On\ue000 February\ue000 20,\ue000 2009,\ue000 as\ue000 part\ue000 of\ue000 the\ue000 Troubled\ue000 Asset\ue000 Relief\ue000 Program\ue000 (\u201cTARP\u201d)\ue000 Capital\ue000 Purchase\ue000 Program\ue000 established\ue000 by\ue000 the\ue000 United
States\ue000 Department\ue000 of\ue000 the\ue000 Treasury\ue000 (the\ue000 \u201cU.S.\ue000 Treasury\u201d)\ue000 under\ue000 the\ue000 Emergency\ue000 Economic\ue000 Stabilization\ue000 Act\ue000 of\ue000 2008,\ue000 as\ue000 amended\ue000 by\ue000 the
American\ue000 Recovery\ue000 and\ue000 Reinvestment\ue000 Act\ue000 of\ue000 2009\ue000 (\u201cEESA\u201d),\ue000 Northern\ue000 States\ue000 Financial\ue000 Corporation\ue000 (the\ue000 \u201cCompany\u201d)\ue000 entered\ue000 into\ue000 a\ue000 Letter
Agreement\ue000 and\ue000 the\ue000 Securities\ue000 Purchase\ue000 Agreement\ue000 \u2013\ue000 Standard\ue000 Terms\ue000 attached\ue000 thereto\ue000 (the\ue000 \u201cSecurities\ue000 Purchase\ue000 Agreement\u201d)\ue000 with\ue000 the\ue000 U.S.
Treasury,\ue000 pursuant\ue000 to\ue000 which\ue000 the\ue000 Company\ue000 agreed\ue000 to\ue000 issue\ue000 and\ue000 sell,\ue000 and\ue000 the\ue000 U.S.\ue000 Treasury\ue000 agreed\ue000 to\ue000 purchase,\ue000 (i)\ue000 17,211\ue000 shares\ue000 of\ue000 the
Company\u2019s\ue000 Fixed\ue000 Rate\ue000 Cumulative\ue000 Perpetual\ue000 Preferred\ue000 Stock,\ue000 Series\ue000 A\ue000 (the\ue000 \u201cPreferred\ue000 Stock\u201d)\ue000 having\ue000 a\ue000 liquidation\ue000 amount\ue000 per\ue000 share\ue000 equal\ue000 to
$1,000,\ue000 and\ue000 (ii)\ue000 a\ue000 ten-year\ue000 warrant\ue000 (the\ue000 \u201cWarrant\u201d)\ue000 to\ue000 purchase\ue000 up\ue000 to\ue000 584,084\ue000 shares\ue000 of\ue000 the\ue000 Company\u2019s\ue000 common\ue000 stock\ue000 (the\ue000 \u201cCommon\ue000 Stock\u201d),\ue000 or
15%\ue000 of\ue000 the\ue000 aggregate\ue000 dollar\ue000 amount\ue000 of\ue000 Preferred\ue000 Stock\ue000 purchased\ue000 by\ue000 the\ue000 U.S.\ue000 Treasury,\ue000 at\ue000 an\ue000 exercise\ue000 price\ue000 of\ue000 $4.42\ue000 per\ue000 share,\ue000 for\ue000 an\ue000 aggregate
purchase\ue000 price\ue000 of\ue000 $17,211,000\ue000 in\ue000 cash.\ue000 \ue000 Both\ue000 the\ue000 Preferred\ue000 Stock\ue000 and\ue000 the\ue000 Warrant\ue000 will\ue000 qualify\ue000 as\ue000 Tier\ue000 1\ue000 capital.

The\ue000 Preferred\ue000 Stock\ue000 will\ue000 pay\ue000 cumulative\ue000 dividends\ue000 at\ue000 a\ue000 rate\ue000 of\ue000 5%\ue000 per\ue000 year\ue000 for\ue000 the\ue000 first\ue000 five\ue000 years,\ue000 and\ue000 9%\ue000 per\ue000 year\ue000 thereafter.\ue000 \ue000 Also,
pursuant\ue000 to\ue000 recent\ue000 amendments\ue000 to\ue000 EESA,\ue000 the\ue000 Company\ue000 may,\ue000 subject\ue000 to\ue000 consultation\ue000 with\ue000 the\ue000 Federal\ue000 Reserve\ue000 Bank\ue000 of\ue000 Chicago,\ue000 redeem\ue000 the
Preferred\ue000 Stock\ue000 at\ue000 any\ue000 time\ue000 for\ue000 its\ue000 aggregate\ue000 liquidation\ue000 amount\ue000 plus\ue000 any\ue000 accrued\ue000 and\ue000 unpaid\ue000 dividends\ue000 without\ue000 first\ue000 raising\ue000 additional\ue000 capital
in\ue000 an\ue000 equity\ue000 offering.\ue000 \ue000 Upon\ue000 such\ue000 redemption\ue000 of\ue000 the\ue000 Preferred\ue000 Stock,\ue000 the\ue000 Warrant\ue000 will\ue000 be\ue000 liquidated\ue000 at\ue000 the\ue000 then\ue000 current\ue000 market\ue000 price.\ue000 \ue000 The
Preferred\ue000 Stock\ue000 is\ue000 generally\ue000 non-voting.

Prior\ue000 to\ue000 February\ue000 20,\ue000 2012,\ue000 unless\ue000 the\ue000 Company\ue000 has\ue000 redeemed\ue000 the\ue000 Preferred\ue000 Stock\ue000 or\ue000 the\ue000 U.S.\ue000 Treasury\ue000 has\ue000 transferred\ue000 the\ue000 Preferred Stock\ue000 to\ue000 a\ue000 third\ue000 party,\ue000 the\ue000 consent\ue000 of\ue000 the\ue000 U.S.\ue000 Treasury\ue000 will\ue000 be\ue000 required\ue000 for\ue000 the\ue000 Company\ue000 to\ue000 increase\ue000 its\ue000 common\ue000 stock\ue000 dividend\ue000 or\ue000 redeem, repurchase\ue000 or\ue000 acquire\ue000 any\ue000 shares\ue000 of\ue000 its\ue000 Common\ue000 Stock\ue000 or\ue000 other\ue000 capital\ue000 stock\ue000 or\ue000 other\ue000 equity\ue000 securities\ue000 or\ue000 any\ue000 trust\ue000 preferred\ue000 securities,\ue000 other than\ue000 in\ue000 connection\ue000 with\ue000 employee\ue000 benefit\ue000 plans\ue000 consistent\ue000 with\ue000 past\ue000 practice\ue000 and\ue000 certain\ue000 other\ue000 circumstances\ue000 specified\ue000 in\ue000 the\ue000 Securities Purchase\ue000 Agreement.

The\ue000 Warrant\ue000 is\ue000 immediately\ue000 exercisable\ue000 upon\ue000 its\ue000 issuance.\ue000 \ue000 The\ue000 Warrant\ue000 provides\ue000 for\ue000 the\ue000 adjustment\ue000 of\ue000 the\ue000 exercise\ue000 price\ue000 and\ue000 the
number\ue000 of\ue000 shares\ue000 of\ue000 Common\ue000 Stock\ue000 issuable\ue000 upon\ue000 exercise\ue000 pursuant\ue000 to\ue000 customary\ue000 anti-dilution\ue000 provisions,\ue000 such\ue000 as\ue000 upon\ue000 stock\ue000 splits\ue000 or
distributions\ue000 of\ue000 securities\ue000 or\ue000 other\ue000 assets\ue000 by\ue000 the\ue000 Company\ue000 to\ue000 holders\ue000 of\ue000 its\ue000 Common\ue000 Stock,\ue000 and\ue000 upon\ue000 certain\ue000 issuances\ue000 of\ue000 Common\ue000 Stock\ue000 at\ue000 or
below\ue000 a\ue000 specified\ue000 price\ue000 relative\ue000 to\ue000 the\ue000 initial\ue000 exercise\ue000 price.\ue000 \ue000 In\ue000 the\ue000 event\ue000 the\ue000 Company\ue000 completes\ue000 one\ue000 or\ue000 more\ue000 \u201cqualified\ue000 equity\ue000 offerings\u201d\ue000 on\ue000 or
prior\ue000 to\ue000 December\ue000 31,\ue000 2009\ue000 that\ue000 result\ue000 in\ue000 the\ue000 Company\ue000 receiving\ue000 aggregate\ue000 gross\ue000 proceeds\ue000 of\ue000 at\ue000 least\ue000 $17,211,000,\ue000 the\ue000 number\ue000 of\ue000 shares\ue000 of
Common\ue000 Stock\ue000 underlying\ue000 the\ue000 portion\ue000 of\ue000 the\ue000 Warrant\ue000 then\ue000 held\ue000 by\ue000 the\ue000 U.S.\ue000 Treasury\ue000 will\ue000 be\ue000 reduced\ue000 by\ue000 one-half\ue000 of\ue000 the\ue000 shares\ue000 of\ue000 Common
Stock\ue000 originally\ue000 covered\ue000 by\ue000 the\ue000 Warrant.\ue000 \ue000 Pursuant\ue000 to\ue000 the\ue000 Securities\ue000 Purchase\ue000 Agreement,\ue000 the\ue000 U.S.\ue000 Treasury\ue000 has\ue000 agreed\ue000 not\ue000 to\ue000 exercise\ue000 voting
power\ue000 with\ue000 respect\ue000 to\ue000 any\ue000 shares\ue000 of\ue000 Common\ue000 Stock\ue000 issued\ue000 upon\ue000 exercise\ue000 of\ue000 the\ue000 Warrant.

Pursuant\ue000 to\ue000 the\ue000 terms\ue000 of\ue000 the\ue000 Securities\ue000 Purchase\ue000 Agreement,\ue000 the\ue000 Company\ue000 agreed\ue000 that,\ue000 until\ue000 such\ue000 time\ue000 as\ue000 the\ue000 U.S.\ue000 Treasury\ue000 ceases\ue000 to
own\ue000 any\ue000 securities\ue000 of\ue000 the\ue000 Company\ue000 acquired\ue000 pursuant\ue000 to\ue000 the\ue000 Securities\ue000 Purchase\ue000 Agreement,\ue000 the\ue000 Company\ue000 will\ue000 take\ue000 all\ue000 necessary\ue000 action\ue000 to
ensure\ue000 that\ue000 its\ue000 benefit\ue000 plans\ue000 with\ue000 respect\ue000 to\ue000 its\ue000 senior\ue000 executive\ue000 officers\ue000 comply\ue000 with\ue000 Section\ue000 111(b)\ue000 of\ue000 the\ue000 EESA\ue000 as\ue000 implemented\ue000 by\ue000 any
guidance\ue000 or\ue000 regulation\ue000 under\ue000 the\ue000 EESA\ue000 that\ue000 has\ue000 been\ue000 issued\ue000 and\ue000 is\ue000 in\ue000 effect\ue000 as\ue000 of\ue000 the\ue000 date\ue000 of\ue000 issuance\ue000 of\ue000 the\ue000 Preferred\ue000 Stock\ue000 and\ue000 the\ue000 Warrant,
and\ue000 has\ue000 agreed\ue000 to\ue000 not\ue000 adopt\ue000 any\ue000 benefit\ue000 plans\ue000 with\ue000 respect\ue000 to,\ue000 or\ue000 which\ue000 cover,\ue000 its\ue000 senior\ue000 executive\ue000 officers\ue000 that\ue000 do\ue000 not\ue000 comply\ue000 with\ue000 the
EESA.\ue000 \ue000 These\ue000 requirements\ue000 include\ue000 certain\ue000 restrictions\ue000 on\ue000 executive\ue000 compensation\ue000 that\ue000 limit\ue000 the\ue000 bonus,\ue000 incentive\ue000 and\ue000 severance\ue000 compensation
and\ue000 tax\ue000 deductibility\ue000 of\ue000 compensation\ue000 the\ue000 Company\ue000 pays\ue000 to\ue000 its\ue000 senior\ue000 executive\ue000 officers\ue000 and\ue000 other\ue000 highly\ue000 compensated\ue000 officers\ue000 as\ue000 specified\ue000 in
the\ue000 EESA.\ue000 \ue000 Each\ue000 of\ue000 the\ue000 applicable\ue000 executives\ue000 of\ue000 the\ue000 Company\ue000 has\ue000 consented\ue000 to\ue000 be\ue000 bound\ue000 by\ue000 the\ue000 foregoing\ue000 requirements\ue000 and\ue000 restrictions.

The\ue000 Preferred\ue000 Stock\ue000 and\ue000 the\ue000 Warrant\ue000 were\ue000 issued\ue000 in\ue000 a\ue000 private\ue000 placement\ue000 exempt\ue000 from\ue000 registration\ue000 pursuant\ue000 to\ue000 Section\ue000 4(2)\ue000 of\ue000 the
Securities\ue000 Act\ue000 of\ue000 1933,\ue000 as\ue000 amended.\ue000 \ue000 Upon\ue000 the\ue000 request\ue000 of\ue000 the\ue000 U.S.\ue000 Treasury\ue000 at\ue000 any\ue000 time,\ue000 the\ue000 Company\ue000 has\ue000 agreed\ue000 to\ue000 promptly\ue000 enter\ue000 into\ue000 a
deposit\ue000 arrangement\ue000 pursuant\ue000 to\ue000 which\ue000 the\ue000 Preferred\ue000 Stock\ue000 may\ue000 be\ue000 deposited\ue000 and\ue000 depositary\ue000 shares\ue000 (\u201cDepositary\ue000 Shares\u201d),\ue000 representing
fractional\ue000 shares\ue000 of\ue000 the\ue000 Preferred\ue000 Stock,\ue000 may\ue000 be\ue000 issued.\ue000 \ue000 The\ue000 Company\ue000 has\ue000 agreed\ue000 to\ue000 register\ue000 the\ue000 Preferred\ue000 Stock,\ue000 the\ue000 Warrant,\ue000 the\ue000 shares\ue000 of
Common\ue000 Stock\ue000 underlying\ue000 the\ue000 Warrant\ue000 (the\ue000 \u201cWarrant\ue000 Shares\u201d)\ue000 and\ue000 Depositary\ue000 Shares,\ue000 if\ue000 any,\ue000 as\ue000 soon\ue000 as\ue000 practicable\ue000 after\ue000 the\ue000 date\ue000 of\ue000 the
issuance\ue000 of\ue000 the\ue000 Preferred\ue000 Stock\ue000 and\ue000 the\ue000 Warrant.\ue000 \ue000 Neither\ue000 the\ue000 Preferred\ue000 Stock\ue000 nor\ue000 the\ue000 Warrant\ue000 will\ue000 be\ue000 subject\ue000 to\ue000 any\ue000 contractual\ue000 restrictions\ue000 on
transfer,\ue000 except\ue000 that\ue000 the\ue000 U.S.\ue000 Treasury\ue000 may\ue000 only\ue000 transfer\ue000 or\ue000 exercise\ue000 an\ue000 aggregate\ue000 of\ue000 one-half\ue000 of\ue000 the\ue000 Warrant\ue000 Shares\ue000 prior\ue000 to\ue000 the\ue000 earlier\ue000 of\ue000 the
date\ue000 on\ue000 which\ue000 the\ue000 Company\ue000 has\ue000 received\ue000 aggregate\ue000 proceeds\ue000 of\ue000 not\ue000 less\ue000 than\ue000 $17,211,000\ue000 from\ue000 one\ue000 or\ue000 more\ue000 \u201cqualified\ue000 equity\ue000 offerings\u201d\ue000 and

Copies\ue000 of\ue000 the\ue000 Securities\ue000 Purchase\ue000 Agreement,\ue000 the\ue000 Warrant,\ue000 the\ue000 Certificate\ue000 of\ue000 Designations\ue000 with\ue000 respect\ue000 to\ue000 the\ue000 Preferred\ue000 Stock\ue000 and\ue000 the
Certificate\ue000 representing\ue000 the\ue000 Preferred\ue000 Stock\ue000 are\ue000 included\ue000 as\ue000 exhibits\ue000 to\ue000 this\ue000 Current\ue000 Report\ue000 on\ue000 Form\ue000 8-K\ue000 and\ue000 are\ue000 incorporated\ue000 herein\ue000 by
reference.\ue000 \ue000 The\ue000 foregoing\ue000 summary\ue000 of\ue000 certain\ue000 provisions\ue000 of\ue000 these\ue000 documents\ue000 is\ue000 qualified\ue000 in\ue000 its\ue000 entirety\ue000 by\ue000 reference\ue000 to\ue000 such\ue000 documents.

Prior\ue000 to\ue000 February\ue000 20,\ue000 2012,\ue000 unless\ue000 the\ue000 Company\ue000 has\ue000 redeemed\ue000 the\ue000 Preferred\ue000 Stock\ue000 or\ue000 the\ue000 U.S.\ue000 Treasury\ue000 has\ue000 transferred\ue000 the\ue000 Preferred
Stock\ue000 to\ue000 a\ue000 third\ue000 party,\ue000 the\ue000 consent\ue000 of\ue000 the\ue000 U.S.\ue000 Treasury\ue000 will\ue000 be\ue000 required\ue000 for\ue000 the\ue000 Company\ue000 to\ue000 (1)\ue000 declare\ue000 or\ue000 pay\ue000 any\ue000 dividend\ue000 or\ue000 make\ue000 any
distribution\ue000 on\ue000 its\ue000 Common\ue000 Stock\ue000 (other\ue000 than\ue000 regular\ue000 quarterly\ue000 cash\ue000 dividends\ue000 of\ue000 not\ue000 more\ue000 than\ue000 $0.20\ue000 per\ue000 share\ue000 of\ue000 common\ue000 stock)\ue000 or\ue000 (2)
redeem,\ue000 purchase\ue000 or\ue000 acquire\ue000 any\ue000 shares\ue000 of\ue000 its\ue000 Common\ue000 Stock\ue000 or\ue000 other\ue000 capital\ue000 stock\ue000 or\ue000 other\ue000 equity\ue000 securities\ue000 or\ue000 any\ue000 trust\ue000 preferred\ue000 securities,
other\ue000 than\ue000 in\ue000 connection\ue000 with\ue000 employee\ue000 benefit\ue000 plans\ue000 consistent\ue000 with\ue000 past\ue000 practice\ue000 and\ue000 certain\ue000 other\ue000 circumstances\ue000 specified\ue000 in\ue000 the\ue000 Securities
Purchase\ue000 Agreement.

In\ue000 addition,\ue000 pursuant\ue000 to\ue000 the\ue000 Certificate\ue000 of\ue000 Designations,\ue000 the\ue000 ability\ue000 of\ue000 the\ue000 Company\ue000 to\ue000 declare\ue000 or\ue000 pay\ue000 dividends\ue000 or\ue000 distributions\ue000 on,\ue000 or repurchase,\ue000 redeem\ue000 or\ue000 otherwise\ue000 acquire\ue000 for\ue000 consideration,\ue000 shares\ue000 of\ue000 its\ue000 Common\ue000 Stock\ue000 will\ue000 be\ue000 subject\ue000 to\ue000 restrictions\ue000 in\ue000 the\ue000 event\ue000 the\ue000 Company fails\ue000 to\ue000 declare\ue000 and\ue000 pay\ue000 full\ue000 dividends\ue000 (or\ue000 declare\ue000 and\ue000 set\ue000 aside\ue000 a\ue000 sum\ue000 sufficient\ue000 for\ue000 payment\ue000 thereof)\ue000 on\ue000 the\ue000 Preferred\ue000 Stock.\ue000 \ue000 These\ue000 restrictions are\ue000 set\ue000 forth\ue000 in\ue000 the\ue000 Certificate\ue000 of\ue000 Designations.

On\ue000 February\ue000 18,\ue000 2009,\ue000 the\ue000 Company\ue000 filed\ue000 a\ue000 Certificate\ue000 of\ue000 Designations\ue000 (the\ue000 \u201cCertificate\ue000 of\ue000 Designations\u201d)\ue000 to\ue000 its\ue000 Certificate\ue000 of
Incorporation,\ue000 as\ue000 amended,\ue000 with\ue000 the\ue000 Delaware\ue000 Secretary\ue000 of\ue000 State\ue000 for\ue000 the\ue000 purpose\ue000 of\ue000 designating\ue000 the\ue000 Preferred\ue000 Stock\ue000 and\ue000 fixing\ue000 the
designations,\ue000 preferences,\ue000 qualifications,