Northern States Financial Corp. (NSFC-NASD)
Interview with:
Fred Abdula, Chairman and President
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Bank of Waukegan, which offers a complete line of loan, deposit and cash management services.

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Northern States Financial Corp recently acquired Round Lake Bankcorp, which will add a 110 million dollars in assets from their two locations in Illinois

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Northern States Financial Corp.

1601 North Lewis Avenue
Waukegan, IL 60085
Phone: 847-244-6000

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Fred Abdula
Chairman and

Interview conducted by:
Lynn Fosse
Senior Editor
September 2003


Fred Abdula is Chairman of the Board and CEO of Northern States Financial Corp.
1943:  Graduated from high school.
1943 – 1946: United States Marine Corps – South Pacific
1950:  Graduated University of Illinois – B.S.M.E.
1950 – 1952:  Development Engineer – Deep Freeze (refrigeration)
1952 – 1954:  Development Engineer – Johnson Motors (outboard motors)
1955:  Started Air Con Refrigeration and Heating, Inc.
1975:  Elected to the Board of Directors of the Bank of Waukegan
1982:  Elected to Chairman of the Board of Directors of the Bank of Waukegan and CEO1992:   Elected to Chairman of the First Federal Bank and CEO

Major Accomplishments:
1947:  Licensed Professional Engineer – State of Illinois
1993:  Financial World Magazine – CEO of the Year for $300,000,000 Bank of Waukegan
2003:  Entrepreneur Hall of Fame

Company Profile:
The Northern States Financial Corporation (NSFC) is a $636 million bank holding company for the Bank of Waukegan, which serves portions of northeastern Illinois and southeastern Wisconsin. As a full service commercial bank, the bank attracts deposits; makes commercial, real estate and consumer loans; and operates mortgage banking and trust businesses.

Much of the Company’s performance over the years is attributable to its location at the seat of Lake County, Illinois, the wealthiest county in the state and long among the fastest growing in population, construction, retail activity and corporate headquarter sites for suburban Chicago. Branch expansions and new product introductions also have enriched the professional service that is a hallmark of the Bank.

Bank of Waukegan is a community bank. It is managed by a strong local board and its management team is made up of experienced bankers, many with more than 20 years of service to the bank. As a full service commercial bank, they provide their customers with a complete line of loan, deposit and cash management services. As a community bank, they attempt to get to know their customers, so that they can provide them with the very best products and services to meet their unique needs. That is why at the Bank of Waukegan’s motto is, Our Most Important Customer Is You.

CEOCFOinterviews: Mr. Abdula, will you give us an overview of Northern States Financial Corp.?

Mr. Abdula: “Northern States is a one-bank holding company with assets at about six hundred and fifty million dollars. The bank has been in business for about 45 years and is a profitable business. Our numbers are good, earning about 7.5 million dollars since 2002.”

CEOCFOinterviews: Please tell us about your recent acquisition and what benefits Northern States will get from this acquisition.

Mr. Abdula: “We acquired Round Lake Bankcorp, Inc. and its wholly-owned subsidiary, First State Bank of Round Lake last Thursday, which was September 11th. It is a profitable bank that is a mirror to our bank with two locations and a full staff. We are very pleased to have the opportunity to purchase it. Northern States will add a hundred and ten million dollars in assets from these two locations.”

CEOCFOinterviews: Will the acquisition result in a name change?

Mr. Abdula: “We will change the name probably after the first of the year to Bank of Waukegan, and then we may do something different after that.”

CEOCFOinterviews: Why did you make the decision to make the acquisition now, and do you see other acquisitions on the horizon?

Mr. Abdula: “The decision was made because it was a good acquisition and a good match. Interest rates were low and we have additional capital so we are starting to look for more purchases. Some people like to build branches. I think it is smarter to buy banks because the banks are performing.”

CEOCFOinterviews: Will you please tell us a bit about the economics in the area that you cover, and how Northern States has been affected by it?

Mr. Abdula: “Our community of Waukegan, Illinois, has about ninety thousand people. The economics here are the same that give the industry the squeeze everywhere. We have a time delay and time to catch up with it. The bank builds strong relationships with the individual businesses located in this area, as well as the government bodies.”

CEOCFOinterviews: Is there much competition, and if so, how do you attract more business?

Mr. Abdula: “There is a lot of competition. In Gurnee, IL, a very small community to the west of us, there are sixteen banks with just about one on every corner. We attract business through some advertising but it is usually word-of-mouth that brings people here. We have an open-door policy where anybody can come in the bank. It seems that the ones with the best business are the customers.”

CEOCFOinterviews: What will a customer find at Northern States that they are not going to receive somewhere else?

Mr. Abdula: “Our customers receive good treatment here. If they need loans, we will do that; if they want to deposit money or need trust services, we have that also. We have Internet banking and about everything a customer would want. That is how we keep our customers and get new ones.”

CEOCFOinterviews: Is Internet banking a big feature for you?

Mr. Abdula: “Internet banking has been growing quite a bit and it is an area we need to have because other banks are doing it. We have trainers here, so people can come in and sit with that trainer for as long as it takes. People can do their banking at their convenience and many people want to pay their bills from home and it is better than writing a check. We want to keep up with the competition and if we can do it better than the next bank, then we are in business.”

CEOCFOinterviews: How are your other departments like the Trusts and Mortgages growing?

Mr. Abdula: “The Trust Department is a growing area and we keep picking up new accounts. As for mortgages, we try to help our customers any way we can. They get personal attention, and we can get you in and out in one day.”

CEOCFOinterviews: Is there a particular type of business that you attract?

Mr. Abdula: “We get a mix of everything; both commercial customers as well as personal customers. We do just about all types of business including real estate and commercial loans.”

CEOCFOinterviews: What do you look for in your people so that they can fulfill the mission of Northern States?

Mr. Abdula: “Our employees are long-time employees; some of them have been here for 10 to 25 years. They have been here a long time and they know the customers. When customers come in, they are treated right. If employees treat the customers well, they will come to this bank.”

CEOCFOinterviews: Will you tell us a bit about community involvement for the bank?

Mr. Abdula: “We do many things for the community. We have an old theatre here that we are revamping to a full-line theatre. For 20 million dollars in improvements, it will be a live theatre. We also have people on the police and fire pension boards and many other community organizations.”

CEOCFOinterviews: How are you doing in the way of non-conforming loans?

Mr. Abdula: “We have some non-conforming loans now that are guaranteed by insurance companies. The insurance company is late on payment and therefore we have losses against them that have to be collected.”

CEOCFOinterviews: Do you find you are hurt by the additional regulations that have been put in place, in terms of them being time consuming and taking away from your other activities?

Mr. Abdula: “They do hurt a bit. We learned about the regulations in a hurry, and they do not seem to be a problem.”

CEOCFOinterviews: Why should investors be interested in Northern States, and what should they know that they might not realize when they first look at the bank?

Mr. Abdula: “You cannot get much with the Money Market rates now. Our dividends are paying 3.5% and many investors buy stock for the three-and-a-half percent dividend that they get. If you invest in CDs, you get one-and-a-half percent. Plus, our bank stock appreciates, and is now selling for about twenty times earnings.”

CEOCFOinterviews: In closing, as CEO, how do you spend your time and where do you focus?

Mr. Abdula: “I look for opportunities for the bank, and make sure the customers are treated well.”

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