |          |   | 5,904  |      |  |  | 2.67    | % |         |          | 414,627 |  |      |   | 10,237 |  |  |  | 4.94  | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Demand deposits                                      |  |         | 46,357  |  |          |   |        |      |  |  |         |   |         |          | 43,428  |  |      |   |        |  |  |  |       |  
|                                     | Other noninterest bearing liabilities                |  |         | 7,277   |  |          |   |        |      |  |  |         |   |         |          | 9,939   |  |      |   |        |  |  |  |       |  
|                                     | Stockholders equity                                 |  |         | 77,060  |  |          |   |        |      |  |  |         |   |         |          | 73,841  |  |      |   |        |  |  |  |       |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Average liabilities and
stockholders equity         |  | $       | 572,181 |  |          |   |        |      |  |  |         |   |         | $        | 541,835 |  |      |   |        |  |  |  |       |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Net interest income                                  |  |         |         |  |          | $ | 10,217 |      |  |  |         |   |         |          |         |  |      | $ | 8,990  |  |  |  |       |  
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Net yield on interest
earning assets                 |  |         |         |  |          |   |        |      |  |  | 3.74    | % |         |          |         |  |      |   |        |  |  |  | 3.47  | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 
|                                     | Interest bearing liabilities to
earning assets ratio |  |         |         |  |          |   |        |      |  |  | 80.90   | % |         |          |         |  |      |   |        |  |  |  | 80.04 | %
|                                     |                                                      |  |         |         |  |          |   |        |      |  |  |         |   |         |          |         |  |      |   |        |  | 



|(1) |  | - Interest income on loans includes loan origination fees of $210 and $195 for the six months ended June 30, 2002
and 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | - Tax-exempt income is reflected on a fully tax equivalent basis utilizing a 34% rate.                                     
|   
|(3) |  | - Non-accrual loans are included in average loans.                                                                         

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

ASSET QUALITY AND THE PROVISION FOR LOAN LOSSES

Management, with the concurrence of the Board of Directors, after
carefully reviewing the adequacy of the allowance for loan losses and the
levels of nonperforming and impaired loans and leases, found that a $75,000
provision for loan losses was necessary for the three months ended June 30,
2002. For the first half of 2002 a provision for loan losses of $150,000 was
found to be necessary. The review of the adequacy of the allowance for loan
losses during the first half of 2001 showed the allowance was adequate and no
provision for loan losses was made during the three and six months ended June
30, 2001.

At June 30, 2002, the allowance for loan losses was $3,664,000 or 1.10% of
loans and leases as compared to $3,822,000 or 1.17% of loans and leases at
December 31, 2001. During the first six months of 2002, $313,000 in loans were
charged off through the allowance compared to $1,025,000 during the same period
last year. Recoveries of loans previously charged off were $5,000 during the
first half of 2002 compared to $62,000 during the same period in 2001.

Nonperforming loans, which includes nonaccrual loans and leases and loans
and leases 90 days or more past due and still accruing were $15.3 million at
June 30, 2002 or 4.58% of loans and leases. Nonperforming loan totals declined
from $17.4 million at December 31, 2001 or 5.32% of loans and leases. During
the first quarter of 2002, payments were made bringing one real estate
development loan totaling $10.6 million current that had previously been past
due greater than 90 days at year-end. However, lease pools totaling $11.3
million became greater than 90 days past due during the quarter ended March 31,
2002 and at June 30, 2002 remained past due. The lease pools at June 30, 2002
were placed on non-accrual status. Prior to being placed on nonaccrual status
the Company had been recognizing income of $290,000 per quarter on these
leases. The leases had been purchased from an investment-banking house and are
secured by equipment and carry a surety bond. The Company is in the process of
collecting on these leases from the surety. Of the remaining $4.0 million in
nonperforming loans that are not leases, $2.9 million are secured by real
estate with the remaining primarily secured by business assets. Impaired loans
at June 30, 2002 were $12.8 million, which includes the $11.3 million in
leases, increasing from $3.4 million at December 31, 2001. The amount of the
allowance for loan losses allocated for impaired loans was $1.1 million at June
30, 2002 increasing from $585,000 from year-end 2001.

Management and the Board of Directors analyze the adequacy of the
allowance for loan losses at least quarterly. Loans judged to be impaired,
loans with probable incurred loss exposure, loans that are no longer accruing
interest, and historical net loan loss percentages are reviewed in the analysis
of the allowance for loan losses. Based on management and the Board of
Directors analysis, the allowance for loan losses at June 30, 2002 is adequate
to cover probable incurred credit losses.

Other real estate owned, a non-performing asset, at June 30, 2002 was
$2,022,000 and remained unchanged from December 31, 2001. One piece of
property accounts for approximately 88 percent of the total of other real
estate owned. The property was acquired by the Bank through the receipt of a
deed in lieu of foreclosure in 1987. The parcel consists of approximately
525,000 square feet of land situated on

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Lake Michigan in Waukegan, Illinois. During the second quarter of 2002, a
purchase agreement on the property was entered into with earnest money
received. The purchase agreement will expire by year end if not executed or
renewed.

NONINTEREST INCOME

Noninterest income for the three months ended June 30, 2002 was $927,000
as compared to $1,130,000 for the three months ended June 30, 2001, a decrease
of $203,000. During 2001s second quarter the Company sold an equity security
that netted a one-time gain of $314,000. When discounting this gain from
noninterest income for the three months ended June 30, 2001, the second quarter
2002 noninterest income increased $111,000 compared to last year. Service fees
on deposits increased $109,000 as compared to the same quarter last year with
most of the increase attributable to greater overdraft fee income. On January
1, 2002 the Company increased overdraft charges by 25% and in February 2002 the
Company began a new overdraft marketing program to compete with the payday
lending operations that have proliferated the past couple years. The program
notified qualified retail checking account customers that the Bank would pay
overdrafts up to $500 with overdraft charges being assessed. As a result of
these developments, second quarter 2002 overdraft fee income increased $82,000
or 43% over the same period the previous year.

For the first six months of 2002 noninterest income remained relatively
unchanged from the previous year at $1,839,000 as compared to $1,841,000 for
the same period of 2001. When discounting the one-time gain on the sale of the
equity security of $314,000 from 2001, noninterest income was $312,000 greater
than the prior year. Service fees on deposits were $247,000 greater during the
first half of 2002 as compared to the same period last year as the result of
increased overdraft fee income. Trust income for the six months ended June 30,
2002 declined slightly by $2,000. Mortgage banking income increased $36,000
during the first half of 2002, as the volume of mortgages refinanced increased
due to lower home mortgage rates. Other noninterest income was $23,000 greater
than last year as loan fees increased during the first half of 2002 as compared
to the first half of 2001. The loan fee growth was attributable to the
increases in loans during the first half of 2002.

NONINTEREST EXPENSES

Noninterest expenses were $2,817,000 during the three months ended June
30, 2002 an increase of $213,000 from the same quarter last year. The
Companys efficiency ratio, noninterest expenses divided by the sum of net
interest income and noninterest income, was 46.30% for the second quarter of
2002 as compared to 46.77% for the same quarter of 2001. A decreasing ratio
indicates improved performance. Compared to its peers, the Companys ability
to control overhead is one of its operating strengths.

Increases in salaries and employee benefits expenses of $65,000 occurred
during the second quarter of 2002 compared to the same period last year, an
increase of 4.03%. Salary expense was $62,000 greater during the second
quarter of 2002 due to annual merit increases.

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Occupancy expenses for the second quarter of 2002 were $331,000, $8,000
greater when compared to the second quarter of 2001. Most of the increased
expense was the result of increased property taxes as passed school bond issues
raised the Banks property tax rates.

Data processing expense during the three months ended June 30, 2002 was
$147,000, an increase of $6,000 from the same quarter last year. Data
processing expense increased due to expenses relating to setting up data
interfaces to the Companys new overdraft marketing program.

Other operating expenses increased $134,000 during the three months ended
June 30, 2002 compared to the same three months last year. Expenses related
to collection efforts on the Companys loans and leases were $69,000 greater
than last year because of increases to the Banks nonperforming loan levels.
Telephone expense increased $25,000 during the quarter as more data lines were
installed and telecommunication changes were made as the Company implemented a
new ATM network during the second quarter of 2002. Expenses relating to our
bank accounts with our correspondent banks increased $15,000 due to the lower
interest rates during the second quarter of 2002 compared to last year. Audit
expenses also increased $12,000 during the period due to audit service
increases.

During the six months ended June 30, 2002, total noninterest expenses were
$5,551,000 or $316,000 greater than during the same period last year. The
Companys efficiency ratio for the first half of 2002 was 46.61% as compared to
49.27% for the first half of 2001.

Salaries and employee benefit expenses increased 6.14% or $192,000 during
the six months ending June 30, 2002 as compared to the same period last year.
Salary expense during the first half of 2002 showed increases of $126,000 or
5.29% due to annual merit increases and additions to staff. Increases to the
Companys stock price during the first two quarters of 2002 increased salary
expenses relating to stock appreciation rights by $33,000 when compared to the
same period last year. As of July 1, 2002, all outstanding stock appreciation
rights had been exercised. Group insurance expense increased $15,000 during
the first half of 2002 compared to last year as the Company changed insurance
carriers and coverage.

Occupancy expenses declined $26,000 during the first six months of 2002
when compared to the same period of 2001. Depreciation expense declined
$42,000 during the first half of 2002 as various building components and
equipment became fully depreciated. Maintenance expenses for the building and
equipment increased $10,000 during the first six months of 2002 as equipment
aged.

Data processing expense was $32,000 greater during the first six months of
2002 when compared to the same period of 2001. Data processing expense
increased due to expenses relating to setting up the Companys new overdraft
marketing program and to changing the Companys ATM network.

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Other operating expenses were $118,000 more for the six months ending June
30, 2002 than they were the same period last year. As the levels of
nonperforming loans increased in 2002 compared to 2001, expenses related to
collection efforts on the Companys loans and leases were $103,000 greater than
last year.

FEDERAL AND STATE INCOME TAXES

For the three months ended June 30, 2002 and 2001, the Companys
provisions for federal and state income taxes were $1,098,000 and $983,000,
which as a percentage of pretax earnings was 34.40% and 33.16%. The tax rate
has increased in part because interest income from securities exempt from
federal income tax has declined during 2002 as it is becoming increasingly
difficult to replace these securities as they mature with bank qualified tax
advantaged securities. For the six months ended June 30, 2002, the Companys
provision for federal and state taxes was $2,115,000 or 34.06% of pretax
earnings as compared to $1,753,000 or 32.52% of pretax earnings for the six
months ending June 30, 2001.

RECENT ACCOUNTING PRONOUNCEMENTS

Financial Accounting Standards Board (FASB), in July 2001, issued SFAS
142, Goodwill and Other Intangible Assets, that requires goodwill to no
longer be amortized to earnings, but instead be reviewed for impairment. The
amortization of goodwill by the Company ceased upon adoption of the Statement,
which became effective at January 1, 2002. This pronouncement has not had a
material effect on the Companys financial statements.

Effective January 1, 2003, SFAS 143, Accounting for Asset Retirement
Obligations, will apply. The statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period
incurred. The effect of this statement on the financial position and
operations of the Company will not have a material effect.

The Company adopted SFAS 144, Accounting for the Impairment or Disposal
of Long-Lived Assets on January 1, 2002. The statement requires that the
Company recognize an impairment loss on long-lived assets when the carrying
amount is not recoverable and the measurement of the impairment loss is the
difference between the carrying amount and the fair value of the asset. This
pronouncement did not have a material effect on the Companys financial
statements.

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION




QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

The Companys primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. Interest-rate risk (IRR) is the exposure of a
banking organizations financial condition to adverse movements in interest
rates. Accepting this risk can be an important source of profitability and
stockholder value, however excessive levels of IRR can pose a significant
threat to the Companys earnings and capital base. Accordingly, effective risk
management that maintains IRR at prudent levels is essential to the Companys
safety and soundness.

Evaluating a financial institutions exposure to changes in interest rates
includes assessing both the adequacy of the management process used to control
IRR and the organizations quantitative level of exposure. When assessing the
IRR management process, the Company seeks to ensure that appropriate policies,
procedures, management information systems and internal controls are in place
to maintain IRR at prudent levels with consistency and continuity. Evaluating
the quantitative level of IRR exposure requires the Company to assess the
existing and potential future effects of changes in interest rates on its
consolidated financial condition, including capital adequacy, earnings,
liquidity, and, where appropriate, asset quality.

The Federal Reserve Board, together with the Office of the Comptroller of
the Currency and the Federal Deposit Insurance Corporation, adopted a Joint
Agency Policy Statement on Interest-Rate Risk, effective June 26, 1996. The
policy statement provides guidance to examiners and bankers on sound practices
for managing IRR, which will form the basis for ongoing evaluation of the
adequacy of IRR management at supervised institutions. The policy statement
also outlines fundamental elements of sound management that have been
identified in prior Federal Reserve guidance and discusses the importance of
these elements in the context of managing IRR. Specifically, the guidance
emphasizes the need for active board of director and management oversight and a
comprehensive risk-management process that effectively identifies, measures,
and controls IRR. Several techniques might be used by an institution to
minimize IRR. One approach is to periodically analyze its assets and
liabilities and make future financing and investment decisions based on payment
streams, interest rates, contractual maturities and estimated sensitivity to
actual or potential changes in market interest rates. Such activities fall
under the broad definition of asset/liability management. The Companys
primary measurement tool used by management is to shock the balance sheet by
decreasing rates 2% and increasing rates 2% using computer simulation to show
the effect of rate changes on the fair value of the Companys financial
instruments.

Several ways an institution can manage IRR include: selling existing
assets or repaying certain liabilities; matching repricing periods for new
assets and liabilities for example, by shortening terms of new loans or
investments. Financial institutions are also subject to prepayment risk in
falling rate environments. For example, a debtor may prepay other financial
assets so that the debtor may refinance their obligations at new, lower rates.
Prepayments of assets carrying higher rates reduce the Companys interest
income and overall asset yields. A large portion of an institutions
liabilities may be short term or due on demand, while most of its assets may be
invested in long-term loans or investments. Accordingly, the Company seeks to
have in place sources of cash to meet short-term demands. By increasing
deposits, borrowing, or selling assets the Company can obtain these funds.

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Table 3, Effect of Interest Shocks on Financial Instruments, compares
information about the current fair value of the Companys financial instruments
at March 31, 2002 to December 31, 2001. Table 3 shows the effects of interest
rate shocks of decreasing rates 2% and increasing rates 2% on the fair value of
the Companys financial instruments. The computer simulation model that is
used to do the interest rate shocks and calculates the effect on the fair value
of the Companys balance sheet takes into consideration maturity and repricing
schedules of the various assets and liabilities. March 31, 2002 is used in
Table 3 as it has the most recent data made available from the computer
simulation model.

TABLE 3
NORTHERN STATES FINANCIAL CORPORATION
EFFECT OF INTEREST SHOCKS ON FINANCIAL INSTRUMENTS
as of March 31, 2002 and December 31, 2001
($000s)

|                       |                                                                             |  |                              |         |  |         |   |         |       |  |   |         | 
|---------------------- | --------------------------------------------------------------------------- |  | ---------------------------- | ------- |  | ------- | - | ------- | ----- |  | - | ------- | 
|                       |                                                                             |  | Fair Value at March 31, 2002 |        
|                       |                                                                             |  |                              |        
|                       |                                                                             |  | Down 2%                      |         |  | Current |   |         | Up 2% | 
|                       |                                                                             |  |                              |         |  |         |   |         |       | 
|Assets                 |                                                                             |  |                              |         |  |         |   |         |       |  |   |        
|                       | Cash and cash equivalents                                                   |  | $                            | 23,322  |  |         | $ | 23,321  |       |  | $ | 23,320  | 
|                       | Securities available for sale                                               |  |                              | 211,862 |  |         |   | 206,601 |       |  |   | 195,918 | 
|                       | Loans                                                                       |  |                              | 338,207 |  |         |   | 324,391 |       |  |   | 311,711 | 
|                       | Federal Home Loan Bank stock                                                |  |                              | 1,671   |  |         |   | 1,671   |       |  |   | 1,671   | 
|                       | Accrued interest receivable                                                 |  |                              | 4,964   |  |         |   | 4,964   |       |  |   | 4,964   | 
|                      
|Financial liabilities: |                                                                             |  |                              |         |  |         |   |         |       |  |   |        
|                       | Deposits                                                                    |  | $                            | 397,623 |  |         | $ | 395,416 |       |  | $ | 393,361 | 
|                       | Securities sold under repurchase agreements
and other short-term borrowings |  |                              | 86,809  |  |         |   | 86,348  |       |  |   | 85,892  | 
|                       | Federal Home Loan Bank term advances                                        |  |                              | 5,027   |  |         |   | 5,000   |       |  |   | 4,974   | 
|                       | Advances from borrowers for taxes and insurance                             |  |                              | 869     |  |         |   | 869     |       |  |   | 869     | 
|                       | Accrued interest payable                                                    |  |                              | 3,735   |  |         |   | 3,735   |       |  |   | 3,735   | 

|                       |                                                                             |  |                                 |         |  |         |   |         |       |  |   |         | 
|---------------------- | --------------------------------------------------------------------------- |  | ------------------------------- | ------- |  | ------- | - | ------- | ----- |  | - | ------- | 
|                       |                                                                             |  | Fair Value at December 31, 2001 |        
|                       |                                                                             |  |                                 |        
|                       |                                                                             |  | Down 2%                         |         |  | Current |   |         | Up 2% | 
|                       |                                                                             |  |                                 |         |  |         |   |         |       | 
|Assets                 |                                                                             |  |                                 |         |  |         |   |         |       |  |   |        
|                       | Cash and cash equivalents                                                   |  | $                               | 34,317  |  |         | $ | 34,315  |       |  | $ | 34,313  | 
|                       | Securities available for sale                                               |  |                                 | 218,779 |  |         |   | 213,982 |       |  |   | 201,848 | 
|                       | Loans and leases                                                            |  |                                 | 336,441 |  |         |   | 333,465 |       |  |   | 311,431 | 
|                       | Federal Home Loan Bank stock                                                |  |                                 | 1,647   |  |         |   | 1,647   |       |  |   | 1,647   | 
|                       | Accrued interest receivable                                                 |  |                                 | 4,592   |  |         |   | 4,592   |       |  |   | 4,592   | 
|                      
|Financial liabilities: |                                                                             |  |                                 |         |  |         |   |         |       |  |   |        
|                       | Deposits                                                                    |  | $                               | 428,176 |  |         | $ | 409,012 |       |  | $ | 402,148 | 
|                       | Securities sold under repurchase agreements
and other short-term borrowings |  |                                 | 87,008  |  |         |   | 86,246  |       |  |   | 85,502  | 
|                       | Federal Home Loan Bank term advances                                        |  |                                 | 10,088  |  |         |   | 10,000  |       |  |   | 9,914   | 
|                       | Advances from borrowers for taxes and insurance                             |  |                                 | 743     |  |         |   | 743     |       |  |   | 743     | 
|                       | Accrued interest payable                                                    |  |                                 | 4,916   |  |         |   | 4,916   |       |  |   | 4,916   | 

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##### Table of Contents



NORTHERN STATES FINANCIAL CORPORATION







ITEM 1. LEGAL PROCEEDINGS

The Company and its subsidiary are involved as plaintiff or defendant in
various legal actions arising in the formal course of their business. While
the ultimate outcome of the various legal proceedings involving the Company and
its subsidiary cannot be predicted with certainty, it is the opinion of
management, after consultation with counsel, that the resolution of these legal
actions should not have a material effect on the Companys consolidated
financial position or results of operations.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None




ITEM 3. DEFAULTS 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

On April 17, 2002 a Form 8-K was filed with the SEC under Item 5 regarding
the announcement that the Northern States Financial Corporations Board of
Directors approved a stock repurchase program that allows the Company to
purchase up to 200,000 shares of Northern States Financial Corporation stock
either in open market or private transactions.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to sign on its behalf by the undersigned
hereunto duly authorized, on this 2nd day of August 2002.

|                                                                                    |                 |  |     |                                                             
|----------------------------------------------------------------------------------- | --------------- |  | --- | ------------------------------------------------------------
|NORTHERN STATES FINANCIAL CORPORATION
                 
               (Registrant)
|                                                                                   
|                                                                                   
|Date:                                                                               | August  2, 2002 |  | By: | /s/   Fred Abdula                                           
|                                                                                    |                 |  |     | Fred Abdula
Chairman of the Board of
Directors and President
|                                                                                   
|                                                                                   
|Date:                                                                               | August 2, 2002  |  | By: | /s/   Thomas M. Nemeth                                      
|                                                                                    |                 |  |     | Thomas M. Nemeth
Vice President and Treasurer               

20