----

----

| Ø Rehabilitating or liquidating non-performing assets; |   | Ø Increasing our net interest margin (NIM); |
|-------------------------------------------------------------|--------|--------------------------------------------------|
| Ø Growing non-interest income;                         |   | Ø Reducing controllable expenses.           |

----

----

| Financial condition data:                                                    |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |
|------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|
|                                                                         |   | For Years Ended December 31, |    |
|                                                                         |   | 2010                                             |    |   | 2009   |   |    | 2008   |   |   | 2007    |   |   | 2006   |    |
|                                                                         |   | (In thousands)                              |    |
| Total assets                                                                 |   | $                                                | 215,733 |   |   | $      | 233,506 |   |   | $      | 247,672 |   |   | $      | 250,831 |   |   | $ | 280,959 |   |
| Loans receivable, net                                                        |   |                                             | 157,144 |   |   |   | 171,219 |   |   |   | 192,270 |   |   |   | 201,333 |   |   |   | 209,518 |   |
| Loans held for sale                                                          |   |                                             | -       |   |   |   | 52      |   |   |   | 107     |   |   |   | -       |   |   |   | 72 |   |
| Investment securities                                                        |   |                                             | 37,821  |   |   |   | 37,641  |   |   |   | 29,687  |   |   |   | 23,451  |   |   |   | 44,850 |   |
| Cash and cash equivalents                                                    |   |                                             | 1,963   |   |   |   | 3,099   |   |   |   | 3,471   |   |   |   | 5,341   |   |   |   | 4,993 |   |
| Deposits                                                                     |   |                                             | 155,466 |   |   |   | 158,100 |   |   |   | 165,778 |   |   |   | 157,833 |   |   |   | 170,530 |   |
| FHLB advances and note payable                                               |   |                                             | 29,000  |   |   |   | 45,031  |   |   |   | 40,969  |   |   |   | 52,684  |   |   |   | 66,042 |   |
| Repo Sweep agreements                                                        |   |                                             | 6,172   |   |   |   | 5,408   |   |   |   | 9,447   |   |   |   | 6,637   |   |   |   | 6,528 |   |
| Stockholders' equity                                                         |   |                                             | 23,236  |   |   |   | 23,052  |   |   |   | 29,419  |   |   |   | 32,503  |   |   |   | 35,453 |   |
|                                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating data:                                                              |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
|                                                                         |   | At December 31,                        |    |
|                                                                         |   | 2010                                             |    |   | 2009   |   |    | 2008   |   |   | 2007    |   |   | 2006   |    |
|                                                                         |   | (In thousands)                              |    |
| Interest income                                                              |   | $                                                | 11,447  |   |   | $      | 12,442  |   |   | $      | 13,967  |   |   | $      | 16,200  |   |   | $ | 17,170 |   |
| Interest expense                                                             |   |                                             | 3,447   |   |   |   | 5,088   |   |   |   | 7,130   |   |   |   | 8,437   |   |   |   | 8,548 |   |
|                                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net interest income                                                          |   |                                             | 8,000   |   |   |   | 7,354   |   |   |   | 6,837   |   |   |   | 7,763   |   |   |   | 8,622 |   |
| Provision for loan losses                                                    |   |                                             | 1,101   |   |   |   | 6,196   |   |   |   | 4,421   |   |   |   | 2,377   |   |   |   | 851 |   |
|                                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Net interest income after provision for loan losses                          |   |                                             | 6,899   |   |   |   | 1,158   |   |   |   | 2,416   |   |   |   | 5,386   |   |   |   | 7,771 |   |
| Other income (loss):                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Service charges and fees                                                     |   |                                             | 804     |   |   |   | 869     |   |   |   | 942     |   |   |   | 911     |   |   |   | 1,044 |   |
| Mortgage banking activities                                                  |   |                                             | 1,438   |   |   |   | 1,414   |   |   |   | 432     |   |   |   | 418     |   |   |   | 344 |   |
| Net gain (loss) on sale of investment securities                             |   |                                             | 546     |   |   |   | -       |   |   |   | 6       |   |   |   | (97     | ) |   |   | (45 | ) |
| Gain (loss) on sale of real estate                                           |   |                                             | (43     | )      |   |   | 20      |   |   |   | 22      |   |   |   | (40     | ) |   |   | 4 |   |
| Other non-interest income                                                    |   |                                             | 301     |   |   |   | 102     |   |   |   | 95      |   |   |   | 64      |   |   |   | 103 |   |
| Insurance & brokerage commissions                                        |   |                                             | 159     |   |   |   | 170     |   |   |   | 180     |   |   |   | 180     |   |   |   | 180 |   |
|                                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Total other income                                                           |   |                                             | 3,205   |   |   |   | 2,575   |   |   |   | 1,677   |   |   |   | 1,436   |   |   |   | 1,630 |   |
| Other expenses                                                               |   |                                             | 9,866   |   |   |   | 9,360   |   |   |   | 8,874   |   |   |   | 9,313   |   |   |   | 8,761 |   |
|                                                                         |   |                                             |    |   |   |   |    |   |   |   |    |   |   |   |    |   |   |   |   |   |
| Income (loss) from continuing operations before income tax expense (benefit) |   |                                             | 238     |   |   |   | (5,627  | )      |   |   | (4,781  | )      |   |   | (2,491  | ) |   |   | 640 |   |
| Income tax expense (benefit) from continuing operations                      |   |                                             | -       |   |   |   | 1,090   |   |   |   | (1,601  | )      |   |   | (908    | ) |   |   | 164 |   |
| Net income (loss) from continuing operations                                 |   |                                             | 238     |   |   |   | (6,717  | )      |   |   | (3,180  | )      |   |   | (1,583  | ) |   |   | 476 |   |
| Loss from discontinued operations, net of tax benefit                        |   |                                             | -       |   |   |   | (46     | )      |   |   | (61     | )      |   |   | (17     | ) |   |   | (13 | ) |
| Net income (loss)                                                            |   | $                                                | 238     |   |   | $      | (6,763  | )      |   | $      | (3,241  | )      |   | $      | (1,600  | ) |   | $ | 463 |   |

----

| Key Financial Ratios and Other Data:                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                    |   | For Years Ended December 31, |   |
|                                                                    |   | 2010                                             |   |   | 2009   |   |   | 2008   |   |   | 2007   |   |   | 2006   |   |
| Performance Ratios:                                                     |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Return on average assets                                                |   |                                             | 0.10   | %      |   |   | -2.80  | %      |   |   | -1.30  | %      |   |   | -0.60  | % |   |   | 0.16 | % |
| Return on average equity                                                |   |                                             | 0.99   | %      |   |   | -23.21 | %      |   |   | -10.05 | %      |   |   | -4.84  | % |   |   | 1.35 | % |
| Average interest rate spread                                            |   |                                             | 3.60   | %      |   |   | 2.97   | %      |   |   | 2.51   | %      |   |   | 2.68   | % |   |   | 2.83 | % |
| Dividend payout ratio                                                   |   |                                             | 0.00   | %      |   |   | 0.00   | %      |   |   | N/M    | ***    |   |   | N/M    | *** |   |   | 133.33 | % |
| Dividends per share                                                     |   | $                                                | 0.00   |   |   | $      | 0.00   |   |   | $      | 0.15   |   |   | $      | 0.20   |   |   | $ | 0.20 |   |
| Net interest margin                                                     |   |                                             | 3.78   | %      |   |   | 3.26   | %      |   |   | 2.93   | %      |   |   | 3.13   | % |   |   | 3.24 | % |
| Efficiency ratio (Bank)                                                 |   |                                             | 102.76 | %      |   |   | 252.19 | %      |   |   | 104.54 | %      |   |   | 101.18 | % |   |   | 89.37 | % |
| Non-interest expense to average total assets                            |   |                                             | 4.33   | %      |   |   | 3.88   | %      |   |   | 3.56   | %      |   |   | 4.45   | % |   |   | 4.04 | % |
| Average interest-earning assets to average interest-bearing liabilities |   |                                             | 111.20 | %      |   |   | 113.32 | %      |   |   | 113.85 | %      |   |   | 113.65 | % |   |   | 112.99 | % |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Asset Quality Ratios:                                                   |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-performing assets to total assets                                   |   |                                             | 4.37   | %      |   |   | 6.58   | %      |   |   | 5.57   | %      |   |   | 4.15   | % |   |   | 1.59 | % |
| Non-performing loans to total loans                                     |   |                                             | 4.13   | %      |   |   | 6.73   | %      |   |   | 6.14   | %      |   |   | 4.54   | % |   |   | 1.90 | % |
| Allowance for loan losses to nonperforming loans                        |   |                                             | 42.85  | %      |   |   | 31.05  | %      |   |   | 46.41  | %      |   |   | 43.93  | % |   |   | 52.24 | % |
| Allowance for loan losses to total loans                                |   |                                             | 1.77   | %      |   |   | 2.09   | %      |   |   | 2.85   | %      |   |   | 1.95   | % |   |   | 0.98 | % |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Ratios:                                                         |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity to total assets at end of period                                 |   |                                             | 10.77  | %      |   |   | 9.87   | %      |   |   | 11.88  | %      |   |   | 12.96  | % |   |   | 12.62 | % |
| Average equity to average assets                                        |   |                                             | 10.47  | %      |   |   | 12.07  | %      |   |   | 12.44  | %      |   |   | 12.38  | % |   |   | 12.07 | % |
| Risk-based capital ratio (Bank only)                                    |   |                                             | 15.57  | %      |   |   | 13.58  | %      |   |   | 15.75  | %      |   |   | 16.27  | % |   |   | 17.07 | % |
|                                                                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Data:                                                             |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Number of full service offices                                          |   |                                             | 8      |   |   |   | 8      |   |   |   | 8      |   |   |   | 9      | ** |   |   | 10 | * |

----

----

----

----

|                                                                                                |   |                    |    |   | Average Consolidated Statements of Condition |   |   |           |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|----------------------------------------------|--------|--------|----------------|--------|
|                                                                                                |   |                    |    |   | For Years Ended December 31,                 |   |   |           |   |
|                                                                                                |   | As of December 31, 2010 |    |   | 2010                                         |   |   | 2009           |   |   | 2008 |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   | Average |   |   |   |   |   |   |   |   | Average |   |   |   |   |   |   |   |   | Average |   |
|                                                                                                |   |                    |    |   | Yield /                                      |   |   | Average        |   |   |   |   |   | Yield / |   |   | Average |   |   |   |   |   | Yield / |   |   | Average |   |   |   |   |   | Yield / |   |
|                                                                                                |   | Balance                 |    |   | Rate                                         |   |   | Balance        |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
|                                                                                                |   |                    |    |   |                                         |   |   | (In thousands) |   |   | (In thousands) |   |   | (In thousands) |   |
| Interest-earning assets:                                                                            |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage loans                                                                                      |   |                    |    |   |                                         |   |   | $              | 77,280 |   |   | $ | 4,806 |   |   |   |   |   | $ | 86,015 |   |   | $ | 5,372 |   |   |   |   |   | $ | 94,787 |   |   | $ | 5,969 |   |   |   |   |
| Non-mortgage loans                                                                                  |   |                    |    |   |                                         |   |   |           | 91,470 |   |   |   | 5,327 |   |   |   |   |   |   | 103,134 |   |   |   | 5,732 |   |   |   |   |   |   | 104,983 |   |   |   | 6,619 |   |   |   |   |
| Loans                                                                                               |   | $                       | 157,144 |   |                                         |   | 5.83   | %              |   |   | 168,750 |   |   |   | 10,133 |   |   |   | 6.00 | % |   |   | 189,149 |   |   |   | 11,104 |   |   |   | 5.87 | % |   |   | 199,770 |   |   |   | 12,588 |   |   |   | 6.30 | % |
| Mortgage-backed securities                                                                          |   |                    | 25,684  |   |                                         |   | 2.65   | %              |   |   | 18,973 |   |   |   | 648 |   |   |   | 3.42 | % |   |   | 13,714 |   |   |   | 577 |   |   |   | 4.21 | % |   |   | 10,071 |   |   |   | 421 |   |   |   | 4.18 | % |
| Other Investment securities                                                                         |   |                    | 12,137  |   |                                         |   | 3.43   | %              |   |   | 16,940 |   |   |   | 568 |   |   |   | 3.35 | % |   |   | 18,316 |   |   |   | 646 |   |   |   | 3.53 | % |   |   | 16,423 |   |   |   | 671 |   |   |   | 4.09 | % |
| Investment securities                                                                               |   |                    | 37,821  |   |                                         |   | 2.89   | %              |   |   | 35,913 |   |   |   | 1,216 |   |   |   | 3.39 | % |   |   | 32,030 |   |   |   | 1,223 |   |   |   | 3.82 | % |   |   | 26,494 |   |   |   | 1,092 |   |   |   | 4.12 | % |
| Other investments                                                                                   |   |                    | 4,826   |   |                                         |   | 1.47   | %              |   |   | 7,151 |   |   |   | 98 |   |   |   | 1.37 | % |   |   | 4,784 |   |   |   | 115 |   |   |   | 2.40 | % |   |   | 8,387 |   |   |   | 297 |   |   |   | 3.54 | % |
| Total interest earning assets                                                                       |   |                    | 199,791 |   |                                         |   | 5.17   | %              |   |   | 211,814 |   |   |   | 11,447 |   |   |   | 5.41 | % |   |   | 225,963 |   |   |   | 12,442 |   |   |   | 5.51 | % |   |   | 234,651 |   |   |   | 13,967 |   |   |   | 5.95 | % |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non Interest Earning Assets                                                                         |   |                    | 15,942  |   |                                         |   |   |           |   |   | 15,809 |   |   |   |   |   |   |   |   |   |   |   | 15,417 |   |   |   |   |   |   |   |   |   |   |   | 14,709 |   |   |   |   |   |   |   |   |   |
| Total Assets                                                                                        |   | $                       | 215,733 |   |                                         |   |   |           |   | $ | 227,623 |   |   |   |   |   |   |   |   |   |   | $ | 241,380 |   |   |   |   |   |   |   |   |   |   | $ | 249,360 |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest bearing liabilities:                                                                       |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings Deposits                                                                                    |   | $                       | 16,785  |   |                                         |   | 0.05   | %              |   | $ | 16,053 |   |   | $ | 8 |   |   |   | 0.06 | % |   | $ | 15,123 |   |   | $ | 17 |   |   |   | 0.12 | % |   | $ | 15,071 |   |   | $ | 25 |   |   |   | 0.18 | % |
| Money market/NOW accounts                                                                           |   |                    | 44,107  |   |                                         |   | 0.46   | %              |   |   | 41,845 |   |   |   | 324 |   |   |   | 0.76 | % |   |   | 36,558 |   |   |   | 384 |   |   |   | 1.04 | % |   |   | 28,889 |   |   |   | 415 |   |   |   | 1.43 | % |
| Certificates of deposit                                                                             |   |                    | 84,225  |   |                                         |   | 1.94   | %              |   |   | 88,379 |   |   |   | 1,964 |   |   |   | 2.22 | % |   |   | 98,772 |   |   |   | 3,056 |   |   |   | 3.09 | % |   |   | 107,213 |   |   |   | 4,457 |   |   |   | 4.16 | % |
| Total Interest bearing deposits                                                                     |   |                    | 145,117 |   |                                         |   | 1.27   | %              |   |   | 146,277 |   |   | $ | 2,296 |   |   |   | 1.57 | % |   |   | 150,453 |   |   | $ | 3,457 |   |   |   | 2.30 | % |   |   | 151,173 |   |   | $ | 4,897 |   |   |   | 3.24 | % |
| Borrowed funds                                                                                      |   |                    | 35,172  |   |                                         |   | 2.00   | %              |   |   | 44,211 |   |   |   | 1,151 |   |   |   | 2.60 | % |   |   | 48,942 |   |   |   | 1,631 |   |   |   | 3.33 | % |   |   | 55,104 |   |   |   | 2,233 |   |   |   | 4.05 | % |
| Total Interest bearing liabilities                                                                  |   |                    | 180,289 |   |                                         |   | 1.41   | %              |   |   | 190,488 |   |   |   | 3,447 |   |   |   | 1.81 | % |   |   | 199,395 |   |   |   | 5,088 |   |   |   | 2.55 | % |   |   | 206,277 |   |   |   | 7,130 |   |   |   | 3.44 | % |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non interest bearing liabilities                                                                    |   |                    | 12,208  |   |                                         |   |   |           |   |   | 13,312 |   |   |   |   |   |   |   |   |   |   |   | 12,848 |   |   |   |   |   |   |   |   |   |   |   | 10,849 |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                   |   |                    | 192,497 |   |                                         |   |   |           |   |   | 203,800 |   |   |   |   |   |   |   |   |   |   |   | 212,243 |   |   |   |   |   |   |   |   |   |   |   | 217,126 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                                |   |                    | 23,236  |   |                                         |   |   |           |   |   | 23,823 |   |   |   |   |   |   |   |   |   |   |   | 29,137 |   |   |   |   |   |   |   |   |   |   |   | 32,234 |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Liabilities & stockholders' equity                                                        |   | $                       | 215,733 |   |                                         |   |   |           |   | $ | 227,623 |   |   |   |   |   |   |   |   |   |   | $ | 241,380 |   |   |   |   |   |   |   |   |   |   | $ | 249,360 |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income                                                                                 |   |                    |    |   |                                         |   |   |           |   |   | $ | 8,000 |   |   |   |   |   |   |   |   |   |   | $ | 7,354 |   |   |   |   |   |   |   |   |   |   | $ | 6,837 |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest rate spread                                                                                |   |                    |    | 3.76   | %                                            |   |   |           |   |   |   |   |   |   |   | 3.60 | % |   |   |   |   |   |   |   |   |   |   | 2.97 | % |   |   |   |   |   |   |   |   |   |   | 2.51 | % |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest-earning assets                                                                         |   |                    |    |   |                                         |   |   |           |   | $ | 21,326 |   |   |   |   |   |   |   |   |   |   | $ | 26,568 |   |   |   |   |   |   |   |   |   |   | $ | 28,374 |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest margin (1)                                                                             |   |                    |    | 3.89   | %                                            |   |   |           |   |   |   |   |   |   |   | 3.78 | % |   |   |   |   |   |   |   |   |   |   | 3.26 | % |   |   |   |   |   |   |   |   |   |   | 2.93 | % |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Average interest-earning assets                                                                     |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| to average interest-bearing liabilities                                                             |   |                    |    | 110.82 | %                                            |   |   |           |   |   |   |   |   |   |   | 111.20 | % |   |   |   |   |   |   |   |   |   |   | 113.32 | % |   |   |   |   |   |   |   |   |   |   | 113.76 | % |
|                                                                                                |   |                    |    |   |                                         |   |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |
| (1) Net interest margin represents net interest income divided by the interest-earning assets. |   |

----

|                               |   | Year ended December 31, 2010 |   |
|------------------------------------|--------|--------------------------------------------------|--------|
|                               |   | Compared to                                 |   |
|                               |   | Year ended December 31, 2009 |   |
|                               |   | Increase (Decrease) Due to:       |   |
|                               |   | Volume                                           |   |   | Rate |   |   | Total |   |
|                               |   | (In thousands)                              |   |
| Interest-earning assets:           |   |                                             |   |   |   |   |   |   |   |
| Loans receivable                   |   | $                                                | (1,245 | ) |   | $ | 274 |   |   | $ | (971 | ) |
| Investment securities              |   |                                             | 146    |   |   |   | (154 | ) |   | $ | (8 | ) |
| Other investments                  |   |                                             | 44     |   |   |   | (60 | ) |   | $ | (16 | ) |
|                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets      |   |                                             | (1,055 | ) |   |   | 60 |   |   |   | (995 | ) |
|                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:      |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Savings Deposits                   |   |                                             | 1      |   |   |   | (10 | ) |   |   | (9 | ) |
| Money Market/NOW accounts          |   |                                             | 73     |   |   |   | (133 | ) |   |   | (60 | ) |
| Certificates of Deposit            |   |                                             | (392   | ) |   |   | (700 | ) |   |   | (1,092 | ) |
| Deposits                           |   |                                             | (318   | ) |   |   | (843 | ) |   |   | (1,161 | ) |
| Borrowed funds                     |   |                                             | (185   | ) |   |   | (295 | ) |   |   | (480 | ) |
|                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities |   |                                             | (503   | ) |   |   | (1,138 | ) |   |   | (1,641 | ) |
|                               |   |                                             |   |   |   |   |   |   |   |   |   |   |
| Change in net interest income      |   | $                                                | (552   | ) |   | $ | 1,198 |   |   | $ | 646 |   |

|                               |   | Year ended December 31, 2009 |    |
|------------------------------------|--------|------------------------------|---------|
|                               |   | Compared to                  |    |
|                               |   | Year ended December 31, 2008 |    |
|                               |   | Increase (Decrease) Due to:  |    |
|                               |   | Volume                       |    |   | Rate |   |   | Total |   |
|                               |   | (In thousands)               |    |
| Interest-earning assets:           |   |                         |    |   |   |   |   |   |   |
| Loans receivable                   |   | $                            | (665    | ) |   | $ | (819 | ) |   | $ | (1,484 | ) |
| Investment securities              |   |                         | 293     |   |   |   | (160 | ) |   | $ | 133 |   |
| Other investments                  |   |                         | 4       |   |   |   | (178 | ) |   | $ | (174 | ) |
|                               |   |                         |    |   |   |   |   |   |   |   |   |   |
| Total interest-earning assets      |   |                         | (368    | ) |   |   | (1,157 | ) |   |   | (1,525 | ) |
|                               |   |                         |    |   |   |   |   |   |   |   |   |   |
|                               |   |                         |    |   |   |   |   |   |   |   |   |   |
| Interest-bearing liabilities:      |   |                         |    |   |   |   |   |   |   |   |   |   |
| Savings Deposits                   |   |                         | 1       |   |   |   | (8 | ) |   |   | (7 | ) |
| Money Market/NOW accounts          |   |                         | 15,196  |   |   |   | (15,228 | ) |   |   | (32 | ) |
| Certificates of Deposit            |   |                         | (401    | ) |   |   | (1,000 | ) |   |   | (1,401 | ) |
| Deposits                           |   |                         | 14,796  |   |   |   | (16,236 | ) |   |   | (1,440 | ) |
| Borrowed funds                     |   |                         | (350    | ) |   |   | (252 | ) |   |   | (602 | ) |
|                               |   |                         |    |   |   |   |   |   |   |   |   |   |
| Total interest-bearing liabilities |   |                         | 14,446  |   |   |   | (16,488 | ) |   |   | (2,042 | ) |
|                               |   |                         |    |   |   |   |   |   |   |   |   |   |
| Change in net interest income      |   | $                            | (14,814 | ) |   | $ | 15,331 |   |   | $ | 517 |   |

----

| Change in Interest   |   |                        |   |   |                                                     |   |    | NPV as a Percentage of Present Value of Assets (3) |   |
|--------------------------------|--------|-----------------------------|--------|--------|----------------------------------------------------------|--------|---------|-------------------------------------------------------------------------------------------------|--------|
| Rates (basis points) |   |                        |   |   | Estimated Increase (Decrease) in NPV |   |    |                                                                                            |   |   | Increase (Decrease) |   |
| (1)                            |   | Estimated NPV (2) |   |   | Amount                                                   |   |    | Percent                                                                                         |   |   | NPV Ratio (4) |   |   | (basis points) |   |
|                           |   | (Dollars in thousands)      |   |   |                                                     |   |    |                                                                                            |   |   |   |   |
|                           |   |                        |   |   |                                                     |   |    |                                                                                            |   |   |   |   |   |   |   |
| +300                           |   |                        | 27,191 |   |                                                     |   | (4,671  | )                                                                                               |   |   | -15.0 | % |   |   | 12.39 | % |   |   | (161 | ) |
| +200                           |   |                        | 30,753 |   |                                                     |   | (1,109  | )                                                                                               |   |   | -3.0 | % |   |   | 13.73 | % |   |   | (28 | ) |
| +100                           |   |                        | 31,520 |   |                                                     |   | (342    | )                                                                                               |   |   | -1.0 | % |   |   | 13.95 | % |   |   | (6 | ) |
| +50                            |   |                        | 31,442 |   |                                                     |   | (420    | )                                                                                               |   |   | -1.0 | % |   |   | 13.89 | % |   |   | (12 | ) |
| —                        |   |                        | 31,862 |   |                                                     |   | — |                                                                                            |   |   | — |   |   |   | 14.01 | % |   |   | — |   |
| -50                            |   |                        | 32,025 |   |                                                     |   | 162     |                                                                                            |   |   | 1.0 | % |   |   | 14.03 | % |   |   | 2 |   |
| -100                           |   |                        | 32,125 |   |                                                     |   | 263     |                                                                                            |   |   | 1.0 | % |   |   | 14.04 | % |   |   | 4 |   |

|   | (1) | Assumes an instantaneous uniform change in interest rates at all maturities. |
|--------|-----|------------------------------------------------------------------------------|

|   | (2) | NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------|

|   | (3) | Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------|

|   | (4) | NPV Ratio represents NPV divided by the present value of assets. |
|--------|-----|------------------------------------------------------------------|

----

----

----

| Annual constant prepayment speed (CPR):      |   |   |                   15.7 | %      |
|----------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------|--------|
| Weighted average life remaining (in months): |   |   | 246                                                                                                              |   |
| Discount rate used:                          |   |   | 8.0                                                                                                              | %      |

----

----

----

----

----

----

|               |   | Market Price                                                                                                                        |   |   |                                                                                                                                    |   |
|--------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|--------|
| Quarter Ended |   |            High            |   |   |            Low            |   |   | Cash Dividends Declared |   |
|               |   |                                                                                                                                     |   |   |                                                                                                                                    |   |   |   |   |
| December 31, 2010  |   | $                                                                                                                                        | 2.99   |   |                                                                                                                                    | $      | 2.39 |   |   | $ | - |   |
| September 30, 2010 |   | $                                                                                                                                        | 2.75   |   |                                                                                                                                    | $      | 2.05 |   |   | $ | - |   |
| June 30, 2010      |   | $                                                                                                                                        | 2.44   |   |                                                                                                                                    | $      | 1.38 |   |   | $ | - |   |
| March 31, 2010     |   | $                                                                                                                                        | 1.80   |   |                                                                                                                                    | $      | 1.13 |   |   | $ | - |   |
| December 31, 2009  |   | $                                                                                                                                        | 2.15   |   |                                                                                                                                    | $      | 1.21 |   |   | $ | - |   |
| September 30, 2009 |   | $                                                                                                                                        | 2.15   |   |                                                                                                                                    | $      | 1.81 |   |   | $ | - |   |
| June 30, 2009      |   | $                                                                                                                                        | 2.20   |   |                                                                                                                                    | $      | 0.70 |   |   | $ | - |   |
| March 31, 2009     |   | $                                                                                                                                        | 2.35   |   |                                                                                                                                    | $      | 0.66 |   |   | $ | - |   |

----

| Special Counsel Luse Gorman Pomerenk & Schick, PC5335 Wisconsin Avenue, N.W.Suite 400Washington, D.C.  20015 Market Makers Raymond James & Associates, Inc.222 South Riverside Plaza7th FloorChicago, IL 60606312-655-3000 Stifel Nicolaus237 Park Avenue8th FloorNew York, NY 10017212-847-6500 Keefe, Bruyette & Woods787 7th Avenue4th FloorNew York, NY 10019212-887-7777 FIG Partners, LLC1175 Peachtree St. NE100 Colony Sq, Suite 2250Atlanta, GA 30361866-344-2657 |   | Independent Auditor Plante & Moran, PLLC2601 Cambridge Ct.  Suite 500Auburn Hills, MI 48326 Transfer Agent Registrar and Transfer Company10 Commerce DriveCranford, NJ 07016800-346-6084 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| First Federal of Northern Michigan Bancorp, Inc.  and Subsidiaries |
|-------------------------------------------------------------------------|
|                                                                    |

|                                               | Contents |
|----------------------------------------------------|----------|
|                                               |     |
| Report Letter                                      | 2        |
|                                               |     |
| Consolidated Financial Statements                  |     |
|                                               |     |
| Balance Sheet                                      | 3        |
|                                               |     |
| Statement of Operations                            | 4        |
|                                               |     |
| Statement of Changes in Stockholders’ Equity | 5        |
|                                               |     |
| Statement of Cash Flows                            | 6        |
|                                               |     |
| Notes to Consolidated Financial Statements         | 7        |

----

----

| First Federal of Northern Michigan Bancorp, Inc.  and Subsidiaries |
|-------------------------------------------------------------------------|
|                                                                    |
| Consolidated Balance Sheet                                              |
| (000s omitted, except per share data)                                   |

|                                                                                |   | December 31 |    |
|-------------------------------------------------------------------------------------|--------|------------------|---------|
|                                                                                |   | 2010             |    |   | 2009 |   |
| Assets                                                                              |
| Cash and cash equivalents                                                           |   | $                | 1,890   |   |   | $ | 2,583 |   |
| Overnight deposits with Federal Home Loan Bank                                      |   |             | 73      |   |   |   | 516 |   |
|                                                                                |   |             |    |   |   |   |   |   |
| Total cash and cash equivalents                                                     |   |             | 1,963   |   |   |   | 3,099 |   |
|                                                                                |   |             |    |   |   |   |   |   |
| Securities available for sale (Note 2)                                              |   |             | 35,301  |   |   |   | 33,713 |   |
| Securities held to maturity (Note 2)                                                |   |             | 2,520   |   |   |   | 3,928 |   |
| Loans - Net (Note 3)                                                                |   |             | 157,144 |   |   |   | 171,219 |   |
| Loans held for sale                                                                 |   |             | -       |   |   |   | 52 |   |
| Federal Home Loan Bank stock                                                        |   |             | 3,775   |   |   |   | 4,197 |   |
| Property and equipment (Note 4)                                                     |   |             | 6,027   |   |   |   | 6,564 |   |
| Foreclosed real estate                                                              |   |             | 2,818   |   |   |   | 3,580 |   |
| Accrued interest receivable                                                         |   |             | 1,231   |   |   |   | 1,230 |   |
| Prepaid FDIC insurance premiums                                                     |   |             | 967     |   |   |   | 1,315 |   |
| Intangible assets (Note 6)                                                          |   |             | 627     |   |   |   | 920 |   |
| Deferred tax asset                                                                  |   |             | 659     |   |   |   | 559 |   |
| Other assets (Note 5)                                                               |   |             | 2,701   |   |   |   | 3,130 |   |
| Total assets                                                                        |   | $                | 215,733 |   |   | $ | 233,506 |   |
|                                                                                |   |             |    |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                |
| Liabilities                                                                         |   |             |    |   |   |   |   |   |
| Non-interest bearing deposits                                                       |   | $                | 10,349  |   |   | $ | 11,074 |   |
| Interest-bearing deposits (Note 7)                                                  |   |             | 145,117 |   |   |   | 147,026 |   |
| Advances from Federal Home Loan Bank (Note 8)                                       |   |             | 29,000  |   |   |   | 44,400 |   |
| Note payable (Note 9)                                                               |   |             | -       |   |   |   | 631 |   |
| REPO sweep accounts                                                                 |   |             | 6,172   |   |   |   | 5,408 |   |
| Accrued expenses and other liabilities (Note 13)                                    |   |             | 1,859   |   |   |   | 1,915 |   |
| Total liabilities                                                                   |   |             | 192,497 |   |   |   | 210,454 |   |
|                                                                                |   |             |    |   |   |   |   |   |
| Stockholders' Equity (Note 12)                                                      |   |             |    |   |   |   |   |   |
| Common stock ($0.01 par value 20,000,000 shares authorized 3,191,799 shares issued) |   |             | 32      |   |   |   | 32 |   |
| Additional paid-in capital                                                          |   |             | 23,822  |   |   |   | 23,723 |   |
| Retained earnings                                                                   |   |             | 2,238   |   |   |   | 2,000 |   |
| Treasury stock at cost (307,750 shares)                                             |   |             | (2,964  | ) |   |   | (2,964 | ) |
| Unearned compensation                                                               |   |             | (38     | ) |   |   | (162 | ) |
| Accumulated other comprehensive income                                              |   |             | 146     |   |   |   | 423 |   |
| Total stockholders' equity                                                          |   |             | 23,236  |   |   |   | 23,052 |   |
| Total liabilities and stockholders' equity                                          |   | $                | 215,733 |   |   | $ | 233,506 |   |

----

| First Federal of Northern Michigan Bancorp, Inc.  and Subsidiaries |
|-------------------------------------------------------------------------|
|                                                                    |
| Consolidated Statement of Operations                                    |
| (000s omitted, except per share data)                                   |

|                                                                         |   | Year Ended December 31 |   |
|------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                         |   | 2010                                  |   |   | 2009 |   |
|                                                                         |   |                                  |   |   |   |   |
| Interest Income                                                              |   |                                  |   |   |   |   |
| Loans, including fees                                                        |   | $                                     | 10,133 |   |   | $ | 11,104 |   |
| Investments                                                                  |   |                                  |   |   |   |   |   |   |
| Taxable                                                                      |   |                                  | 480    |   |   |   | 548 |   |
| Tax-exempt                                                                   |   |                                  | 186    |   |   |   | 213 |   |
| Mortgage-backed securities                                                   |   |                                  | 648    |   |   |   | 577 |   |
| Total interest income                                                        |   |                                  | 11,447 |   |   |   | 12,442 |   |
| Interest Expense                                                             |   |                                  |   |   |   |   |   |   |
| Deposits (Note 8)                                                            |   |                                  | 2,296  |   |   |   | 3,457 |   |
| Borrowings                                                                   |   |                                  | 1,151  |   |   |   | 1,631 |   |
| Total interest expense                                                       |   |                                  | 3,447  |   |   |   | 5,088 |   |
| Net Interest Income - Before provision for loan losses                       |   |                                  | 8,000  |   |   |   | 7,354 |   |
| Provision for Loan Losses (Note 3)                                           |   |                                  | 1,101  |   |   |   | 6,196 |   |
| Net Interest Income - After provision for loan losses                        |   |                                  | 6,899  |   |   |   | 1,158 |   |
| Other Income                                                                 |   |                                  |   |   |   |   |   |   |
| Service charges and other fees                                               |   |                                  | 804    |   |   |   | 869 |   |
| Net gain on sale of investments                                              |   |                                  | 546    |   |   |   | - |   |
| Net gain on sale of loans                                                    |   |                                  | 597    |   |   |   | 585 |   |
| Loan servicing fees                                                          |   |                                  | 841    |   |   |   | 829 |   |
| Insurance and brokerage commissions                                          |   |                                  | 159    |   |   |   | 170 |   |
| Other                                                                        |   |                                  | 258    |   |   |   | 122 |   |
| Total other income                                                           |   |                                  | 3,205  |   |   |   | 2,575 |   |
| Operating Expenses                                                           |   |                                  |   |   |   |   |   |   |
| Compensation and employee benefits (Note 13)                                 |   |                                  | 4,682  |   |   |   | 4,735 |   |
| FDIC insurance premiums                                                      |   |                                  | 366    |   |   |   | 480 |   |
| Amortization of intangible assets                                            |   |                                  | 292    |   |   |   | 273 |   |
| Advertising                                                                  |   |                                  | 136    |   |   |   | 117 |   |
| Occupancy and equipment                                                      |   |                                  | 1,156  |   |   |   | 1,202 |   |
| Data processing service bureau                                               |   |                                  | 314    |   |   |   | 335 |   |
| Professional fees                                                            |   |                                  | 425    |   |   |   | 478 |   |
| Other                                                                        |   |                                  | 2,495  |   |   |   | 1,740 |   |
| Total operating expenses                                                     |   |                                  | 9,866  |   |   |   | 9,360 |   |
| Income (loss) from continuing operations - before federal income tax expense |   |                                  | 238    |   |   |   | (5,627 | ) |
| Income tax expense from continuing operations (Note 10)                      |   |                                  | -      |   |   |   | 1,090 |   |
| Net income (loss) from continuing operations                                 |   |                                  | 238    |   |   |   | (6,717 | ) |
| Loss from discontinued operations, net of tax benefit of $24 (Note 15)       |   |                                  | -      |   |   |   | (46 | ) |
| Net income (loss)                                                            |   | $                                     | 238    |   |   | $ | (6,763 | ) |
|                                                                         |   |                                  |   |   |   |   |   |   |
| Per Share Data                                                               |   |                                  |   |   |   |   |   |   |
| Income (loss) per share from continuing operations                           |   |                                  |   |   |   |   |   |   |
| Basic                                                                        |   | $                                     | 0.08   |   |   | $ | (2.33 | ) |
| Diluted                                                                      |   | $                                     | 0.08   |   |   | $ | (2.33 | ) |
| Loss per share from discontinued operations                                  |   |                                  |   |   |   |   |   |   |
| Basic                                                                        |   | $                                     | -      |   |   | $ | (0.01 | ) |
| Diluted                                                                      |   | $                                     | -      |   |   | $ | (0.01 | ) |
| Net income (loss) per share                                                  |   |                                  |   |   |   |   |   |   |
| Basic                                                                        |   | $                                     | 0.08   |   |   | $ | (2.34 | ) |
| Diluted                                                                      |   | $                                     | 0.08   |   |   | $ | (2.34 | ) |

----

| First Federal of Northern Michigan Bancorp, Inc.  and Subsidiaries |
|-------------------------------------------------------------------------|
|                                                                    |
| Consolidated Statement of Changes in Stockholders’ Equity         |
| (000s omitted)                                                          |

|                                                                            |   | Shares |   |   | CommonStock |   |   | TreasuryStock |   |   | AdditionalPaid-inCapital |   |   | UnearnedCompensation |   |   | RetainedEarnings |   |   | UnallocatedESOP Shares |   |   | AccumulatedOtherComprehensiveIncome (Loss) |   |   | TotalStockholders'Equity |   |
|---------------------------------------------------------------------------------|--------|--------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------------------------|--------|--------|----------------------|--------|--------|------------------|--------|--------|-----------------------------|--------|--------|-------------------------------------------------|--------|--------|--------------------------|--------|
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |
| Balance - January 1, 2009                                                       |   |   | 3,192  |   |        | $      | 32     |          |   | $      | (2,964                   | )      |   | $                    | 24,306 |   |             | $      | (290   | )                           |   | $      | 8,763                                           |   |   | $                        | (765   | ) |   | $ | 337 |   |   | $ | 29,419 |   |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                    |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                        |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | -      |   |             |   | -      |                        |   |   | (6,763                                          | )      |   |                     | -      |   |   |   | - |   |   |   | (6,763 | ) |
| Other comprehensive income:                                                     |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Unrealized appreciation on available-for-sale securities - Net of tax of $44    |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | -      |   |             |   | -      |                        |   |   | -                                               |   |   |                     | -      |   |   |   | 86 |   |   |   | 86 |   |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive loss                                                        |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   | (6,677 | ) |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| ESOP common stock committed to be released                                      |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | (666   | )      |             |   | -      |                        |   |   | -                                               |   |   |                     | 765    |   |   |   | - |   |   |   | 99 |   |
| Stock options/MRP shares expensed                                               |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | 83     |   |             |   | 128    |                        |   |   | -                                               |   |   |                     | -      |   |   |   | - |   |   |   | 211 |   |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2009                                                     |   |   | 3,192  |   |        |   | 32     |          |   |   | (2,964                   | )      |   |                 | 23,723 |   |             |   | (162   | )                           |   |   | 2,000                                           |   |   |                     | -      |   |   |   | 423 |   |   |   | 23,052 |   |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss):                                                    |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                      |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | -      |   |             |   | -      |                        |   |   | 238                                             |   |   |                     | -      |   |   |   | - |   |   |   | 238 |   |
| Other comprehensive income:                                                     |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Unrealized depreciation on available-for-sale securities - Net of tax of ($143) |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | -      |   |             |   | -      |                        |   |   | -                                               |   |   |                     | -      |   |   |   | (277 | ) |   |   | (277 | ) |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                                      |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   | (39 | ) |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Stock options/MRP shares expensed                                               |   |   | -      |   |        |   | -      |          |   |   | -                        |   |   |                 | 99     |   |             |   | 124    |                        |   |   | -                                               |   |   |                     | -      |   |   |   | - |   |   |   | 223 |   |
|                                                                            |   |   |   |   |        |   |   |          |   |   |                     |   |   |                 |   |   |             |   |   |                        |   |   |                                            |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Balance - December 31, 2010                                                     |   |   | 3,192  |   |        | $      | 32     |          |   | $      | (2,964                   | )      |   | $                    | 23,822 |   |             | $      | (38    | )                           |   | $      | 2,238                                           |   |   | $                        | -      |   |   | $ | 146 |   |   | $ | 23,236 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Consolidated Statement of Cash Flows                              |
| (000s omitted, except per share data)                             |

|                                                                          |   | Year Ended December 31 |    |
|-------------------------------------------------------------------------------|--------|---------------------------------------|---------|
|                                                                          |   | 2010                                  |    |   | 2009 |   |
| Cash Flows from Operating Activities                                          |   |                                  |    |   |   |   |
| Net income (loss)                                                             |   | $                                     | 238     |   |   | $ | (6,763 | ) |
| Adjustments to reconcile net income (loss) to cash from operating activities: |   |                                  |    |   |   |   |   |   |
| Depreciation and amortization                                                 |   |                                  | 802     |   |   |   | 835 |   |
| Provision for loan losses                                                     |   |                                  | 1,101   |   |   |   | 6,196 |   |
| Amortization and accretion on securities                                      |   |                                  | 143     |   |   |   | 82 |   |
| Gain on sale of investment securities                                         |   |                                  | (546    | ) |   |   | - |   |
| ESOP contribution                                                             |   |                                  | -       |   |   |   | 99 |   |
| Stock options/awards                                                          |   |                                  | 223     |   |   |   | 211 |   |
| Gain on sale of loans held for sale                                           |   |                                  | (597    | ) |   |   | (585 | ) |
| Gain on sale of property and equipment                              |   |                                  | (10     | ) |   |   | (5 | ) |
| Originations of loans held for sale                                           |   |                                  | (42,151 | ) |   |   | (49,858 | ) |
| Proceeds from sale of loans held for sale                                     |   |                                  | 42,800  |   |   |   | 50,497 |   |
| Net change in:                                                                |   |                                  |    |   |   |   |   |   |
| Accrued interest receivable                                                   |   |                                  | (1      | ) |   |   | 239 |   |
| Other assets                                                                  |   |                                  | 1,457   |   |   |   | (2,730 | ) |
| Prepaid FDIC insurance premiums                                               |   |                                  | 348     |   |   |   | (1,315 | ) |
| Accrued expenses and other liabilities                                        |   |                                  | (56     | ) |   |   | 276 |   |
| Deferred income tax expense (benefit)                                         |   |                                  | (202    | ) |   |   | 1,775 |   |
| Net cash provided by (used in) operating activities                           |   |                                  | 3,549   |   |   |   | (1,046 | ) |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Cash Flows from Investing Activities                                          |   |                                  |    |   |   |   |   |   |
| Net decrease in loans                                                         |   |                                  | 12,974  |   |   |   | 14,856 |   |
| Proceeds from maturity of securities                                          |   |                                  | 15,951  |   |   |   | 13,890 |   |
| Proceeds from sale of securities available-for-sale                           |   |                                  | 14,426  |   |   |   | - |   |
| Net change in discontinued operations                                         |   |                                  | -       |   |   |   | 1,534 |   |
| Proceeds from sale of property and equipment                                  |   |                                  | 31      |   |   |   | 11 |   |
| Purchase of securities available for sale                                     |   |                                  | (30,574 | ) |   |   | (21,795 | ) |
| Proceeds from sale of Federal Home Loan Bank stock                            |   |                                  | 422     |   |   |   | - |   |
| Purchase of premises and equipment                                            |   |                                  | (14     | ) |   |   | (167 | ) |
| Net cash provided by investing activities                                     |   |                                  | 13,216  |   |   |   | 8,329 |   |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Cash Flows from Financing Activities                                          |   |                                  |    |   |   |   |   |   |
| Net decrease in deposits                                                      |   |                                  | (2,634  | ) |   |   | (7,678 | ) |
| Net increase (decrease) in Repo Sweep Accts                                   |   |                                  | 764     |   |   |   | (4,039 | ) |
| Additions to advances from FHLB and Notes Payable                             |   |                                  | 23,025  |   |   |   | 85,180 |   |
| Repayments of advances from FHLB and Notes Payable                            |   |                                  | (39,056 | ) |   |   | (81,118 | ) |
| Net cash used in financing activities                                         |   |                                  | (17,901 | ) |   |   | (7,655 | ) |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Net Decrease in Cash and Cash Equivalents                                     |   |                                  | (1,136  | ) |   |   | (372 | ) |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Cash and Cash Equivalents - Beginning of year                                 |   |                                  | 3,099   |   |   |   | 3,471 |   |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Cash and Cash Equivalents - End of year                                       |   | $                                     | 1,963   |   |   | $ | 3,099 |   |
|                                                                          |   |                                  |    |   |   |   |   |   |
| Supplemental Cash Flow and Noncash Information                                |   |                                  |    |   |   |   |   |   |
| Cash (refunded) paid for income taxes                                         |   | $                                     | (638    | ) |   | $ | 15 |   |
| Cash paid for interest on deposits and borrowings                             |   |                                  | 3,575   |   |   |   | 5,284 |   |
| Transfer of loans to real estate owned & other repossessed assets         |   |                                  | 2,080   |   |   |   | 6,382 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                                                                            |   | December 31, |      |
|-------------------------------------------------------------------------------------------------|--------|-------------------|-----------|
|                                                                                            |   | 2010              |      |   | 2009 |   |
|                                                                                            |   |              |      |   |   |   |
| Net income (loss) from continuing operations                                                    |   | $                 | 238       |   |   | $ | (6,717 | ) |
| Net loss from discontinued operations                                                           |   |              | -         |   |   |   | (46 | ) |
| Net income (loss)                                                                               |   | $                 | 238       |   |   | $ | (6,763 | ) |
|                                                                                            |   |              |      |   |   |   |   |   |
| Average number of common shares outstanding                                                     |   |              | 2,884,049 |   |   |   | 2,884,249 |   |
| Effect of dilutive options                                                                      |   |              | -         |   |   |   | - |   |
| Average number of common shares outstanding used to calculate diluted earnings per common share |   |              | 2,884,049 |   |   |   | 2,884,249 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                                                                  |   | December 31, 2010 |   |
|---------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                  |   | AmortizedCost               |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | MarketValue |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale                                                         |   |                        |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies |   | $                           | 4,518  |   |   | $ | 44 |   |   | $ | - |   |   |   | 4,562 |   |
| Municipal notes                                                                       |   |                        | 4,875  |   |   |   | 171 |   |   |   | - |   |   |   | 5,046 |   |
| Mortgage-backed securities                                                            |   |                        | 25,684 |   |   |   | 83 |   |   |   | (75 | ) |   |   | 25,692 |   |
| Equity securities                                                                     |   |                        | 3      |   |   |   | - |   |   |   | (2 | ) |   |   | 1 |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                 |   | $                           | 35,080 |   |   | $ | 298 |   |   | $ | (77 | ) |   | $ | 35,301 |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Held to Maturity                                                           |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipal notes                                                                       |   | $                           | 2,520  |   |   | $ | 90 |   |   | $ | (15 | ) |   | $ | 2,595 |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                  |   | December 31, 2009 |   |
|                                                                                  |   | AmortizedCost               |   |   | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |   |   | MarketValue |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Available for Sale                                                         |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies |   | $                           | 8,220  |   |   | $ | 37 |   |   | $ | - |   |   |   | 8,257 |   |
| Municipal notes                                                                       |   |                        | 7,870  |   |   |   | 183 |   |   |   | - |   |   |   | 8,053 |   |
| Corporate securities                                                                  |   |                        | 1,000  |   |   |   | 2 |   |   |   | - |   |   |   | 1,002 |   |
| Mortgage-backed securities                                                            |   |                        | 15,979 |   |   |   | 419 |   |   |   | (1 | ) |   |   | 16,397 |   |
| Equity securities                                                                     |   |                        | 3      |   |   |   | 1 |   |   |   | - |   |   |   | 4 |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                                                 |   | $                           | 33,072 |   |   | $ | 642 |   |   | $ | (1 | ) |   | $ | 33,713 |   |
|                                                                                  |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Securities Held to Maturity                                                           |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipal notes                                                                       |   | $                           | 3,928  |   |   | $ | 159 |   |   | $ | (3 | ) |   | $ | 4,090 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

| Note 2 - Securities (Continued) |
|---------------------------------|

|                                  |   | December 31, 2010 |   |
|---------------------------------------|--------|-----------------------------|--------|
|                                  |   | AmortizedCost               |   |   | MarketValue |   |
|                                  |   |                        |   |   |   |   |
| Available For Sale:                   |   |                        |   |   |   |   |
|                                  |   |                        |   |   |   |   |
| Due in one year or less               |   | $                           | 2,809  |   |   | $ | 2,836 |   |
| Due after one year through five years |   |                        | 4,292  |   |   |   | 4,390 |   |
| Due in five year through ten years    |   |                        | 1,851  |   |   |   | 1,903 |   |
| Due after ten years                   |   |                        | 441    |   |   |   | 479 |   |
|                                  |   |                        |   |   |   |   |   |   |
| Subtotal                              |   |                        | 9,393  |   |   |   | 9,608 |   |
|                                  |   |                        |   |   |   |   |   |   |
| Equity securities                     |   |                        | 3      |   |   |   | 1 |   |
| Mortgage-backed securities            |   |                        | 25,684 |   |   |   | 25,692 |   |
|                                  |   |                        |   |   |   |   |   |   |
| Total                                 |   | $                           | 35,080 |   |   | $ | 35,301 |   |
|                                  |   |                        |   |   |   |   |   |   |
| Held To Maturity                      |   |                        |   |   |   |   |   |   |
| Due in one year or less               |   | $                           | 85     |   |   | $ | 86 |   |
| Due after one year through five years |   |                        | 390    |   |   |   | 414 |   |
| Due in five year through ten years    |   |                        | 630    |   |   |   | 663 |   |
| Due after ten years                   |   |                        | 1,415  |   |   |   | 1,432 |   |
|                                  |   |                        |   |   |   |   |   |   |
| Total                                 |   | $                           | 2,520  |   |   | $ | 2,595 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                                                                  |   | December 31, 2010 |   |   | December 31, 2009 |   |
|---------------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|
|                                                                                  |   |                        |   |   | GrossUnrealizedLosses       |   |   |   |   |   | GrossUnrealizedLosses |   |   |   |   |   | GrossUnrealizedLosses |   |   |   |   |   | GrossUnrealizedLosses |   |
|                                                                                  |   | Fair Value             |   |   | <12months                |   |   | Fair Value |   |   | > 12months |   |   | Fair Value |   |   | <12 months |   |   | Fair Value |   |   | > 12months |   |
| Available For Sale:                                                                   |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury securities and obligations of U.S. government corporations and agencies |   | $                           | -      |   |                        | $      | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Corporate and other securities                                                        |   |                        | -      |   |                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Municipal notes                                                                       |   |                        | -      |   |                        |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Mortgage-backed securities                                                            |   |                        | 12,626 |   |                        |   | (75 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 13 |   |   |   | (1 | ) |
| Equity securities                                                                     |   |                        | 3      |   |                        |   | (2 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total Securities available for sale                                                   |   | $                           | 12,629 |   |                        | $      | (77 | ) |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 13 |   |   | $ | (1 | ) |
| Held to Maturity:                                                                     |   |                        |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Municipal notes                                                                       |   |                        | 382    |   |                        |   | (13 | ) |   |   | 28 |   |   |   | (2 | ) |   |   | - |   |   |   | - |   |   |   | 27 |   |   |   | (3 | ) |
| Total Securities held to maturity                                                     |   | $                           | 382    |   |                        | $      | (13 | ) |   | $ | 28 |   |   | $ | (2 | ) |   | $ | - |   |   | $ | - |   |   | $ | 27 |   |   | $ | (3 | ) |

|                                                |   | December 31 |    |
|-----------------------------------------------------|--------|-------------|---------|
|                                                |   | 2010        |    |   | 2009 |   |
|                                                |   |        |    |   |   |   |
| Real estate loans - One- to four-family residential |   | $           | 71,697  |   |   | $ | 81,620 |   |
| Commercial loans:                                   |   |        |    |   |   |   |   |   |
| Secured by real estate                              |   |        | 61,010  |   |   |   | 62,376 |   |
| Other                                               |   |        | 8,848   |   |   |   | 9,873 |   |
| Total commercial loans                              |   |        | 69,858  |   |   |   | 72,249 |   |
| Consumer loans:                                     |   |        |    |   |   |   |   |   |
| Secured by real estate                              |   |        | 16,547  |   |   |   | 18,732 |   |
| Other                                               |   |        | 2,118   |   |   |   | 2,553 |   |
| Total consumer loans                                |   |        | 18,665  |   |   |   | 21,285 |   |
| Total gross loans                                   |   |        | 160,220 |   |   |   | 175,154 |   |
| Less:                                               |   |        |    |   |   |   |   |   |
| Net deferred loan fees                              |   |        | 245     |   |   |   | 275 |   |
| Allowance for loan losses                           |   |        | 2,831   |   |   |   | 3,660 |   |
| Total loans - net                                   |   | $           | 157,144 |   |   | $ | 171,219 |   |

|                             |   | December 31, 2010 |   |
|----------------------------------|--------|-----------------------------|--------|
|                             |   | Less ThanOne Year |   |   | One Yearto FiveYears |   |   | AfterFiveYears |   |   | Total |   |
|                             |   |                        |   |   |   |   |   |   |   |   |   |   |
| Loans at fixed interest rates    |   | $                           | 15,802 |   |   | $ | 28,790 |   |   | $ | 41,941 |   |   | $ | 86,533 |   |
| Loans at variable interest rates |   |                        | 9,676  |   |   |   | 18,105 |   |   |   | 45,906 |   |   |   | 73,687 |   |
|                             |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $                           | 25,478 |   |   | $ | 46,895 |   |   | $ | 87,847 |   |   | $ | 160,220 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                    |   | December 31 |   |
|-----------------------------------------|--------|-------------|--------|
|                                    |   | 2010        |   |   | 2009 |   |
|                                    |   |        |   |   |   |   |
| Aggregate balance - Beginning of Period |   | $           | 3,931  |   |   | $ | 4,428 |   |
| New loans                               |   |        | 1,010  |   |   |   | 2,379 |   |
| Repayments                              |   |        | (1,584 | ) |   |   | (2,876 | ) |
|                                    |   |        |   |   |   |   |   |   |
| Aggregate balance - End of Period       |   | $           | 3,357  |   |   | $ | 3,931 |   |

|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    | Recorded                     |   |
|---------------------------------------|--------|-----------------------------|--------|--------|-----------------------------|--------|--------|---------------------------|--------|--------|---------------|--------|--------|---------|--------|--------|----------------------|--------|---------|------------------------------|--------|
|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    | Investment > 90 |   |
|                                  |   | 30 - 59 Days |   |   | 60 - 89 Days |   |   | Greater than 90 |   |   | Total         |   |   |    |   |   | Total Financing |   |    | Days and                |   |
|                                  |   | Past Due               |   |   | Past Due               |   |   | Days                      |   |   | Past Due |   |   | Current |   |   | Receivables          |   |    | Accruing                     |   |
|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |
| 2010                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |
|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |
| Commercial Real Estate:               |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |
| Commercial Real Estate - construction |   | $                           | -      |   |                        | $      | -      |                      |   | $      | 1,772         |   |   | $       | 1,772  |   |                 | $      | 1,498   |                         |   | $ | 3,270 |   |   | $ | - |   |
| Commercial Real Estate - other        |   |                        | 891    |   |                        |   | 488    |                      |   |   | 784           |   |   |    | 2,163  |   |                 |   | 55,577  |                         |   |   | 57,740 |   |   |   | 82 |   |
| Commercial - non real estate          |   |                        | -      |   |                        |   | 6      |                      |   |   | -             |   |   |    | 6      |   |                 |   | 8,842   |                         |   |   | 8,848 |   |   |   | - |   |
|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |   |   |   |   |   |   |   |
| Consumer:                             |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |   |   |   |   |   |   |   |
| Consumer - Real Estate                |   |                        | 650    |   |                        |   | 108    |                      |   |   | 205           |   |   |    | 963    |   |                 |   | 15,584  |                         |   |   | 16,547 |   |   |   | - |   |
| Consumer - Other                      |   |                        | 27     |   |                        |   | 14     |                      |   |   | 2             |   |   |    | 43     |   |                 |   | 2,075   |                         |   |   | 2,118 |   |   |   | 2 |   |
|                                  |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |   |   |   |   |   |   |   |
| Residential:                          |   |                        |   |   |                        |   |   |                      |   |   |          |   |   |    |   |   |                 |   |    |                         |   |   |   |   |   |   |   |   |
| Residential                           |   |                        | 3,919  |   |                        |   | 2,056  |                      |   |   | 2,434         |   |   |    | 8,409  |   |                 |   | 63,288  |                         |   |   | 71,697 |   |   |   | 282 |   |
| Total                                 |   | $                           | 5,487  |   |                        | $      | 2,672  |                      |   | $      | 5,197         |   |   | $       | 13,356 |   |                 | $      | 146,864 |                         |   | $ | 160,220 |   |   | $ | 366 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|             |   | Commercial Real Estate |   |   | Commercial Real Estate |   |   |       |   |
|------------------|--------|----------------------------------|--------|--------|----------------------------------|--------|--------|------------|--------|
|  Loan Grade |   | Construction                     |   |   | Other                            |   |   | Commercial |   |
|             |   |                             |   |   |                             |   |   |       |   |
| 1-2              |   | $                                | -      |   |                             | $      | -      |       |   | $ | 5 |   |
| 3                |   |                             | 70     |   |                             |   | 12,411 |       |   |   | 2,958 |   |
| 4                |   |                             | 1,428  |   |                             |   | 33,754 |       |   |   | 5,631 |   |
| 5                |   |                             | -      |   |                             |   | 3,245  |       |   |   | 248 |   |
| 6                |   |                             | 1,772  |   |                             |   | 8,330  |       |   |   | 6 |   |
| 7                |   |                             | -      |   |                             |   | -      |       |   |   | - |   |
| 8                |   |                             | -      |   |                             |   | -      |       |   |   | - |   |
| Total            |   | $                                | 3,270  |   |                             | $      | 57,740 |       |   | $ | 8,848 |   |

|                          |   | Residential |   |
|-------------------------------|--------|-------------|--------|
|                          |   |        |   |
| Grade                         |   |        |   |
|                          |   |        |   |
| Pass                          |   | $           | 68,301 |   |
| Special Mention               |   |        | -      |   |
| Substandard                   |   |        | 3,396  |   |
|     Total |   | $           | 71,697 |   |

|                                |   | Consumer -  |   |   |                       |   |
|-------------------------------------|--------|------------------|--------|--------|----------------------------|--------|
|                                |   | Real Estate |   |   | Consumer - Other |   |
|                                |   |             |   |   |                       |   |
| Performing                          |   | $                | 16,341 |   |                       | $      | 2,116 |   |
| Nonperforming                       |   |             | 206    |   |                       |   | 2 |   |
|      Total |   | $                | 16,547 |   |                       | $      | 2,118 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                  |   | 2010   |   |
|---------------------------------------|--------|--------|--------|
|                                  |   |   |   |
| Commercial Real Estate:               |   |   |   |
| Commercial Real Estate - construction |   | $      | 1,772  |   |
| Commercial Real Estate - other        |   |   | 1,148  |   |
| Commercial                            |   |   | -      |   |
|                                  |   |   |   |   |
| Consumer:                             |   |   |   |   |
| Consumer - real estate                |   |   | 206    |   |
| Consumer - other                      |   |   | -      |   |
|                                  |   |   |   |   |
| Residential:                          |   |   |   |   |
| Residential                           |   |   | 3,114  |   |
|                                  |   |   |   |   |
| Total                                 |   | $      | 6,240  |   |

|                                                        |   | 2009   |   |
|-------------------------------------------------------------|--------|--------|--------|
| Impaired loans without a  valuation allowance     |   | $      | 3,502  |   |
| Impaired loans with a valuation allowance                   |   |   | 2,344  |   |
| Total impaired loans                                        |   | $      | 5,846  |   |
| Valuation allowance related to impaired loans               |   | $      | 743    |   |
| Total non-accrual loans                                     |   | $      | 8,947  |   |
| Total loans past-due ninety days or more and still accruing |   | $      | 2,839  |   |

|                                                         |   | 2009 |   |
|--------------------------------------------------------------|--------|------|--------|
| Average investment in impaired loans                         |   | $    | 14,914 |   |
| Interest income recognized on impaired loans                 |   | $    | -      |   |
| Interest income recognized on a cash basis on impaired loans |   | $    | -      |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                  |   |                  |       |   |       |   |   |      |   |   | Average    |   |   | Interest   |   |
|---------------------------------------|--------|-----------------------|------------|--------|------------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|
|                                  |   | Unpaid Principal |       |   | Recorded   |   |   | Related   |   |   | Recorded   |   |   | Income     |   |
|                                  |   | Balance               |       |   | Investment |   |   | Allowance |   |   | Investment |   |   | Recognized |   |
| 2010                                  |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |
|                                  |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |
| With no related allowance recorded:   |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |
| Commercial                            |   | $                     | -          |   |       | $      | -      |      |   | $      | -          |   |   | $          | -      |   |   | $ | - |   |
| Commercial Real Estate - Construction |   |                  | -          |   |       |   | -      |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
| Commercial Real Estate - Other        |   |                  | 822        |   |       |   | 674    |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
| Consumer - Real Estate                |   |                  | 124        |   |       |   | 123    |      |   |   | -          |   |   |       | 193    |   |   |   | - |   |
| Consumer - Other                      |   |                  | -          |   |       |   | -      |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
| Residential                           |   |                  | 1,842      |   |       |   | 1,770  |      |   |   | -          |   |   |       | 1,803  |   |   |   | - |   |
|                                  |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| With a specific allowance recorded:   |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Commercial                            |   |                  | -          |   |       |   | -      |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
| Commercial Real Estate - Construction |   |                  | 3,449      |   |       |   | 1,772  |      |   |   | 305        |   |   |       | 1,805  |   |   |   | - |   |
| Commercial Real Estate - Other        |   |                  |   586 |   |       |   | 474    |      |   |   | 89         |   |   |       | 1,132  |   |   |   | - |   |
| Consumer - Real Estate                |   |                  | 83         |   |       |   | 83     |      |   |   | 25         |   |   |       | 14     |   |   |   | - |   |
| Consumer - Other                      |   |                  | -          |   |       |   | -      |      |   |   | -          |   |   |       | -      |   |   |   | - |   |
| Residential                           |   |                  | 1,416      |   |       |   | 1,344  |      |   |   | 165        |   |   |       | 1,330  |   |   |   | - |   |
|                                  |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Totals:                               |   |                  |       |   |       |   |   |      |   |   |       |   |   |       |   |   |   |   |   |   |
| Commercial                            |   | $                     | -          |   |       | $      | -      |      |   | $      | -          |   |   | $          | -      |   |   | $ | - |   |
| Commercial Real Estate - Construction |   | $                     | 3,449      |   |       | $      | 1,772  |      |   | $      | 305        |   |   | $          | 1,805  |   |   | $ | - |   |
| Commercial Real Estate - Other        |   | $                     | 1,408      |   |       | $      | 1,148  |      |   | $      | 89         |   |   | $          | 1,132  |   |   | $ | - |   |
| Consumer - Real Estate                |   | $                     | 207        |   |       | $      | 206    |      |   | $      | 25         |   |   | $          | 207    |   |   | $ | - |   |
| Consumer - Other                      |   | $                     | -          |   |       | $      | -      |      |   | $      | -          |   |   | $          | -      |   |   | $ | - |   |
| Residential                           |   | $                     | 3,258      |   |       | $      | 3,114  |      |   | $      | 165        |   |   | $          | 3,133  |   |   | $ | - |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                                            |   | Commercial   |   |   | Commercial       |   |   |       |   |   | Consumer         |   |   |     |   |   |        |   |   |        |   |   |   |   |
|-----------------------------------------------------------------|--------|--------------|--------|--------|------------------|--------|--------|------------|--------|--------|------------------|--------|--------|----------|--------|--------|-------------|--------|--------|-------------|--------|--------|--------|--------|
|                                                            |   | Construction |   |   | Real Estate |   |   | Commercial |   |   | Real Estate |   |   | Consumer |   |   | Residential |   |   | Unallocated |   |   | Total  |   |
| 2010                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |
| Allowance for credit losses:                                    |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning Balance                                               |   | $            | 997    |   |             | $      | 1,513  |       |   | $      | 245              |   |   | $        | 211    |   |        | $      | 45     |        |   | $      | 649    |   |   | $ | - |   |   | $ | 3,660 |   |
| Charge-offs                                                     |   |         | (1,013 | )      |             |   | (512   | )          |   |   | -                |   |   |     | (220   | )      |        |   | (99    | )           |   |   | (258   | )      |   |   | - |   |   |   | (2,102 | ) |
| Recoveries                                                      |   |         | 60     |   |             |   | 85     |       |   |   | -                |   |   |     | 14     |   |        |   | 11     |        |   |   | 2      |   |   |   | - |   |   |   | 172 |   |
| Provision                                                       |   |         | 491    |   |             |   | 195    |       |   |   | (53              | )      |   |     | 223    |   |        |   | 102    |        |   |   | 143    |   |   |   | - |   |   |   | 1,101 |   |
| Ending Balance                                                  |   | $            | 535    |   |             | $      | 1,281  |       |   | $      | 192              |   |   | $        | 228    |   |        | $      | 59     |        |   | $      | 536    |   |   | $ | - |   |   | $ | 2,831 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: individually evaluated for impairment           |   | $            | 305    |   |             | $      | 89     |       |   | $      | -                |   |   | $        | 25     |   |        | $      | -      |        |   | $      | 165    |   |   | $ | - |   |   | $ | 584 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: loans collectively evaluated for impairment     |   | $            | 230    |   |             | $      | 1,192  |       |   | $      | 192              |   |   | $        | 203    |   |        | $      | 59     |        |   | $      | 371    |   |   | $ | - |   |   | $ | 2,247 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: loans acquired with deteriorated credit quality |   | $            | -      |   |             | $      | -      |       |   | $      | -                |   |   | $        | -      |   |        | $      | -      |        |   | $      | -      |   |   | $ | - |   |   | $ | - |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Financing Receivables:                                          |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending Balance                                                  |   | $            | 3,270  |   |             | $      | 57,740 |       |   | $      | 8,848            |   |   | $        | 16,547 |   |        | $      | 2,118  |        |   | $      | 71,697 |   |   | $ | - |   |   | $ | 160,220 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: individually evaluated for impairment           |   | $            | 1,772  |   |             | $      | 1,148  |       |   | $      | -                |   |   | $        | 206    |   |        | $      | -      |        |   | $      | 3,114  |   |   | $ | - |   |   | $ | 6,240 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: loans collectively evaluated for impairment     |   | $            | 1,498  |   |             | $      | 56,592 |       |   | $      | 8,848            |   |   | $        | 16,341 |   |        | $      | 2,118  |        |   | $      | 68,583 |   |   | $ | - |   |   | $ | 153,980 |   |
|                                                            |   |         |   |   |             |   |   |       |   |   |             |   |   |     |   |   |        |   |   |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Ending balance: loans acquired with deteriorated credit quality |   | $            | -      |   |             | $      | -      |       |   | $      | -                |   |   | $        | -      |   |        | $      | -      |        |   | $      | -      |   |   | $ | - |   |   | $ | - |   |

|                          |   | Year EndedDecember 31 |   |
|-------------------------------|--------|---------------------------------|--------|
|                          |   | 2009                            |   |
| Balance - Beginning of period |   | $                               | 5,647  |   |
|                          |   |                            |   |   |
| Provision for losses          |   |                            | 6,196  |   |
| Charge-offs                   |   |                            | (8,247 | ) |
| Recoveries                    |   |                            | 64     |   |
|                          |   |                            |   |   |
| Balance - End of period       |   | $                               | 3,660  |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                         |   | December 31 |   |
|------------------------------|--------|------------------|--------|
|                         |   | 2010             |   |   | 2009 |   |
|                         |   |             |   |   |   |   |
| Land                         |   | $                | 1,188  |   |   | $ | 1,198 |   |
| Land improvements            |   |             | 214    |   |   |   | 221 |   |
| Buildings                    |   |             | 6,470  |   |   |   | 6,528 |   |
| Equipment                    |   |             | 3,573  |   |   |   | 3,570 |   |
|                         |   |             |   |   |   |   |   |   |
| Total property and equipment |   |             | 11,445 |   |   |   | 11,517 |   |
|                         |   |             |   |   |   |   |   |   |
| Accumulated depreciation     |   |             | 5,418  |   |   |   | 4,953 |   |
|                         |   |             |   |   |   |   |   |   |
| Net property and equipment   |   | $                | 6,027  |   |   | $ | 6,564 |   |

|                                   |   | December 31, |   |
|----------------------------------------|--------|-------------------|--------|
|                                   |   | 2010              |   |   | 2009 |   |
| Annual constant prepayment speed (CPR) |   |              | 15.67  | % |   |   | 17.23 | % |
| Weighted average life (in months)      |   |              | 246    |   |   |   | 249 |   |
| Discount rate                          |   |              | 7.96   | % |   |   | 8.17 | % |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                             |   | December 31 |   |
|--------------------------------------------------|--------|------------------|--------|
|                                             |   | 2010             |   |   | 2009 |   |
|                                             |   |             |   |   |   |   |
| Balance, beginning of period                     |   | $                | 730    |   |   | $ | 430 |   |
| Originated mortgage servicing rights capitalized |   |             | 536    |   |   |   | 584 |   |
| Amortization of mortgage servicing rights        |   |             | (306   | ) |   |   | (284 | ) |
| Balance - end of period                          |   |             | 960    |   |   |   | 730 |   |
| Valuation allowances:                            |   |             |   |   |   |   |   |   |
| Balance at beginning of year                     |   |             | -      |   |   |   | - |   |
| Additions                                        |   |             | -      |   |   |   | - |   |
| Reductions                                       |   |             | -      |   |   |   | - |   |
| Write-downs                                      |   |             | -      |   |   |   | - |   |
|                                             |   |             |   |   |   |   |   |   |
| Balance, end of year (net of allowances)         |   | $                | 960    |   |   | $ | 730 |   |

|                         |   | December 31, 2010 |   |
|------------------------------|--------|-----------------------------|--------|
|                         |   | Gross CarryingAmount   |   |   | AccumulatedAmortization |   |   | Net CarryingAmount |   |
| Amortized intangible assets: |   |                        |   |   |   |   |   |   |   |
| Core deposit                 |   | $                           | 3,081  |   |   | $ | 2,841 |   |   | $ | 240 |   |
| Commission residual          |   |                        | 600    |   |   |   | 213 |   |   |   | 387 |   |
| Total                        |   | $                           | 3,681  |   |   | $ | 3,054 |   |   | $ | 627 |   |

|                         |   | December 31, 2009 |   |
|------------------------------|--------|-----------------------------|--------|
|                         |   | Gross CarryingAmount   |   |   | AccumulatedAmortization |   |   | Net CarryingAmount |   |
| Amortized intangible assets: |   |                        |   |   |   |   |   |   |   |
| Core deposit                 |   | $                           | 3,081  |   |   | $ | 2,664 |   |   | $ | 417 |   |
| Commission residual          |   |                        | 600    |   |   |   | 97 |   |   |   | 503 |   |
| Total                        |   | $                           | 3,681  |   |   | $ | 2,761 |   |   | $ | 920 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                            |   | December 31 |    |
|---------------------------------|--------|------------------|---------|
|                            |   | 2010             |    |   | 2009 |   |
| Account Type                    |   |             |    |   |   |   |
|                            |   |             |    |   |   |   |
| NOW accounts and MMDA           |   | $                | 44,107  |   |   | $ | 37,092 |   |
| Regular savings accounts        |   |             | 16,785  |   |   |   | 15,722 |   |
|                            |   |             |    |   |   |   |   |   |
| Total                           |   |             | 60,892  |   |   |   | 52,814 |   |
| Certificate of Deposit Rates    |   |             |    |   |   |   |   |   |
|                            |   |             |    |   |   |   |   |   |
| 0.50 percent to 0.99 percent    |   |             | 9,852   |   |   |   | 5,926 |   |
| 1.00 percent to 1.99 percent    |   |             | 35,119  |   |   |   | 32,658 |   |
| 2.00 percent to 2.99 percent    |   |             | 26,573  |   |   |   | 24,116 |   |
| 3.00 percent to 3.99 percent    |   |             | 8,718   |   |   |   | 15,629 |   |
| 4.00 percent to 4.99 percent    |   |             | 3,488   |   |   |   | 11,912 |   |
| 5.00 percent to 8.99 percent    |   |             | 475     |   |   |   | 3,971 |   |
|                            |   |             |    |   |   |   |   |   |
| Total certificate of deposits   |   |             | 84,225  |   |   |   | 94,212 |   |
|                            |   |             |    |   |   |   |   |   |
| Total interest-bearing deposits |   | $                | 145,117 |   |   | $ | 147,026 |   |

|            |   | December 31, 2010 |   |
|-----------------|--------|-----------------------------|--------|
|            |   | Amount Due             |   |
| Rate            |   | Less than1 Year   |   |   | 1-2Years |   |   | 2-3Years |   |   | 3-5Years |   |   | Greaterthan5 Years |   |   | Total |   |
| 0.50 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 0.99 percent    |   | $                           | 6,931  |   |   | $ | 2,921 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 9,852 |   |
| 1.00 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 1.99 percent    |   |                        | 28,038 |   |   |   | 6,125 |   |   |   | 671 |   |   |   | 271 |   |   |   | 14 |   |   |   | 35,119 |   |
| 2.00 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 2.99 percent    |   |                        | 9,952  |   |   |   | 5,038 |   |   |   | 3,560 |   |   |   | 6,045 |   |   |   | 1,978 |   |   |   | 26,573 |   |
| 3.00 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 3.99 percent    |   |                        | 4,399  |   |   |   | 434 |   |   |   | 1,855 |   |   |   | 1,460 |   |   |   | 570 |   |   |   | 8,718 |   |
| 4.00 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 4.99 percent    |   |                        | 2,272  |   |   |   | 824 |   |   |   | 262 |   |   |   | 46 |   |   |   | 84 |   |   |   | 3,488 |   |
| 5.00 percent to |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 8.99 percent    |   |                        | 467    |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 8 |   |   |   | 475 |   |
| Total           |   | $                           | 52,059 |   |   | $ | 15,342 |   |   | $ | 6,348 |   |   | $ | 7,822 |   |   | $ | 2,654 |   |   | $ | 84,225 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                    |   | Year Ended December 31 |   |
|-------------------------|--------|---------------------------------------|--------|
|                    |   | 2010                                  |   |   | 2009 |   |
|                    |   |                                  |   |   |   |   |   |   |
| NOW and MMDAs           |   | $                                     | 324    |   |   | $ | 384 |   |
| Regular savings         |   |                                  | 8      |   |   |   | 17 |   |
| Certificates of deposit |   |                                  | 1,964  |   |   |   | 3,056 |   |
|                    |   |                                  |   |   |   |   |   |   |
| Total                   |   | $                                     | 2,296  |   |   | $ | 3,457 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

| December 31, 2010       |   |
|-----------------------------------|--------|
| Years EndingDecember 31 |   | Amount |   |   | Weighted Average Interest Rate |   |
|                              |   |   |   |   |   |   |
| 2011                              |   | $ | 7,500 |   |   |   | 1.24 |   |
| 2012                              |   |   | 17,000 |   |   |   | 2.37 |   |
| 2013                              |   |   | 4,500 |   |   |   | 3.34 |   |
| Total                             |   | $ | 29,000 |   |   |   | 2.23 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                             |   | Year Ended December 31 |   |
|----------------------------------|--------|---------------------------------------|--------|
|                             |   | 2010                                  |   |   | 2009 |   |
|                             |   |                                  |   |   |   |   |
| Continuing operations:           |   |                                  |   |   |   |   |
| Current provision                |   | $                                     | 201    |   |   | $ | (685 | ) |
| Deferred benefit                 |   |                                  | ( 201  | ) |   |   | 1,775 |   |
|                             |   |                                  | -      |   |   |   |   |   |
| Total from continuing operations |   | $                                     | -      |   |   | $ | 1,090 |   |
|                             |   |                                  |   |   |   |   |   |   |
| Discontinued operations          |   |                                  | -      |   |   |   | (24 | ) |
|                             |   |                                  |   |   |   |   |   |   |
| Total                            |   | $                                     | -      |   |   | $ | 1,066 |   |

|                          |   | Year Ended December 31 |   |
|-------------------------------|--------|---------------------------------------|--------|
|                          |   | 2010                                  |   |   | 2009 |   |
| Tax at statutory rate         |   | $                                     | 81     |   |   | $ | (1,913 | ) |
| Increase (decrease) from:     |   |                                  |   |   |   |   |   |   |
| Change in valuation allowance |   |                                  | (167   | ) |   |   | 3,372 |   |
| ESOP expense                  |   |                                  | -      |   |   |   | (235 | ) |
| Tax-exempt interest           |   |                                  | (60    | ) |   |   | (81 | ) |
| Other                         |   |                                  | 146    |   |   |   | (53 | ) |
|                          |   |                                  |   |   |   |   |   |   |
| Total income tax expense      |   | $                                     | -      |   |   | $ | 1,090 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                              |   | December 31 |   |
|---------------------------------------------------|--------|-------------|--------|
|                                              |   | 2010        |   |   | 2009 |   |
| Deferred tax assets:                              |   |        |   |   |   |   |
| Allowance for loan losses                         |   | $           | 327    |   |   | $ | 660 |   |
| Valuation allowance for real estate held for sale |   |        | 538    |   |   |   | 136 |   |
| Non-accrual loan interest                         |   |        | 87     |   |   |   | 12 |   |
| Directors' benefit plan                           |   |        | 347    |   |   |   | 361 |   |
| Net operating loss carryforward                   |   |        | 2,572  |   |   |   | 2,773 |   |
| Investment in  subsidiary               |   |        | 784    |   |   |   | 784 |   |
| Other                                             |   |        | 257    |   |   |   | 384 |   |
|                                              |   |        |   |   |   |   |   |   |
| Total deferred tax assets                         |   |        | 4,912  |   |   |   | 5,110 |   |
|                                              |   |        |   |   |   |   |   |   |
| Less: valuation allowance                         |   |        | 3,205  |   |   |   | 3,372 |   |
|                                              |   |        |   |   |   |   |   |   |
| Deferred tax liabilities:                         |   |        |   |   |   |   |   |   |
| Mortgage servicing rights                         |   |        | 327    |   |   |   | 248 |   |
| Partnership losses                                |   |        | 121    |   |   |   | 113 |   |
| Unrealized gain on available-for-sale securities  |   |        | 75     |   |   |   | 218 |   |
| Depreciation                                      |   |        | 308    |   |   |   | 361 |   |
| Other                                             |   |        | 217    |   |   |   | 239 |   |
|                                              |   |        |   |   |   |   |   |   |
| Total deferred tax liabilities                    |   |        | 1,048  |   |   |   | 1,179 |   |
|                                              |   |        |   |   |   |   |   |   |
| Net deferred tax asset                            |   | $           | 659    |   |   | $ | 559 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

|                                       |   | December 31 |   |
|--------------------------------------------|--------|------------------|--------|
|                                       |   | 2010             |   |   | 2009 |   |
|                                       |   |             |   |   |   |   |   |   |
| Commitments to grant loans                 |   | $                | 13,019 |   |   | $ | 12,000 |   |
| Unfunded commitments under lines of credit |   |             | 14,138 |   |   |   | 13,976 |   |
| Commercial and standby letters of credit   |   |             | 5      |   |   |   | 5 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                        |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                     |   | Actual                 |   |   | For CapitalAdequacy Purposes |   |   | To be Categorized asWell-Capitalized UnderPrompt CorrectiveAction Provisions |   |
|--------------------------|--------|------------------------|--------|--------|----------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------|--------|
|                     |   | Amount                 |   |   | Ratio                                  |   |   | Amount                                                                                                     |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                     |   | (Dollars in Thousands) |   |
|                     |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| December 31, 2010        |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-  |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |
| weighted assets)         |   | $                      | 22,763 |   |                                   |   | 15.6   | %                                                                                                          |   | $ | 11,693 |   |   |   | 8.0 | % |   | $ | 14,617 |   |   |   | 10.0 | % |
| Tier 1 capital (to risk- |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)         |   | $                      | 20,931 |   |                                   |   | 14.3   | %                                                                                                          |   | $ | 5,847 |   |   |   | 4.0 | % |   | $ | 8,770 |   |   |   | 6.0 | % |
| Tangible capital (to     |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tangible assets)         |   | $                      | 20,931 |   |                                   |   | 9.8    | %                                                                                                          |   | $ | 3,214 |   |   |   | 1.5 | % |   | $ | 4,285 |   |   |   | 2.0 | % |
|                     |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009        |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total capital (to risk-  |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)         |   | $                      | 22,304 |   |                                   |   | 13.6   | %                                                                                                          |   | $ | 13,153 |   |   |   | 8.0 | % |   | $ | 16,442 |   |   |   | 10.0 | % |
| Tier 1 capital (to risk- |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| weighted assets)         |   | $                      | 20,239 |   |                                   |   | 12.3   | %                                                                                                          |   | $ | 6,577 |   |   |   | 4.0 | % |   | $ | 9,865 |   |   |   | 6.0 | % |
| Tangible capital (to     |   |                   |   |   |                                   |   |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| tangible assets)         |   | $                      | 20,239 |   |                                   |   | 8.8    | %                                                                                                          |   | $ | 3,470 |   |   |   | 1.5 | % |   | $ | 4,627 |   |   |   | 2.0 | % |

|                                     |   | December 31                                                             |   |
|------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                     |   |       2010       |   |   |       2009       |   |
|                                     |   |                                                                         |   |   |   |   |
| GAAP Capital                             |   | $                                                                            | 22,272 |   |   | $ | 22,119 |   |
| Reconciling items:                       |   |                                                                         |   |   |   |   |   |   |
| Less: Investment in and advances to      |   |                                                                         |   |   |   |   |   |   |
| nonincludable subsidaries                |   |                                                                         | (310   | ) |   |   | (311 | ) |
| Core deposit and other intangible assets |   |                                                                         | (627   | ) |   |   | (920 | ) |
| Disallowed deferred tax asset            |   |                                                                         | (258   | ) |   |   | (226 | ) |
| Unrealized gain on securities            |   |                                                                         |   |   |   |   |   |   |
| available for sale                       |   |                                                                         | (146   | ) |   |   | (423 | ) |
|                                     |   |                                                                         |   |   |   |   |   |   |
| Tangible and core capital                |   |                                                                         | 20,931 |   |   |   | 20,239 |   |
|                                     |   |                                                                         |   |   |   |   |   |   |
| Allowable unrealized gain on             |   |                                                                         |   |   |   |   |   |   |
| securities available for sale            |   |                                                                         | -      |   |   |   | 1 |   |
| General valuation allowance              |   |                                                                         | 1,832  |   |   |   | 2,064 |   |
|                                     |   |                                                                         |   |   |   |   |   |   |
| Risk Based Capital                       |   | $                                                                            | 22,763 |   |   | $ | 22,304 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|        |   | December 31                                                                                                                                                   |    |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
|        |   | 2010                                                                                                                                                               |    |   | 2009 |   |
|        |   |                             |    |   |                             |   |
| Allocated   |   |                                                                                                                                                               | 152,156 |   |   |   | 182,570 |   |
| Unallocated |   |                                                                                                                                                               | -       |   |   |   | - |   |
| Total       |   |                                                                                                                                                               | 152,156 |   |   |   | 182,570 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                     |   |   |    |   |                |   |   | Weighted-Average      |   |   |                 |   |
|------------------------------------------|--------|--------|---------|--------|---------------------|--------|--------|-----------------------|--------|--------|----------------------|--------|
|                                     |   |   |    |   | Weighted-           |   |   | Remaining             |   |   |                 |   |
|                                     |   |   |    |   | Average             |   |   | Contractual Term |   |   | Aggregate            |   |
| Options                                  |   | Shares |    |   | Exercise Price |   |   | (Years)               |   |   | Intrinsic Value |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |
| Outstanding at January 1, 2009           |   |   | 192,132 |   |                | $      | 9.48   |                  |   |   | 7.5                  |   |   |   | - |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Granted in 2009                          |   |   | -       |   |                | $      | 0.00   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Exercised in 2009                        |   |   | -       |   |                | $      | 0.00   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Forfeited or Expired in 2009             |   |   | (4,000  | )      |                | $      | 9.57   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Outstanding at December 31, 2009         |   |   | 188,132 |   |                | $      | 9.47   |                  |   |   | 6.3                  |   |   |   | - |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Granted in 2010                          |   |   | -       |   |                | $      | 0.00   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Exercised in 2010                        |   |   | -       |   |                | $      | 0.00   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Forfeited or expired in 2010             |   |   | (2,000  | )      |                | $      | 9.54   |                  |   |   |                 |   |   |   |   |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Oustanding at December 31, 2010          |   |   | 186,132 |   |                | $      | 9.47   |                  |   |   | 5.3                  |   |   |   | - |   |
|                                     |   |   |    |   |                |   |   |                  |   |   |                 |   |   |   |   |   |
| Options Exercisable at December 31, 2010 |   |   | 148,774 |   |                | $      | 9.46   |                  |   |   | 5.2                  |   |   |   | - |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                           |   |                                                                                       |    |   | Weighted-Average |   |
|--------------------------------|--------|--------------------------------------------------------------------------------------------|---------|--------|------------------|--------|
|                           |   |                                                                                       |    |   | Grant-Date       |   |
| Nonvested Shares          |   |        Shares        |    |   | Fair Value  |   |
|                           |   |                                                                                       |    |   |             |   |
| Nonvested at January 1, 2009   |   |                                                                                       | 111,774 |   |             | $      | 2.11 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Granted                        |   |                                                                                       | -       |   |             | $      | 0.00 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Vested                         |   |                                                                                       | (36,368 | )      |             | $      | 2.11 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Forfeited                      |   |                                                                                       | (1,930  | )      |             | $      | 2.10 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Nonvested at December 31, 2009 |   |                                                                                       | 73,476  |   |             | $      | 2.11 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Granted                        |   |                                                                                       | -       |   |             |   | - |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Vested                         |   |                                                                                       | (34,118 | )      |             | $      | 2.11 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Forfeited                      |   |                                                                                       | (2,000  | )      |             | $      | 2.10 |   |
|                           |   |                                                                                       |    |   |             |   |   |   |
| Nonvested at December 31, 2010 |   |                                                                                       | 37,358  |   |             | $      | 2.11 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                     |   |         2010         |    |   |         2009         |   |
|--------------------------|--------|------------------------------------------------------------------------------------------------------|---------|--------|------------------------------------------------------------------------------------------------------|--------|
|                     |   |                                                                                                 |    |   |                                                                                                 |   |
| Beginning of period      |   |                                                                                                 | 26,000  |   |                                                                                                 |   | 38,850 |   |
|                     |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Granted                  |   |                                                                                                 | -       |   |                                                                                                 |   | 0 |   |
|                     |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Vested                   |   |                                                                                                 | (12,750 | )      |                                                                                                 |   | (12,850 | ) |
|                     |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Forfeited                |   |                                                                                                 | (200    | )      |                                                                                                 |   | 0 |   |
|                     |   |                                                                                                 |    |   |                                                                                                 |   |   |   |
| Nonvested, end of period |   |                                                                                                 | 13,050  |   |                                                                                                 |   | 26,000 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

| Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2010(in Thousands)  |
|-------------------------------------------------------------------------------------------------------------|
|                                                                                                        |   | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |   | Balance atDecember 31,2010 |   |
| Assets                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities- available-for-sale:                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| US Treasury securities and obligations of U.S. government corporations and agencies                         |   | $ | - |   |   | $ | 4,562 |   |   | $ | - |   |   | $ | 4,562 |   |
| Municipal notes                                                                                             |   |   | - |   |   |   | 5,046 |   |   |   | - |   |   |   | 5,046 |   |
| Mortgage-backed securities                                                                                  |   |   | - |   |   |   | 25,692 |   |   |   | - |   |   |   | 25,692 |   |
| Equity securities                                                                                           |   |   | - |   |   |   | 1 |   |   |   | - |   |   |   | 1 |   |
|                                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total investment securities - available-for-sale                                                            |   | $ | - |   |   | $ | 35,301 |   |   | $ | - |   |   | $ | 35,301 |   |

| Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2009(in Thousands)   |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |   | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs(Level 2) |   |   | SignificantUnobservableInputs(Level 3) |   |   | Balance atDecember 31,2009 |   |
| Assets                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment securities- available-for-sale:                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| US Treasury securities and obligations of U.S. government corporations and agencies                               |   | $ | - |   |   | $ | 8,257 |   |   | $ | - |   |   | $ | 8,257 |   |
| Municipal notes                                                                                                   |   |   | - |   |   |   | 8,053 |   |   |   | - |   |   |   | 8,053 |   |
| Corporate securities                                                                                              |   |   | - |   |   |   | 1,002 |   |   |   | - |   |   |   | 1,002 |   |
| Mortgage-backed securities                                                                                        |   |   | - |   |   |   | 16,397 |   |   |   | - |   |   |   | 16,397 |   |
| Equity securities                                                                                                 |   |   | - |   |   |   | 4 |   |   |   | - |   |   |   | 4 |   |
|                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total investment securities - available-for-sale                                                                  |   | $ | - |   |   | $ | 33,713 |   |   | $ | - |   |   | $ | 33,713 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                               |   | Balance atDecember 31,2010 |   |   | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs (Level2) |   |   | SignificantUnobservableInputs (Level3) |   |   | Change in fairvalue for thetwelve-monthperiod endedDecember 31,2010 |   |
|----------------------------------------------------|--------|--------------------------------------|--------|--------|-------------------------------------------------------------------------------------|--------|--------|------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |
| Impaired loans accounted for under FASB ASC 310-10 |   | $                                    | 2,920  |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 2,920  |   |   | $ | 878 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Other real estate owned -residential mortgages     |   | $                                    | 514    |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 514    |   |   | $ | 68 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Other Real estate owned - commercial               |   | $                                    | 2,569  |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 2,569  |   |   | $ | 830 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Total change in fair value                         |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   | $ | 1,776 |   |

|                                               |   | Balance atDecember 31,2009 |   |   | Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) |   |   | SignificantOtherObservableInputs (Level2) |   |   | SignificantUnobservableInputs (Level3) |   |   | Change in fairvalue for thetwelve-monthperiod endedDecember 31,2009 |   |
|----------------------------------------------------|--------|--------------------------------------|--------|--------|-------------------------------------------------------------------------------------|--------|--------|------------------------------------------------|--------|--------|---------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |
| Impaired loans accounted for under FASB ASC 310-10 |   | $                                    | 5,846  |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 5,846  |   |   | $ | 3,584 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Other real estate owned -residential mortgages     |   | $                                    | 584    |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 584    |   |   | $ | 11 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Other Real estate owned - commercial               |   | $                                    | 2,996  |   |                                                                                | $      | -      |                                           |   | $      | -                                           |   |   | $                                                                                                 | 2,996  |   |   | $ | 955 |   |
|                                               |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   |   |   |   |
| Total change in fair value                         |   |                                 |   |   |                                                                                |   |   |                                           |   |   |                                        |   |   |                                                                                              |   |   |   | $ | 4,550 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                |   | December 31, 2010 |    |   | December 31, 2009   |   |
|-------------------------------------|--------|-------------------|---------|--------|---------------------|--------|
|                                |   | CarryingAmounts   |    |   | EstimatedFair Value |   |   | CarryingAmounts |   |   | EstimatedFair Value |   |
|                                |   |              |    |   |                |   |   |   |   |   |   |   |
| Financial assets:                   |   |              |    |   |                |   |   |   |   |   |   |   |
| Cash and cash equivalents           |   | $                 | 1,963   |   |                | $      | 1,963 |   |   | $ | 3,099 |   |   | $ | 3,099 |   |
| Securities available for sale       |   |              | 35,301  |   |                |   | 35,301 |   |   |   | 33,713 |   |   |   | 33,713 |   |
| Securities held to maturity         |   |              | 2,520   |   |                |   | 2,595 |   |   |   | 3,928 |   |   |   | 4,084 |   |
| Loans and loans held for sale - Net |   |              | 157,144 |   |                |   | 157,629 |   |   |   | 171,271 |   |   |   | 171,544 |   |
| Federal Home Loan Bank stock        |   |              | 3,775   |   |                |   | 3,775 |   |   |   | 4,197 |   |   |   | 4,197 |   |
| Accrued interest receivable         |   |              | 1,231   |   |                |   | 1,231 |   |   |   | 1,230 |   |   |   | 1,230 |   |
|                                |   |              |    |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Financial liabilities:              |   |              |    |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Customer deposits                   |   |              | 155,466 |   |                |   | 157,463 |   |   |   | 158,100 |   |   |   | 159,081 |   |
| Federal Home Loan Bank advances     |   |              | 29,000  |   |                |   | 29,657 |   |   |   | 44,400 |   |   |   | 45,552 |   |
| Note payable                        |   |              | -       |   |                |   | - |   |   |   | 631 |   |   |   | 634 |   |
| REPO sweep accounts                 |   |              | 6,172   |   |                |   | 6,172 |   |   |   | 5,408 |   |   |   | 5,408 |   |
| Accrued interest payable            |   |              | 194     |   |                |   | 194 |   |   |   | 322 |   |   |   | 322 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                 |   |         2009         |   |
|----------------------|--------|------------------------------------------------------------------------------------------------------|--------|
|                 |   |                                                                                                 |   |
| Interest income      |   | $                                                                                                    | -      |   |
| Interest expense     |   |                                                                                                 | -      |   |
| Net interest income  |   |                                                                                                 | -      |   |
|                 |   |                                                                                                 |   |   |
| Noninterest income   |   |                                                                                                 | 210    |   |
| Noninterest expenses |   |                                                                                                 | 280    |   |
|                 |   |                                                                                                 |   |   |
| Loss before taxes    |   |                                                                                                 | (70    | ) |
| Income tax benefit   |   |                                                                                                 | (24    | ) |
| Net loss             |   | $                                                                                                    | (46    | ) |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                       |   | December 31                                                                                     |   |
|--------------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|
|                                       |   |         2010         |   |   |         2009         |   |
|                                       |   |                                                                                                 |   |   |   |   |
| Assets                                     |   |                                                                                                 |   |   |   |   |
|                                       |   |                                                                                                 |   |   |   |   |
| Cash at subsidiary bank                    |   | $                                                                                                    | 424    |   |   | $ | 517 |   |
| Investment in subsidiary                   |   |                                                                                                 | 22,272 |   |   |   | 22,119 |   |
| Deferred Tax Asset                         |   |                                                                                                 | 318    |   |   |   | 318 |   |
| Other assets                               |   |                                                                                                 | 222    |   |   |   | 98 |   |
|                                       |   |                                                                                                 |   |   |   |   |   |   |
| Total assets                               |   | $                                                                                                    | 23,236 |   |   | $ | 23,052 |   |
|                                       |   |                                                                                                 |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity       |   |                                                                                                 |   |   |   |   |   |   |
|                                       |   |                                                                                                 |   |   |   |   |   |   |
| Liabilities                                |   | $                                                                                                    | -      |   |   | $ | - |   |
| Stockholders' equity                       |   |                                                                                                 | 23,236 |   |   |   | 23,052 |   |
|                                       |   |                                                                                                 |   |   |   |   |   |   |
| Total liabilities and stockholders' equity |   | $                                                                                                    | 23,236 |   |   | $ | 23,052 |   |

|                                                                          |   | December 31                                                                                     |   |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|--------|
|                                                                          |   |         2010         |   |   |         2009         |   |
|                                                                          |   |                                                                                                 |   |   |   |   |
| Operating income                                                              |   | $                                                                                                    | -      |   |   | $ | - |   |
| Operating expense                                                             |   |                                                                                                 | 192    |   |   |   | 186 |   |
|                                                                          |   |                                                                                                 |   |   |   |   |   |   |
| Loss before income taxes and equity in undistributed net income of subsidiary |   |                                                                                                 | (192   | ) |   |   | (186 | ) |
|                                                                          |   |                                                                                                 |   |   |   |   |   |   |
| Income tax benefit                                                            |   |                                                                                                 | -      |   |   |   | (290 | ) |
|                                                                          |   |                                                                                                 |   |   |   |   |   |   |
| Loss before equity in undistributed loss of subsidiary                        |   |                                                                                                 | (192   | ) |   |   | (476 | ) |
|                                                                          |   |                                                                                                 |   |   |   |   |   |   |
| Equity in undistributed net income (loss) of subsidiary                       |   |                                                                                                 | 430    |   |   |   | (6,287 | ) |
|                                                                          |   |                                                                                                 |   |   |   |   |   |   |
| Net income (loss)                                                             |   | $                                                                                                    | 238    |   |   | $ | (6,763 | ) |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                                                              |   | December 31 |   |
|-----------------------------------------------------------------------------------|--------|------------------|--------|
|                                                                              |   | 2010             |   |   | 2009 |   |
|                                                                              |   |             |   |   |   |   |
| Cash Flows from Operating Activities                                              |   |             |   |   |   |   |
| Net income (loss)                                                                 |   | $                | 238    |   |   | $ | (6,763 | ) |
| Adjustments to reconcile net income (loss) to net cash from operating activities: |   |             |   |   |   |   |   |   |
| Stock-based compensation plans                                                    |   | $                | 223    |   |   | $ | 99 |   |
| Equity in undistributed net (income) loss of subsidiary                           |   |             | (430   | ) |   |   | 6,287 |   |
| Net change in other assets                                                        |   |             | (124   | ) |   |   | 267 |   |
|                                                                              |   |             |   |   |   |   |   |   |
| Net cash used in operating activities                                             |   |             | (93    | ) |   |   | (110 | ) |
|                                                                              |   |             |   |   |   |   |   |   |
| Cash Flows from Financing Activities                                              |   |             |   |   |   |   |   |   |
|   ESOP Loan Repayment                                                        |   |             | -      |   |   |   | 211 |   |
|                                                                              |   |             |   |   |   |   |   |   |
| Net cash provided by financing activities                                         |   |             | -      |   |   |   | 211 |   |
|                                                                              |   |             |   |   |   |   |   |   |
| Net Increase  (Decrease) in Cash                                        |   |             | (93    | ) |   |   | 101 |   |
|                                                                              |   |             |   |   |   |   |   |   |
| Cash - Beginning of year                                                          |   |             | 517    |   |   |   | 416 |   |
|                                                                              |   |             |   |   |   |   |   |   |
| Cash - End of year                                                                |   | $                | 424    |   |   | $ | 517 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                                   |   | For Year Ended    |    |
|--------------------------------------------------------|--------|-----------------------------|---------|
|                                                   |   | December 31, 2009 |    |
|                                                   |   | Bank                        |    |   | ICA |   |   | Eliminations |   |   | Total |   |
| Interest Income                                        |   | $                           | 12,442  |   |   | $ | 4 |   |   | $ | (4 | ) |   | $ | 12,442 |   |
| Interest Expense                                       |   |                        | 5,092   |   |   |   | - |   |   |   | (4 | ) |   |   | 5,088 |   |
| Net Interest Income - Before provision for loan losses |   |                        | 7,350   |   |   |   | 4 |   |   |   | - |   |   |   | 7,354 |   |
| Provision for Loan Losses                              |   |                        | 6,196   |   |   |   | - |   |   |   | - |   |   |   | 6,196 |   |
| Net Interest Income - After provision for loan losses  |   |                        | 1,154   |   |   |   | 4 |   |   |   | - |   |   |   | 1,158 |   |
| Other Income                                           |   |                        | 2,198   |   |   |   | 252 |   |   |   | - |   |   |   | 2,785 |   |
| Operating Expenses                                     |   |                        | 8,941   |   |   |   | 294 |   |   |   | - |   |   |   | 9,640 |   |
| Loss - Before federal income tax                       |   |                        | (5,589  | ) |   |   | (38 | ) |   |   | - |   |   |   | (5,697 | ) |
| Federal Income Tax                                     |   |                        | 1,079   |   |   |   | (13 | ) |   |   | - |   |   |   | 1,066 |   |
| Net Loss                                               |   | $                           | (6,668  | ) |   | $ | (25 | ) |   | $ | - |   |   | $ | (6,763 | ) |
|                                                   |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                          |   | $                           | 824     |   |   | $ | 47 |   |   | $ | - |   |   | $ | 871 |   |
| Assets                                                 |   | $                           | 234,069 |   |   | $ | - |   |   | $ | - |   |   | $ | 234,069 |   |
| Expenditures related to long-lived assets:             |   |                        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment                                 |   |                        | 276     |   |   |   | - |   |   |   | - |   |   |   | 276 |   |
| Total                                                  |   | $                           | 276     |   |   | $ | - |   |   | $ | - |   |   | $ | 276 |   |

----

| First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries |
|-------------------------------------------------------------------|
| Notes to Consolidated Financial Statements                        |
| December 31, 2010 and 2009                                   |
| (000s omitted, except per share data)                             |

|                                                                            |   | For the Three-Month Period Ending |   |
|---------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                            |   | March 31,2010                     |   |   | June 30,2010 |   |   | September 30,2010 |   |   | December 31,2010 |   |
| Interest income                                                                 |   | $                                 | 2,882  |   |   | $ | 2,884 |   |   | $ | 2,907 |   |   | $ | 2,774 |   |
| Interest expense                                                                |   |                              | 956    |   |   |   | 900 |   |   |   | 851 |   |   |   | 740 |   |
| Net interest income                                                             |   |                              | 1,926  |   |   |   | 1,984 |   |   |   | 2,056 |   |   |   | 2,034 |   |
| Provision for loan losses                                                       |   |                              | 11     |   |   |   | 595 |   |   |   | 353 |   |   |   | 142 |   |
| Other income                                                                    |   |                              | 578    |   |   |   | 1,265 |   |   |   | 717 |   |   |   | 645 |   |
| Other expenses                                                                  |   |                              | 2,189  |   |   |   | 2,437 |   |   |   | 2,348 |   |   |   | 2,892 |   |
| Income (loss) - before income tax expense or benefit                            |   |                              | 304    |   |   |   | 217 |   |   |   | 72 |   |   |   | (355 | ) |
| Income tax expense (benefit)                                                    |   |                              | 102    |   |   |   | (102 | ) |   |   | - |   |   |   | - |   |
| Net income (loss)                                                               |   | $                                 | 202    |   |   | $ | 319 |   |   | $ | 72 |   |   | $ | (355 | ) |
|                                                                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per share                                                     |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                           |   | $                                 | 0.07   |   |   | $ | 0.11 |   |   | $ | 0.02 |   |   | $ | (0.12 | ) |
| Diluted                                                                         |   | $                                 | 0.07   |   |   | $ | 0.11 |   |   | $ | 0.02 |   |   | $ | (0.12 | ) |
|                                                                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding - basic and dilutive              |   |                              | 2,884  |   |   |   | 2,884 |   |   |   | 2,884 |   |   |   | 2,884 |   |
| Cash dividends declared per common share                                        |   | $                                 | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   | For the Three-Month Period Ending |   |
|                                                                            |   | March 31,2009                     |   |   | June 30,2009 |   |   | September 30,2009 |   |   | December 31,2009 |   |
| Interest income                                                                 |   | $                                 | 3,291  |   |   | $ | 3,185 |   |   | $ | 3,111 |   |   | $ | 2,855 |   |
| Interest expense                                                                |   |                              | 1,489  |   |   |   | 1,309 |   |   |   | 1,218 |   |   |   | 1,072 |   |
| Net interest income                                                             |   |                              | 1,802  |   |   |   | 1,876 |   |   |   | 1,893 |   |   |   | 1,783 |   |
| Provision for loan losses                                                       |   |                              | 264    |   |   |   | 252 |   |   |   | 2,977 |   |   |   | 2,703 |   |
| Other income                                                                    |   |                              | 798    |   |   |   | 764 |   |   |   | 491 |   |   |   | 522 |   |
| Other expenses                                                                  |   |                              | 2,138  |   |   |   | 2,346 |   |   |   | 2,076 |   |   |   | 2,800 |   |
| Income (loss) from continuing operations - before income tax expense or benefit |   |                              | 198    |   |   |   | 42 |   |   |   | (2,669 | ) |   |   | (3,198 | ) |
| Income tax expense (benefit) from continuing operations                         |   |                              | 51     |   |   |   | - |   |   |   | 1,149 |   |   |   | (110 | ) |
| Net income (loss) from continuing operations                                    |   |                              | 147    |   |   |   | 42 |   |   |   | (3,818 | ) |   |   | (3,088 | ) |
| Loss from discontinued operations, net of tax benefit                           |   |                              | (46    | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income (loss)                                                               |   | $                                 | 101    |   |   | $ | 42 |   |   | $ | (3,818 | ) |   | $ | (3,088 | ) |
|                                                                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) per share from continuing operations                              |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                           |   | $                                 | 0.05   |   |   | $ | 0.01 |   |   | $ | (1.32 | ) |   | $ | (1.07 | ) |
| Diluted                                                                         |   | $                                 | 0.05   |   |   | $ | 0.01 |   |   | $ | (1.32 | ) |   | $ | (1.07 | ) |
| Income (loss) per share from discontinued operations                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                           |   | $                                 | (0.01  | ) |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Diluted                                                                         |   | $                                 | (0.01  | ) |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Net income (loss) per share                                                     |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                           |   | $                                 | 0.04   |   |   | $ | 0.01 |   |   | $ | (1.32 | ) |   | $ | (1.07 | ) |
| Diluted                                                                         |   | $                                 | 0.04   |   |   | $ | 0.01 |   |   | $ | (1.32 | ) |   | $ | (1.07 | ) |
|                                                                            |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding - basic and dilutive              |   |                              | 2,884  |   |   |   | 2,884 |   |   |   | 2,884 |   |   |   | 2,884 |   |
| Cash dividends declared per common share                                        |   | $                                 | -      |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |

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