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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] 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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COMMISSION FILE NUMBER 0 - 19300
NORTHERN STATES FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 36-3449727
(State of incorporation) (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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Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock $2.00 par value NASDAQ Small-Cap Market
Cover Page 1 of 2
Page 1 of 88 Pages
Exhibit Index Appears on Page 29
1
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 such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. [ X ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting shares held by nonaffiliates of
the Registrant is $57,513,897, as of March 18, 1997. Solely for the purpose of
this computation, it has been assumed that executive officers and directors of
the Registrant are "affiliates" and that the last price known to management was
a sale on March 18, 1997, of $93.00 per share.
889,273 shares of common stock were outstanding as of March 18, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Parts II and IV are incorporated by reference from the
Registrant's 1996 Annual Report to Stockholders; and a portion of Part III is
incorporated by reference from the Registrant's Proxy Statement dated March 21,
1997, for the Annual Meeting of Stockholders to be held April 24, 1997.
Except for those portions of the 1996 Annual Report incorporated by
reference, the Annual Report is not deemed filed as part of this Report.
Cover Page 2 of 2
INDEX
2
PART I PAGE NO.
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Item 1 Business 4
Item 2 Properties 14
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote
of Security Holders 14
PART II
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Item 5 Market for the Registrant's Common Stock
and Related Stockholder Matters 15
Item 6 Selected Financial Data 15
Item 7 Management's Discussion and Analysis
of Financial Condition and
Results of Operations 15
Item 8 Financial Statements and Supplementary Data 16
Item 9 Changes in and Disagreements with
Accountants on Accounting
and Financial Disclosure 16
PART III
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Item 10 Directors and Executive Officers of the
Registrant 17
Item 11 Executive Compensation 17
Item 12 Security Ownership of Certain Beneficial
Owners and Management 17
Item 13 Certain Relationships and Related
Transactions 17
PART IV
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Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 18
Signatures 19
3
PART I
Item 1. BUSINESS
THE COMPANY
OVERVIEW
Northern States Financial Corporation (the "Registrant" or the "Company")
is a bank holding company organized in 1984 under the laws of Delaware, for the
purpose of becoming the parent bank holding company of the Bank of Waukegan (the
"Bank"). In 1984, the Company acquired Northern States Trust Company (the
"Trust Company"). On January 1, 1992, the Trust Company's accounts and
operations were assumed by the Bank. By combining the operations of the Trust
Company and the Bank's Trust Department, the Company provides more efficient and
effective service to its trust customers. During 1994, the Trust Company
charter was surrendered and the Trust Company was liquidated. In 1991, the
Registrant acquired First Federal Bank, fsb ("First Federal" or the "Thrift").
The Registrant is registered under the Bank Holding Company Act of 1956, as
amended, and owns all the outstanding stock of the Bank and First Federal. At
December 31, 1996, the Company had approximately 452 registered shareholders of
record, 889,273 shares of Common Stock outstanding, and total consolidated
assets of approximately $427 million. Aside from the stock of the Bank, First
Federal and cash, the Registrant has no other substantial assets.
As a large, community-oriented, independent banking organization in the
Waukegan-Gurnee area in the State of Illinois, the Company is well positioned to
take advantage of the growth in Waukegan-Gurnee and its surrounding communities.
The Company has continuously served the community since 1919 when First Federal
was chartered; complemented by the Bank when it was chartered in 1962. The
Company's local management, coupled with its long record of service, has allowed
it to compete successfully in the banking market. The Company operates
traditional community and savings banks with conveniently located facilities and
a professional staff.
The Registrant, Bank and First Federal have no material patents,
trademarks, licenses or franchises except the corporate franchises which permit
them to engage in banking and trust practices pursuant to law.
The following table shows loans and deposits of the Bank and First Federal
as of December 31, 1996 (in thousands of dollars):
LOANS DEPOSITS
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Bank of Waukegan $164,794 $237,589
First Federal Bank, fsb 66,966 92,013
4
The principal business of the Registrant, operating through the Bank and
First Federal, consists of attracting deposits and securities sold under
repurchase agreements from the general public, making commercial loans, loans
secured by residential and commercial real estate and consumer loans, and
operating a trust business.
SUBSIDIARY OPERATIONS
THE BANK OF WAUKEGAN
The Bank of Waukegan was chartered as a state bank in 1962 and is located
in Waukegan, Illinois. Waukegan is located approximately 37 miles north of
Chicago, Illinois and has a population of approximately 70,000. At December 31,
1996 the Bank of Waukegan had total assets of approximately $318.8 million,
deposits of approximately $237.6 million and stockholder's equity of
approximately $40.6 million. The Bank has two banking offices located in
Waukegan and one office located in Antioch, Illinois.
The Bank provides services to individuals, businesses and local
governmental units in northeastern Illinois and southeastern Wisconsin.
The Bank's full service banking business includes the customary consumer
and commercial products and services which banks provide, including the
following: demand, savings, time, securities sold under repurchase agreements,
individual retirement accounts; commercial, consumer and real estate lending,
including installment loans, student loans, lines of credit and overdraft
checking; safe deposit operations; trust services; and a variety of additional
services tailored to the needs of individual customers, such as the acquisition
of U.S. Treasury notes and bonds, the sale of traveler's checks, money orders,
cashier's checks and foreign currency, direct deposit, and other special
services.
Commercial and consumer loans are made to corporations, partnerships and
individuals, primarily on a secured basis. Commercial lending focuses on
business, capital, construction, inventory and real estate. The installment
loan department of the Bank makes direct and indirect loans to consumers and
commercial customers. The mortgage division originates and services commercial
and residential mortgages.
The Bank's trust department acts as executor, administrator, trustee,
conservator, guardian, custodian and agent.
At December 31, 1996, the Trust Department had assets under management or
custodial arrangements of approximately $176 million. Its office is located in
Waukegan, Illinois.
5
FIRST FEDERAL BANK
First Federal, headquartered in Waukegan, Illinois was incorporated in
Illinois in 1919 as Waukegan Building and Loan Association, a state chartered
mutual savings and loan association. It converted to a federally chartered
mutual savings and loan association in 1934 and changed its name to First
Federal Savings & Loan Association of Waukegan.
In 1990, First Federal converted to a federal mutual savings bank and
changed its name to First Federal Bank, fsb. First Federal is a member of the
Federal Home Loan Bank System and its deposit accounts are insured by the
Federal Deposit Insurance Corporation ("FDIC").
First Federal had total assets of approximately $107.5 million, deposits of
approximately $92.0 million, and stockholder's equity of approximately $13.4
million at December 31, 1996. First Federal's market area is comprised of
sections of northeastern Illinois, including Waukegan and Gurnee, and is
situated in the center of the Chicago-Milwaukee corridor.
First Federal operates as a traditional savings institution. Its business
consists primarily of acquiring retail savings and checking deposits,
originating residential and nonresidential real estate mortgage loans for both
its portfolio and sale into the secondary market, and investing in government
and other debt securities. First Federal has two offices located in Waukegan,
Illinois and one office located in Gurnee, Illinois.
COMPANY OPERATING STRATEGY
Corporate policy, strategy and goals are established by the Board of
Directors of the Company. Pursuant to the Company's philosophy, operational and
administrative policies for the Bank and Thrift are also established by the
Company. Within this framework, both subsidiaries focus on providing
personalized services and quality products to customers to meet the needs of the
communities in which they operate.
As part of its community banking approach, the Company encourages the
officers of both institutions to actively participate in community
organizations. In addition, within credit and rate of return parameters, the
Company attempts to ensure that each institution meets the credit needs of the
community. In addition, the Bank (and the Thrift to a lesser extent) invests in
local municipal securities.
6
LENDING ACTIVITIES
GENERAL - Both banks provide a range of commercial and retail lending
services to corporations, partnerships and individuals, including, but not
limited to, commercial business loans, commercial and residential real estate
construction and mortgage loans, consumer loans, revolving lines of credit and
letters of credit. The installment loan departments of each bank makes direct
and indirect loans to consumers and commercial customers. The mortgage
departments originate and service commercial and residential mortgages. The
majority of commercial mortgages are originated by the Bank, while the Thrift
originates most of the residential mortgages.
Each bank aggressively markets its services to qualified lending customers
in both the commercial and consumer sectors. The Bank's commercial lending
officers actively solicit the business of new companies entering the surrounding
market as well as longstanding members of the business community. Through
personalized professional service and competitive pricing, the Bank has been
successful in attracting new commercial lending customers. At the same time,
the Bank actively advertises its consumer loan products and continually attempts
to make its lending officers more accessible.
COMMERCIAL LOANS - The Bank seeks new commercial loans in its market area
and much of the increase in these loans in recent years can be attributed to the
successful solicitation of new business. The Bank's areas of emphasis include,
but are not limited to, loans to manufacturers, building contractors,
developers, business services companies and retailers. The Bank provides a wide
range of commercial business loans, including lines of credit for working
capital purposes and term loans for the acquisition of equipment and other
purposes. Collateral for these loans generally includes accounts receivable,
inventory, equipment and real estate. Loans may be made on an unsecured basis
where warranted by the overall financial condition of the borrower. Terms of
commercial business loans generally range from one to five years. The majority
of the Bank's commercial business loans have floating interest rates or reprice
within one year. The primary repayment risk for commercial loans is the failure
of the business due to economic or financial factors. In most cases, the Bank
has collateralized these loans and/or taken personal guarantees to help assure
repayment.
Both the Bank and the Thrift regularly provide financing to developers who
have demonstrated a favorable record of performance for the construction of
homes. Sales of these homes have remained very strong in Lake County due to the
growth in population.
MORTGAGE BANKING - The Thrift conducts a mortgage origination operation
through its mortgage division. Since 1991, the Thrift began funding all long-
term residential mortgage loans and selling them in the secondary market with
servicing retained. The Bank will also originate residential mortgages. As a
result of such actions, the Thrift has built its mortgage servicing portfolio to
approximately $64.9 million at December 31, 1996. Management believes that the
retention of mortgage servicing provides First Federal with a relatively steady
source of fee income as compared to fees generated solely from mortgage
origination operations, while maintaining the customer relationship.
7
CONSUMER LENDING - The Company's consumer lending departments provide all
types of consumer loans including motor vehicle, home improvement, home equity,
student loans, unsecured loans and small personal credit lines.
TRUST DEPARTMENT - The Bank's trust department has been providing trust
services to the community for over 10 years. Currently, the Bank has over $176
million of trust assets and provides a full complement of trust services for
individuals and corporations including land trust services.
To build on the trust department's mainstay of personal trust
administration, the trust department's focus is in two major areas: (i)
investment management for individuals and (ii) administration and investment
services for employee benefit plans.
COMPETITION
The Registrant and its subsidiaries encounter significant competition in
all of their activities. The Chicago metropolitan area and suburban Lake County
have a high density of financial institutions, many of which are significantly
larger and have substantially greater financial resources than the Company and
its subsidiaries, and all of which are competitors of the Company and its
subsidiaries to varying degrees. The Registrant and its subsidiaries are
subject to competition from various financial institutions, including state and
national banks, state and federal savings associations, credit unions, certain
non-banking consumer lenders, and other companies or firms, including brokerage
houses and mortgage brokers, that provide similar services in northeastern
Illinois. In total, there are 22 financial institutions located in the Waukegan-
Gurnee area, including the Company's two subsidiaries. These financial
institutions consist of 9 banks, 6 savings associations and 7 credit unions.
The Company also competes with money funds and with insurance companies with
respect to its individual retirement accounts.
Competition may increase as a result of the continuing reduction in the
effective restrictions on the interstate operations of financial institutions.
The Registrant and its subsidiaries face additional competition for deposits
from short-term money market mutual funds and other corporate and government
securities funds. Since the elimination of federal interest rate controls on
deposits, the competition from other financial institutions for deposits has
increased.
The primary factors influencing competition for deposits are interest
rates, service, and convenience of office locations. The Company competes for
loans principally through the range and quality of the services it provides,
interest rate and loan fee terms. The Company believes that its long-standing
presence in the community and personal service philosophy enhances its ability
to compete favorably in attracting and retaining individual and business
customers. The Company actively solicits deposit-related clients and competes
for deposits by offering customers personal attention, professional service and
competitive interest rates.
8
EMPLOYEES
The Registrant and its subsidiaries employed 119 full-time and 26
part-time employees as of December 31, 1996. None of the Registrant's employees
is represented by any collective bargaining group. The Company offers a variety
of employee benefits and management considers its employee relations to be good.
GOVERNMENTAL MONETARY POLICY AND ECONOMIC CONDITIONS
The earnings and growth of the Company are affected not only by general
economic conditions, but also by the fiscal and monetary policies of the federal
government and its agencies. In particular, the Federal Reserve Board regulates
monetary and credit conditions and interest rates in order to influence general
economic conditions, primarily through open-market operations in U.S. Government
securities, varying the discount rate on bank borrowings, and setting reserve
requirements against bank deposits.
These policies have a significant influence on overall growth and
distribution of the Company's loans, investments and deposits, and affect
interest rates charged on loans and earned on investments or paid for deposits.
The monetary policies of the Federal Reserve Board are expected to continue
their substantial influence on the operating results of banks.
The general effect, if any, of such policies upon the future business and
earnings of the Company and its subsidiaries cannot accurately be predicted.
SUPERVISION AND REGULATION
Financial institutions and their holding companies are extensively regulate
under federal and state laws. As a result, the business, financial condition
and prospects of the Company, the Bank and First Federal can be materially
affected not only by management decisions and general economic conditions, but
also by applicable statutes and regulations and other regulatory pronouncements
and policies promulgated by regulatory agencies with jurisdiction over the
Comapany, the Bank and First Federal, such as the Board of Governors of the
Federal Reserve System ("FRB"), the Office of Thrift Supervsion (the "OTS"), the
Federal Deposit Insurance Corporation ("FDIC") and the Office of the Illinois
Commissioner of Banks and Real Estate (the "Commissioner"). The effect of such
statutes, regulations and other pronouncements and policies are intended to
protect depositors and the FDIC's deposit insurance funds, not to protect
stockholders.
9
The Company and its subidiarires are "affiliates" within the meaning of the
Federal Reserve Act so that the Bank and First Federal are subject to certain
restrictions with respect to loans to the Company and certain other transactions
with the Company or involving it securities.
The Company is a bank holding company subject to the Bank Holding Company
Act of 1956, as amended (the "Act"), and to regulation by the FRB. The Act
limits the activities which may be engaged in by bank holding companies and
their nonbank subsidiaries, with certain exceptions, to those so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
Also, under the Act and the FRB's regulations, a bank holding company, as well
as certain of its subsidiaries, are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit or provision of any
property or services.
The Act also prohibits bank holding companies from acquiring substantially
all the assets of or owning more than 5% of the voting shares of any bank or
nonbanking company, which is not already majority owned, without the prior
approval of the FRB. Beginning September 29, 1995 the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Act") permits an
adequately capitalized and adequately managed bank holding company to acquire,
with FRB approval, a bank located in a state other than the bank holding
company's home state, without regard to whether the transaction is permitted
under any state law, except that a host state may establish by statute the
minimum age of its banks (up to a maximum of 5 years) subject to acquisition by
out-of-state bank holding companies. The FRB may not approve the acquisition if
the applicant bank holding company, upon consumation, would control more that
10% of total U.S. insured depository institution deposits or more than 30% of
the host state's total insured depository institution deposits. Effective as of
September 29, 1994, the Interstate Act permits a bank, with the approval of the
appropriate Federal bank regulatory agency, to establish a de novo branch in a
state, other than the bank's home state, in which the bank does not presently
maintain a branch if the host state has enacted a law that applies equally to
all banks and expressly permits all out-of-state banks to branch de novo into
the host state. Commencing June 1, 1997, banks having different home states
may, with approval of the appropriate Federal bank regulatory agency, merge
accross state lines, unless the home state of a participating bank has opted-
out. The Interstate Act permits, as of September 29, 1995, any bank subsidiary
of a bank holding company to receive deposits, renew time deposits, close loans,
service loans and receive payments on loans and other obligations as agent for a
bank or thrift affiliate, whether such affiliate is located in a different state
or in the same state. Illinois law allows the Bank to establish branches
anywhere in the state.
The Illinois Bank Holding Company Act (the "IBHCA") permits Illinois bank
holding companies to acquire control of banks in any state that permits bank
holding companies whose principal place of business is in another state to
acquire control of Illinois banks or bank holding companies upon satisfactory
application to the Commissioner. In reviewing any such application, the
Commissioner will review, amoung other things, compliance by the applicant banks
with the requirements of the Community Reinvestment Act (the "CRA") and other
information designed to determine such banks' abilities to meet community credit
needs.
10
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") amended the Act to authorize the FRB to allow bank holding companies
to acquire any savings association (whether healthy, failed or failing) and
removed "tandem operations" restrictions, which previously prohibited savings
associations from being operated in tandem with a bank holding company's other
subsidiaries. As a result, bank holding companies now have expanded
opportunities to acquire savings associations.
Under FIRREA, and insured depository institution which is commonly
controlled with another insured depository institution shall generally be liable
for any loss incurred, or reasonably anticipated to be incurred, by the FDIC in
connection with the default of such commonly controlled institution, or for any
assistance provided by the FDIC to such commonly controlled institution, which
is in danger of default. The term "default" is defined to mean the appointment
of a conservator or receiver for such institution. Such liability is
subordinated in right of payment to deposit liabilities, secured obligations,
any other general or senior liability and any obligation subordinated to
depositors and or other general creditors, other than obligations owed to any
affiliate of the depository institution (with certain exceptions) and any
obligations to stockholders in such capacity.
The Company, as part of its acquisition of First Federal, became a savings
and loan holding company within the meaning of the Home Owners' Loan Act of
1933, as amended (the "HOLA"). As such, the Company was required to register
with the OTS and is subject to OTS regulations, examinations, supervsion and
reporting requirements. In addition, the OTS has enforcement authority over the
Company in significant aspects of its business. Among other things, this
authority permits the OTS to restrict or prohibit activities that are determined
to be a serious risk to the subsidiary savings institution. The HOLA prohibits
a savings and loan company, directly or indirectly, or through one or more
subsidiaries, or through one or more transactions, from (i) acquiring control
of, or acquiring by merger or purchase of assets, another savings institution or
holding company therof, withour prior written OTS approval; (ii) acquiring or
retaining, with certain exceptions, more than 5% of the voting shares of a
nonsubsidiary savings institution or holding company thereof; or (iii) acquiring
or retaining control of a financial institution not federally insured.
The Bank is a member of the Federal Reserve System, its deposits are
insured by the FDIC and it is subject to regulation by both these entities, as
well as by the Commissioner. First Federal is primarily regulated by the OTS.
Under the Illinois Banking Act (the "IBA"), the Bank is permitted to
declare and pay dividends in amounts up to the amount of its accumulated net
profits provided that it shall retain in its surplus at least one-tenth of its
net profits since the date of the declaration of its most recent previous
dividend until such additions to surplus, in the aggregate, equal at least the
paid-in capital of the Bank. In no event may the Bank, while it continues its
banking business, pay dividends in excess of its net profits then on hand (after
deductions for losses and bad debts).
11
Under the FDIC's risk-based insurance assessment system, each insured
depository institution is placed in one of nine risk categories based on its
level of capital and other relevant information. Each insured depository
institution's insurance assessment rate is then determined by the risk category
in which it has been classified by the FDIC. At December 31, 1996 the Bank
exceeded applicable minimum capital requirements. During 1996, the Thrift was
assessed at the rate of .23%, the lowest factor, of deposits under the
assessment system.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FIDICIA") substantially revised the bank regulatory and funding provisions of
the Federal Deposit Insurance Act and made revisions to several other federal
banking statutes. In general, FDICIA subjects depository institutions to
significantly increased regulation and supervision. Among other things, FDICIA
requires federal bank regulatory authorities to take "prompt corrective action"
with respect to depository institutions that do not meet minimum capital
requirements, and imposes certain restrictions upon depository institutions
which meet minimum capital requirements but are not "well capitalized" for
purposes of FDICIA. FDICIA and the regulations adopted under it establish five
capital categories as follows, with the category for any institution determined
by the lowest of any of these ratios:
TIER 1 TOTAL
LEVERAGE RATIO RISKED-BASED RATIO RISKED-BASED RATIO
Well Capitalized 5% or above 6% or above 10% or above
Adequately
Capitalized 4% or above* 4% of above 8% or above
Undercapitalized Less than 4% Less than 4% Less than 8%
Significantly
Capitalized Less than 3% Less than 3% Less than 6%
RATIO OF
TANGIBLE EQUITY
TO TOTAL ASSETS
Critically Undercapitalized 2% or below
*3% for banks with the highest CAMEL (supervisory) rating.
An insured depository institution may be deemed to be in a capital category
that is lower than is indicated by its capital ratios if it receives an
unsatisfactory rating by its examiners with respect to its assets, management,
earnings or liquidity.
12
Under FIDCIA, a bank that is not well capitalized is generally prohibited
from accepting or renewing brokered deposits and offering interest rates on
deposits significantly higher than the prevailing rate in its normal market area
or nationally (depending upon where the deposits are solicited); in addition,
"pass through" insurance coverage may not be available for certain employee
benefit accounts.
FIDICIA generally prohibits a depository institution from mking any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
limitations on growth and are required to submit a capital restoration plan,
which must be gauranteed by the institution's parent company. Institutions that
fail to submit an acceptable plan, or that are significantly undercapitalized,
are subject to a host of more drastic regulatory restrictions and measures.
The Bank and First Federal are considered "well capitalized" according to
FDICIA guidelines.
FIDICIA directs that each federal banking agency prescribe standards for
depository institutions or depository institutions' holding companies relating
to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses and other standards as they deem appropriate. Many
regulations implementing these directives have been adopted by the agencies
BUSINESS-STATISTICAL DISCLOSURE
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and the Results of Operations" on Pages 11
through 27 of the 1996 Annual Report to Stockholders (filed as Exhibit 13, pages
23 through 39 of this report) is incorporated herein by reference.
13
ITEM 2. PROPERTIES
The Bank conducts its operations through its main office and two branches.
The Company's office is located in the main office of the Bank. All of such
offices are owned by the Bank and are located in Lake County, Illinois. The
Bank believes that its current facilities are adequate for the conduct of its
business.
First Federal conducts its business through its main office and two branch
offices. All offices are located in Lake County and have drive-up facilities.
With the addition of its newest branch office in Gurnee, which opened in
December 1990, First Federal believes that its facilities are adequate to meet
its present and immediately foreseeable needs.
The following table sets forth information relating to each of such
offices:
Bank of Waukegan:
Main Office: Trust Department:
1601 North Lewis Avenue 1601 North Lewis Avenue
Waukegan, Illinois 60085 Waukegan, Illinois 60085
Branches:
3233 Grand Avenue 40220 N. Route 59
Waukegan, Illinois 60085 Antioch, Illinois 60002
First Federal Bank, fsb:
Main Office:
216 Madison Street
Waukegan, Illinois 60085
Branches:
1428 N. Lewis Avenue 5384 Grand Avenue
Waukegan, Illinois 60085 Gurnee, Illinois 60031
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of their business, the Registrant and its subsidiaries
are often subject to various legal actions. These legal actions, whether
pending or threatened, arise through the normal course of business and are not
considered unusual or material.
Currently, no material legal procedures are pending which involve the
Registrant, the Bank, or First Federal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTER
The information set forth under the captions "Stock Market Information";
"Price Summary"; and "Cash Dividends" on Page 46 of the 1996 Annual Report to
Stockholders (filed as Exhibit 13, page 58 of this report) is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL AND OTHER DATA
The information set forth under the caption "Selected Consolidated
Financial Data" on Page 10 of the 1996 Annual Report to Stockholders (filed as
Exhibit 13, page 22 of this report) is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on Pages 11 through
27 of the 1996 Annual Report to Stockholders (filed as Exhibit 13, pages 23
through 39 of this report) is incorporated herein by reference.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant and the Independent
Auditors' Report as set forth on the following pages of the 1996 Annual Report
to Stockholders (filed as Exhibit 13, to this report) are incorporated herein by
reference:
Annual Report
to Stockholders
Page
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Independent Auditors' Report 28
Consolidated Balance Sheets as of
December 31, 1996 and 1995 29
Consolidated Statements of Income for the
Years ended December 31, 1996, 1995 and 1994 30
Consolidated Statements of Cash Flows for the
Years ended December 31, 1996, 1995 and 1994 31
Consolidated Statements of Stockholders'
Equity for the Years ended
December 31, 1996, 1995 and 1994 32
Notes to the Consolidated Financial Statements 33
Parent Company only financial statements 45
The portions of the 1996 Annual Report to Stockholders which are not
specifically incorporated by reference as a part of this Form 10-K are not
deemed to be a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS - The information with respect to Directors of the Registrant set
forth under the caption "Directors and Executive Management" on pages 2 of the
Registrant's Proxy Statement, dated March 21, 1997, relating to the April 24,
1997 Annual Meeting of Stockholders is incorporated herein by reference.
EXECUTIVE OFFICERS - The Company's only executive officers are Mr. Fred Abdula,
the President of the Company, and Mr. Kenneth W. Balza, the Vice President and
Treasurer of the Company. The information with respect to Mr. Abdula and Mr.
Balza is set forth under the caption "Directors and Executive Management" on
page 2 of the Registrant's Proxy Statement, dated March 21, 1997, relating to
the April 24, 1997 Annual Meeting of Stockholders is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Executive Compensation" and
"Summary Compensation Table" on page 5 of the Registrant's Proxy Statement,
dated March 21, 1997, relating to the April 24, 1997 Annual Meeting of
Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" on page 4 through 5 of the Registrant's Proxy
Statement, dated March 21, 1997, relating to the April 24, 1997 Annual Meeting
of Stockholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation Committee Interlocks
and Insider Participation" on page 9 of the Registrant's Proxy Statement, dated
March 21, 1997, relating to the April 24, 1997 Annual Meeting of Stockholders is
incorporated herein by reference.
17
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
All financial statements of the Registrant are incorporated herein
by reference as set forth under Item 8, Part II of this report on
Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES Not applicable
3. EXHIBITS (Numbered in accordance with Item 601 of Regulation S-K)
The following exhibits are filed as part of this
report:
3-A Articles of Incorporation of the Company,
as amended to date. (Filed with Registrant's annual
report on Form 10-K for the year ended December 31,
1994 Commission File 0-19300 and incorporated here by
reference.)
3-B Bylaws of the Company, as amended to date.
(Filed with Registrant's annual report on Form 10-K
for the year ended December 31, 1994 Commission
File 0-19300 and incorporated here by reference.)
10 1992 Northern States Omnibus Incentive Plan.
(Filed with Registrant's annual report on Form 10-K
for the year ended December 31, 1994 Commission
File 0-19300 and incorporated here by reference.)
11 Statement of Computation of per share earnings.
Contained in Note 1 to the consolidated financial
statements, page 34, 1996 Annual Report to
Stockholders (filed as Exhibit 13 to this report)
is incorporated by reference.
13 Copy of the Company's Annual Report to Stockholders
for the year ended December 31, 1996. This exhibit,
except for portions thereof that have been specifically
incorporated by reference into this report, is
furnished for the information of the Commission and
shall not be deemed "filed" as part hereof.
21 List of Subsidiaries.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth
quarter of the year ended December 31, 1996.
(c) Exhibit List and Index
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized, on this
18th day of March 1997.
NORTHERN STATES FINANCIAL CORPORATION
(Registrant)
Fred Abdula,
Chairman of the Board
and President
/S/ FRED ABDULA (Principal Executive Officer)
- ----------------------------
Thomas M. Nemeth,
Assistant Vice President
(Principal Financial Officer and
/S/ THOMAS M. NEMETH Principal Accounting Officer)
- ----------------------------
19
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. Each director of
the Registrant, whose signature appears below, hereby appoints Fred Abdula and
Thomas M. Nemeth and each of them severally, as his attorney-in-fact, to sign in
his name and on his behalf, as a director of the Registrant, and to file with
the Commission any and all Amendments to this Report on Form 10-K, on this 18th
day of March 1997.
Fred Abdula, Director /s/ Fred Abdula
-------------------------------
Kenneth W. Balza, Director /s/ Kenneth W. Balza
-------------------------------
Jack H. Blumberg, Director /s/ Jack H. Blumberg
-------------------------------
Frank Furlan, Director /s/ Frank Furlan
-------------------------------
Harry S. Gaples, Director /s/ Harry S. Gaples
-------------------------------
Laurance A. Guthrie, Director /s/ Laurance A. Guthrie
-------------------------------
James A. Hollensteiner, Director /s/ James A. Hollensteiner
-------------------------------
Raymond M. Mota, Director /s/ Raymond M. Mota
-------------------------------
Helen Rumsa, Director /s/ Helen Rumsa
-------------------------------
Frank Ryskiewicz, Director /s/ Frank Ryskiewicz
-------------------------------
Henry G. Tewes, Director /s/ Henry G. Tewes
-------------------------------
Arthur J. Wagner, Director /s/ Arthur J. Wagner
-------------------------------
20
NORTHERN STATES FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
EXHIBIT INDEX
Exhibits Page(s)
- -------- -------
3-A Articles of Incorporation of the Company,
as amended to date.
(Filed with Registrant's annual report on
Form 10-K for the year ended December 31, 1994
Commission File 0-19300 and incorporated here
by reference.)
3-B Bylaws of the Company, as amended to date.
(Filed with Registrant's annual report on
Form 10-K for the year ended December 31, 1994
Commission File 0-19300 and incorporated here
by reference.)
10 1992 Northern States Omnibus Incentive Plan.
(Filed with Registrant's annual report on
Form 10-K for the year ended December 31, 1994
Commission File 0-19300 and incorporated here
by reference.)
11 Statement of Computation of per share earnings.
Contained in Note 1 to the consolidated
financial statements, Page 34, 1996 Annual
Report to Stockholders (filed as Exhibit 13 to
this report) is incorporated by reference. 46
13 Copy of the Company's Annual Report to
Stockholders for the year ended December 31,
1996. This exhibit, except for portions
thereof that have been specifically incorporated
by reference into this Report, is furnished for
the information of the Commission and shall
not be deemed "filed" as part hereof. 22
21 List of Subsidiaries. 59
27 Financial Data Schedule
21