<PAGE>
                                                                      EXHIBIT 13






                            ALPENA BANCSHARES, INC.

                                      2001
                                  ANNUAL REPORT



<PAGE>
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                               PAGE


<S>                                                                                                           <C>
Message of President and Chief Executive Officer.........................................................         1
Selected Consolidated Financial and Other Data...........................................................         2
Management's Discussion and Analysis of
     Financial Condition and Results of Operations.......................................................         3
Report of Management and Independent Auditors............................................................        13
Consolidated Statements of Financial Condition...........................................................        14
Consolidated Statements of Income........................................................................        15
Consolidated Statements of Stockholders' Equity..........................................................        16
Consolidated Statements of Cash Flows....................................................................        17
Notes to Consolidated Financial Statements...............................................................        18
Directors and Senior Officers of Alpena Bancshares, Inc. and First Federal of Northern Michigan..........        44
Stockholder Information..................................................................................        45
</TABLE>



<PAGE>
[ALPENA BANCSHARES, INC. LETTERHEAD]



March 6, 2002



Dear Stockholders,

The year 2001 will go down in history as a year that America endured tremendous
adversity. The U.S. economy saw a major slowdown and the Federal Reserve made
eleven interest rate cuts in an attempt to stimulate a struggling economy. On
September 11th, America's resolve and courage were tested in a manner never
before experienced. A terrorist declaration of war on America's homeland
involved thousands of innocent civilians on our own soil. The September 11th
tragedies were answered with a tremendous outpouring of patriotism and enduring
love for our great country and our fellow man. Again, as in the past, America
proved to the whole world that it has the strength and character to step up to
meet any challenge with a level of intensity and commitment to preserve the
freedom and unalienable rights that the citizens of this country hold so dear to
their hearts.

Several other events impacted the Bank during the year 2001. The impact of lower
interest rates and declines in the stock market lead to historic rates of
mortgage refinancing and a flight to the safety and security of bank deposit
products. The impact of these economic factors led to compressed margins, lower
investment returns and higher liquidity for First Federal.

Refinancing activity reached record levels as our customers took advantage of
lower rates to lock in longer term fixed rate mortgage products. The Bank's
ability to service these customers with desired products and sell the loans with
servicing retained, provided income opportunities and the ability to retain the
valued customer relationships built over time.

Although deposit rates were lowered due to a decline in the yields available in
the market place, First Federal experienced deposit growth of 2% in 2001, while
Michigan peers declined. The increase is even more encouraging when the increase
in competitors in our markets is considered.

The Bank made significant additions in the area of technology including a new
core processing system, a new loan origination and documentation system and the
implementation of telephone banking which will be released in the second quarter
of 2002. All of these enhancements will improve the efficiencies of the Bank and
allow us to provide quality products to our customers. In June of 2001, First
Federal was pleased to open the Gaylord branch. As the ninth branch, the full
service facility has seen steady growth and we are very optimist about the
opportunities and diversity the growing Gaylord market can bring to our Northern
Michigan service area.

As the industry changes, management continues to adjust the operations of the
Bank to remain a strong competitor in the Northern Michigan communities we
serve. We look forward to providing you, the stockholder, value in return for
your trust and investment in Alpena Bancshares, Inc.

Respectfully yours,

/s/ Martin A. Thomson

Martin A. Thomson
President and Chief Executive Officer



                                       1
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA OF THE COMPANY

         Set forth below is selected financial and other data of the Company.
This information is derived in part from and should be read in conjunction with
the Consolidated Financial Statements of the Company and the notes thereto
presented elsewhere in this Annual Report.

SELECTED FINANCIAL CONDITION DATA:

<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                            -----------------------------------------------------
                                                                 2001     2000        1999       1998     1997
                                                                 ----     ----       -----      -----    -----
                                                                                 (IN THOUSANDS)


<S>                                                         <C>        <C>        <C>        <C>       <C>
Total assets................................................$ 241,472  $267,009   $263,549   $242,380  $221,575
Cash and cash equivalents ..................................   24,990    16,827      9,974      6,251     5,555
Investment securities.......................................   23,212    15,425     19,049     19,713    23,880
Loans receivable, net.......................................  178,037   219,807    223,866    205,460   181,123
Deposits....................................................  166,538   162,771    156,393    147,159   143,329
Stockholders' equity........................................   20,597    19,470     18,805     18,664    17,017
</TABLE>


SELECTED OPERATING DATA:

<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                             ----------------------------------------------------
                                                                 2001     2000       1999       1998      1997
                                                                 ----     ----      -----      -----      ----
                                                                                 (IN THOUSANDS)

<S>                                                         <C>        <C>        <C>        <C>       <C>
Total interest income.......................................$  17,586  $18,654    $17,059    $16,716   $14,112
Total interest expense......................................   11,439   12,558     11,726     11,239     9,014
                                                            ---------  -------    -------    -------   -------
     Net interest income....................................    6,147    6,096      5,333      5,477     5,098
Provision for loan losses...................................      255      280        120        115        98
                                                            ---------  -------    -------    -------   -------
     Net interest income after provision
       for loan losses......................................    5,892    5,816      5,213      5,362     5,000

Other income:
  Service charges and fees..................................      740      462        600        207       109
  Mortgage banking activities...............................    1,352      243          -          -         -
  Net gain on sale of investment securities.................      183    2,028          -          -         -
  Gain (loss) on sale of real estate........................     (107)     (46)        35          -         -
  Loss on impairment of real estate held for investment.....        -     (211)         -          -         -
  Loss on abandonment of fixed assets.......................      (88)    (258)         -          -         -
  Other.....................................................      125      158        405        166       156
                                                            ---------  -------    -------    -------   -------
       Total other income...................................    2,205    2,376      1,040        373       265
                                                            ---------  -------    -------    -------   -------

Other expense...............................................    6,166    5,033      4,877      4,094     3,735
                                                            ---------  -------    -------    -------   -------

  Income before income tax expense..........................    1,931    3,159      1,376      1,641     1,530
  Income tax expense........................................      646    1,035        452        558       444
                                                            ---------  -------    -------    -------   -------

     Net income.............................................$   1,285   $2,124    $   924    $ 1,083   $ 1,086
                                                            =========  --=====    =======    =======   =======
</TABLE>


                                       2
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<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                      ---------------------------------------------------
                                                          2001     2000      1999      1998      1997
                                                          ----     ----      ----      ----      ----
<S>                                                      <C>       <C>       <C>       <C>       <C>

KEY FINANCIAL RATIOS AND OTHER DATA:

Return on average assets (net income
  divided by average total assets) ................      0.51%     0.82%     0.37%     0.48%     0.58%
Return on average equity (net income
  divided by average equity) ......................      6.52      1.37      5.46      6.85      7.08
Average equity to average assets ..................      7.88      7.24      6.77      6.98      8.23
Equity to total assets ............................      8.53      7.29      7.15      7.06      7.23
Net interest rate spread (average yield on
  interest-earning assets less average yield
  on interest-bearing liabilities) ................      2.37      2.34      2.13      2.41      2.74
Net interest margin (net interest income as a
  percentage of average interest-earning assets)...      2.60      2.50      2.27      2.54      2.93
Noninterest expense to average assets .............      2.47      1.95      1.95      1.81      2.01
Net interest income to noninterest expense ........     99.69    121.12    109.35    134.88    137.56
Nonperforming loans to net loans receivable .......      0.38      0.31      0.34      0.55      0.69
Nonperforming assets to total assets ..............      0.36      0.31      0.32      0.48      0.57
Allowance for loan losses to nonperforming assets..     78.94     79.21     52.64     41.21     33.25
Allowance for loan losses to net loans receivable..      0.39      0.30      0.20      0.23      0.23
Average interest-earning assets to
  average interest-bearing liabilities ............    104.66    103.20    102.75    102.86    103.67
Number of full-service offices ....................         9         8         6         6         6
</TABLE>



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

GENERAL

         Alpena Bancshares, Inc. (the "Company") is a holding company whose
primary asset is the investment in First Federal of Northern Michigan (the
"Bank"), which reorganized into the holding company structure, effective
November 14, 2000.

         The Company focuses on establishing and maintaining long-term
relationships with customers, and is committed to serving the financial service
needs of the communities in its market area. The Company attracts retail
deposits from the general public and uses those deposits, together with borrowed
funds, to originate residential mortgage loans, and commercial and consumer
loans. The Company is the only thrift institution headquartered in its market
area, which in recent years has experienced an influx of new commercial banks
headquartered outside of Northeast Michigan. The Company believes it is large
enough to provide a full range of personal and business financial services, and
yet small enough to be able to provide such services on a personalized and
efficient basis. Management believes that the Company can be more effective in
servicing its customers than many of its non-local competitors because of the
Company's ability to quickly and effectively provide senior management responses
to customer needs and inquiries. The Company is majority owned by Alpena
Bancshares, M.H.C., a mutual holding company. The Company intends to use the
mutual holding company structure to enhance its focus as a community-oriented,
independent savings institution.

         The Company's current business strategy is to operate the Bank as a
well-capitalized, profitable and independent community-oriented savings
association dedicated to providing quality customer service. Generally, the
Company has sought to implement this strategy by using retail deposits and FHLB
advances as its source of funds and maintaining a substantial part of its assets
in loans secured by one- to four-family residential real estate located in the
Company's market area, home equity loans, commercial real estate loans,
mortgage-backed securities and in other liquid investment securities.
Specifically, the Company's business strategy incorporates the following
elements: (1) operating as a community-oriented financial institution,
maintaining a strong core customer base by providing quality service and
offering customers the access to senior management and services that a
community-based institution can offer; (2) maintaining high asset quality by
emphasizing investment in residential mortgage loans, mortgage-backed securities
and other securities issued or guaranteed by the United States Government or
agencies thereof; (3) maintaining capital in




                                       3
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excess of regulatory requirements and growing only to the extent that adequate
capital levels can be maintained; and (4) managing interest rate risk exposure
while achieving desirable levels of profitability.

         Asset Quality and Emphasis on Residential Mortgage Lending.
Historically, the Company had emphasized fixed-rate balloon mortgage loans with
three- and five-year terms secured by one- to four-family properties located in
its market area. The Company, historically, had been a portfolio lender; however
in 2000 the Bank began to offer Freddie Mac mortgage products as an additional
service to our customers. These products include 15 year to 30 year fixed rate
and adjustable rate mortgage loans. The Company generally retains all servicing
rights on any loans sold to Freddie Mac. The Company anticipates a continued
commitment to financing the purchase or improvement of residential real estate
in its market area. To supplement local mortgage loan originations where
available funds exceed local mortgage loan demand, the Company also invests in
mortgage-backed securities and investment securities that are issued or
guaranteed by the United States Government or agencies thereof. By investing in
these types of assets, the Company's strategy has been to reduce the credit risk
of its asset base in exchange for lower yields than would typically be available
on commercial real estate loans and multi-family real estate loans.

         Capital Position and Controlled Growth. The Company's stockholders'
equity increased from $7.1 million at December 31, 1992, to $20.6 million at
December 31, 2001, an increase of 190.1%. This includes a net increase of $5.9
million from the proceeds of the Company's initial public offering. Given the
current regulatory environment that focuses on the need for higher capital
ratios, the Company intends to maintain its level of stockholders' equity and
capital ratios by growing only to the extent that adequate capital levels can be
maintained.

         Strong Retail Deposit Base. The Company has had a relatively stable
retail deposit base drawn from its nine full-service offices located in Alpena,
Cheboygan, Iosco, Montmorency, Oscoda and Otsego counties in Northeast Michigan.
At December 31, 2001, 33.9% of its deposit base consisted of core deposits,
which included NOW accounts, regular savings accounts, and money market deposit
accounts. Core deposits are considered to be a more stable and lower cost source
of funds than certificates of deposit or outside borrowings. The Company will
continue to emphasize retail deposits by providing quality customer service,
offering competitive rates on deposit accounts, and providing depositors with a
full range of accounts.

         The earnings of the Company depend primarily on its level of net
interest income, which is the difference between interest earned on the
Company's interest-earning assets, consisting primarily of loans receivable,
mortgage-backed securities, investment securities, and interest-bearing deposits
at other institutions, and the interest paid on interest-bearing liabilities,
which consist primarily of savings deposits and FHLB advances. Interest income
is a function of the Company's interest rate spread, which is the difference
between the average yield earned on interest-earning assets and the average rate
paid on interest-bearing liabilities, as well as a function of the average
balance of interest-earning assets as compared to interest-bearing liabilities.
The Company's earnings also are affected by its level of noninterest income,
including primarily mortgage banking activities, service fees and charges, and
noninterest expense, including primarily compensation and employee benefits,
occupancy expenses, and SAIF deposit insurance premiums. Earnings of the Company
also are affected significantly by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities, which events are beyond the control of the Company.


                                       4
<PAGE>
COMPARISON OF FINANCIAL CONDITION

         Total assets decreased $25.5 million, or 9.6%, to $241.5 million at
December 31, 2001 from $267.0 million at December 31, 2000. The decrease in
assets was the result of the Bank's mortgage banking activities of selling
longer term fixed rate mortgages. This activity resulted in the Bank's increased
liquidity as the funds from the loan sales were utilized to increase short-term
investments and to reduce Federal Home Loan Bank ("FHLB") advances. Cash and
cash equivalents increased by $8.2 million, or 48.5%, to $25.0 million on
December 31, 2001 from $16.8 million at December 31, 2000. Investment securities
increased $7.8 million, or 50.5%, to $23.2 million at December 31, 2001 from
$15.4 million at December 31, 2000. Net loans decreased $41.8 million, or 19.0%,
to $178.0 million at December 31, 2001 from $219.8 million at December 31, 2000.

         Deposits increased $3.8 million, or 2.3%, to $166.5 million at December
31, 2001 from $162.8 million at December 31, 2000. Borrowings in the form of
FHLB advances declined $30.3 million, or 36.8%, to $52.1 million at December 31,
2001 from $82.4 million one year earlier.

         Stockholders' equity increased by $1.1 million, or 5.8%, to $20.6
million at December 31, 2001 from $19.5 million at December 31, 2000. The
increase in stockholders' equity was due to net income of $1.3 million and a net
increase in accumulated other comprehensive income of $141,000, partially offset
by dividends of $360,000 being paid to the stockholders.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

         The Company had net income of $1.3 million and $2.1 million for the
years ended December 31, 2001 and 2000, respectively.

         Interest Income. Total interest income decreased by $1.1 million, or
5.7% to $17.6 million for the year ended December 31, 2001 from $18.7 million
for the year ended December 31, 2000. The decrease in interest income was
attributable to a decline in the average balance of the Company's average
interest-earning assets by $7.0 million, or 2.9%, to $236.6 million for the year
ended December 31, 2001 from $243.6 million for the year ended December 31, 2000
and by a decrease in the average yield on the Company's average interest earning
assets to 7.43% for the year ended December 31, 2001 from 7.66% for the year
ended December 31, 2000. The decrease in the average balance of interest-earning
assets reflected a $35.4 million decline in the average balance of mortgage
loans, partially offset by a $12.4 million increase in the average balance of
other loans, and a $6.2 million increase in the average balance of investment
securities and a $9.8 million increase in the average balance of other
investments. The decline was the result of the Bank's secondary market
activities, which resulted in the sale of $77.6 million of mortgage loans.
Historically low interest rates on 15 and 30 year mortgage loans caused a large
portion of the Bank's balloon mortgage portfolio to refinance into these fixed
rate products, which in turn were sold, thereby decreasing the portfolio
balance. The balances of the balloon products were $58.1 million and $95.7
million at December 31, 2001 and 2000, respectively. The decrease in average
yield was caused primarily by the lower current market interest rates during
2001 on other loans, and interest-earning deposits.

         Interest income on loans receivable decreased by $1.6 million, or 8.5%,
to $15.8 million for the year ended December 31, 2001 from $17.2 million for the
year ended December 31, 2000. Interest income on mortgage loans decreased by
$2.6 million, or 16.8%, to $12.4 million from $15.0 million, and interest income
on other loans increased by $1.0 million, or 46.5%, to $3.3 million from $2.3
million. The increase in interest income on other loans resulted primarily from
an increase in the average balance of other loans to $38.1 million for the year
ended December 31, 2001 from $25.7 million for the year ended December 31, 2000,
and was accompanied by a decrease in the average yield on other loans to 8.73%
from 8.84%. The decrease in average yield on other loans was primarily because
of lower interest rates on loans originated during 2001 along with existing
adjustable rate loans resetting at lower current market interest rates.

    Interest income on investments including mortgage-backed securities and
overnight funds increased $396,000 to $1.8 million from $1.4 million for the
twelve months ended December 31, 2001 and 2000, respectively. This increase


                                       5
<PAGE>
was primarily attributable to an increase in the average balance of the
investment portfolio of $16.0 million to $34.7 million from $18.8 million for
the twelve months ended December 31, 2001 from the same period one year earlier.

         Interest Expense. Total interest expense decreased by $1.2 million, or
8.9%, to $11.4 million for the year ended December 31, 2001 from $12.6 million
for the year ended December 31, 2000. The decrease was primarily attributable to
a decline in the average balance of borrowed funds to $60.5 million from $80.3
million for the years ended December 31, 2001 and 2000, respectively and
partially offset by an increase in the average balance of deposits of $9.9
million, or 6.4%, to $165.6 million for the year ended December 31, 2001 from
$155.7 million for the same period one year earlier. The average cost of
deposits decreased to 4.77% from 4.88% and the average cost of borrowed funds
declined to 5.84% from 6.18%. The increase in average balance of deposits was
due partially to the one-time purchase of brokered certificates of deposit of
$4.5 million, at a cost of 5.68% which mature over a five year period. Also,
savings, NOW and money market accounts have shown steady increases as consumers
have moved away from the stock market and await economic recovery and higher
interest rates. The decrease in the average cost of deposits was attributable to
lower market interest rates during 2001, while the decrease in the cost of
borrowings resulted from the repayment of high cost FHLB advances.

         Provision for Loan Losses. The allowance for loan losses is established
as losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.

         The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the collectibility
of the loans in light of historical experience, the nature and volume of the
loan portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral and prevailing economic
conditions. This evaluation is inherently subjective, as it requires estimates
that are susceptible to significant revision as more information becomes
available. The provision for loan losses amounted to $255,000 and $280,000 for
the twelve month periods ended December 31, 2001 and 2000, respectively.

         Other Income. Other income decreased by $171,000 to $2.2 million for
the year ended December 31, 2001 from $2.4 million for the year ended December
31, 2000. Service charges and other fees increased $278,000, or 60.2% to
$740,000 due to increases in ATM access fees of $22,000, various deposit account
fees of $56,000, late charges and other miscellaneous fees from loans of
$145,000 and incentive fees from a third party vendor for float on issued
official bank checks of $51,000. Net gain on sale of loans increased $675,000 or
630.8% to $782,000 for the twelve months ended December 31, 2001 from the same
period one year earlier. This increase was due to the increase in the volume of
loans sold to $77.6 million in 2001 from $17.9 million in 2000 as refinanced
fixed rate loans were sold by the Bank into the secondary mortgage market. If
interest rates trend up, management does not expect to achieve these same
results in future periods. Income from the associated mortgage banking
activities rose to $1.4 million in 2001 from $243,000 in 2000. Loan servicing
fees increased to $570,000 in 2001 from $136,200 in 2000. This income level was
achieved through mortgage servicing fee income of $108,000 from a serviced loan
portfolio which reached $82.1 million at December 31, 2001 from $17.5 million at
December 31, 2000, and the recognition of income through the net capitalization
of originated mortgage servicing rights of $485,000. Net gains on loan sales
totaled $782,000 for the twelve months ended December 31, 2001 compared to
$107,000 for the same period in 2000. In 2000, the Company began to liquidate
certain available-for-sale securities to enhance both liquidity and future
earnings. These gains totaled approximately $183,000 in 2001 and $2.0 million in
2000. Certain fixed assets, relating to the Company's in-house computer system
were retired in 2001 and 2000. These losses amounted to approximately $88,000
and $258,000 for 2001 and 2000, respectively.

         Operating Expense. Noninterest expense increased by $1.2 million to
$6.2 million for the year ended December 31, 2001 from $5.0 million for the year
ended December 31, 2000.

  Compensation and employee benefits increased $639,000 or 23.5% to $3.4 million
in 2001 from $2.7 million in 2000. Salaries increased $306,000 to $2.6 million
in 2001 as staff was added to service our new office in Gaylord, Michigan.
Additional staffing was also added to back room operations and various branches
for the Company to follow its business strategy of promoting quality customer
service. In addition to salaries, commissions and incentives increased

                                       6
<PAGE>
to $195,000 in 2001. This was primarily due to the increased loan demand during
the year. Employee benefit costs, including health, life and pension, rose 24.4%
to $443,000 in 2001 from $356,000 the prior year. Occupancy and equipment
increased $188,000 to $1.1 million in 2001. The Bank had purchased a building in
Gaylord late in 2000 for its new office and completed extensive remodeling prior
to opening in June 2001. The Bank also converted its core processing system from
an in-house system to a third party service bureau. This conversion was
completed to not only upgrade the core system but to allow growth in services
that the Bank can provide to its customers such as telephone and internet
banking. Other expense increased $314,000 to $1.4 million in 2001 from $1.1
million in 2000. This increase was attributable to several factors. Our market
expansion into the Central area of Northern Michigan has contributed to
increased supplies, courier, postage and communication expense. These costs have
increased $127,000 to $425,000 from $298,000 for the years ended December 31,
2001 and 2000, respectively. Professional expenses, including legal, consulting
and accounting increased $122,000 to $224,000 in 2001 from $102,000 in 2000.

         Income Taxes. Federal income tax expense decreased $389,000 to $646,000
for the year ended December 31, 2001 from $1.0 million for the year ended
December 31, 2000. The decrease was primarily due to the $1.3 million decline in
income before federal income tax expense to $1.9 million for the year ended
December 31, 2001 from $3.2 million for the year ended December 31, 2000.


COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999

         The Company had net income of $2.1 million and $924,000 for the years
ended December 31, 2000 and 1999, respectively.

         Interest Income. Total interest income increased by $1.6 million, or
9.3% to $18.7 million for the year ended December 31, 2000 from $17.1 million
for the year ended December 31, 1999. The increase in interest income was
attributable to an increase in the average balance of the Company's average
interest-earning assets by $8.3 million, or 3.5%, to $243.6 million for the year
ended December 31, 2000 from $235.4 million for the year ended December 31, 1999
and by an increase in the average yield on the Company's average interest
earning assets to 7.66% for the year ended December 31, 2000 from 7.25% for the
year ended December 31, 1999. The increase in the average balance of
interest-earning assets reflected a $122,000 increase in the average balance of
mortgage loans, a $9.8 million increase in the average balance of other loans,
and a $202,000 increase in the average balance of investment securities. This
was partially offset by a $336,000 decrease in the average balance of
mortgage-backed securities and a $1.5 million decrease in the average balance of
other investments. The increase in average yield was caused primarily by the
increase in yield on mortgage loans due to loans being originated in 2000 at
higher interest rates, and also partially due to higher interest rates during
2000 on other loans, mortgage-backed securities and interest-earning deposits.

         Interest income on loans receivable increased by $1.5 million, or 9.8%,
to $17.2 million for the year ended December 31, 2000 from $15.7 million for the
year ended December 31, 1999. Interest income on mortgage loans increased by
$548,000, or 3.8%, to $15.0 million from $14.4 million, and interest income on
other loans increased by $1.0 million, or 77.7%, to $2.3 million from $1.3
million. The increase in interest income on loans resulted primarily from an
increase in the average balance of other loans to $25.7 million for the year
ended December 31, 2000 from $15.9 million for the year ended December 31, 1999,
and was accompanied by an increase in the average yield on other loans to 8.84%
from 8.02%. The increase in average yield on other loans was primarily because
of higher interest rates on loans originated during 2000 along with existing
adjustable rate loans resetting at higher current market interest rates.

         Interest Expense. Total interest expense increased by $832,000, or
7.1%, to $12.6 million for the year ended December 31, 2000 from $11.7 million
for the year ended December 31, 1999. The increase was primarily attributable to
increases in the average balance of deposits of $3.0 million, or 2.0%, to $155.7
million for the year ended December 31, 2000 from $152.7 million for the same
period one year earlier and an increase in the average balance of borrowed funds
to $80.3 million from $76.3 million for the years ended December 31, 2000 and
1999, respectively and in the average cost of deposits to 4.88% from 4.77% and
in the average cost of borrowed funds to 6.18% from 5.82%. The increase in
average balance of deposits was primarily due to promotions for acquiring
certificate accounts. The increase in the average balance of deposits and
borrowed funds was used to fund loan originations. The increase in the average
cost of deposits and borrowed funds was attributable to higher market interest
rates during 2000.


                                       7
<PAGE>
         Provision for Loan Losses. The Company increased its provision for loan
losses to $280,000 for the year ended December 31, 2000 from $120,000 for the
year ended December 31, 1999. The increased provision was because of the
inherent risk of the expanding loan (primarily commercial and consumer)
portfolio. Management believes that its provisions for loan losses have
maintained its allowance for loan losses will not exceed estimated amounts.
Management continues to monitor activity and will make adjustments to this
allowance provision as conditions warrant.

         Other Income. Other income increased by $1.3 million to $2.4 million
for the year ended December 31, 2000 from $1.0 million for the year ended
December 31, 1999. The increase for the 2000 period was primarily attributable
to gains on the sale of assets, income from mortgage banking activities, and
also partially due to increases in various fees collected. These increases were
partially offset by costs associated with the retirement of certain fixed
assets, a valuation adjustment to real estate held for sale, along with a
decrease in miscellaneous other income items. In 2000, the Company recognized
gains in the liquidation of certain available-for-sale securities to enhance
both liquidity and future earnings. These gains totaled approximately $2.0
million. Certain fixed assets, relating to the Company's in-house computer
system were retired during the third quarter of 2000. These costs amounted to
approximately $258,000. In the fourth quarter of 2000, the Company made an
adjustment of approximately $211,000 related to the valuation of its investment
in Wyndham Garden Estates. This development is required by accounting standards
to be valued at the lower of actual cost or current market values. During 2000,
the Company began selling originations of 15 to 30 year fixed rate loans to
Freddie Mac with servicing generally retained. For the year ended December 31,
2000, the Company had income from mortgage banking activities of $243,000.

         Other Expense. Noninterest expense increased by $156,000 to $5.0
million for the year ended December 31, 2000 from $4.9 million for the year
ended December 31, 1999. The increase was attributable to the $263,000 increase
in compensation and benefits expense, the $81,000 increase in occupancy expense,
and partially offset by declines of $56,000 in Federal insurance premiums and
$120,000 in other operating expenses. Compensation and benefit expenses were
higher primarily because of additional employees hired to accommodate some the
Company's significant growth over the past few years and overall wage increases
in 2000, and also partially due to continued increases in pension plan and
health insurance costs. Occupancy expense increased primarily due to the
increased cost of depreciation and maintenance of equipment. The decline in
other operating expenses was primarily attributable to a $95,000 adjustment in
the Michigan Single Business Tax in 1999.

         Income Taxes. Federal income tax expense increased $583,000 to $1.0
million for the year ended December 31, 2000 from $452,000 for the year ended
December 31, 1999. The increase was primarily due to the $1.8 million increase
in income before federal income tax expense to $3.2 million for the year ended
December 31, 2000 from $1.4 million for the year ended December 31, 1999.


                                       8
<PAGE>
AVERAGE BALANCE SHEET

         The following table sets forth certain information relating to the
Company's average balance sheet and reflects the average yield on assets and
average cost of liabilities for the periods indicated and the average yields
earned and rates paid. Such yields and costs are derived by dividing income or
expense by the average balance of assets or liabilities, respectively, for the
periods presented. Average balances are derived from average daily balances.


<TABLE>
<CAPTION>
                                                             Average Consolidated Statements of Condition
                                   Consolidated Statement            For Years Ended December 31,
                                   Of Financial Condition      -----------------------------------------
                                    At December 31, 2001                         2001
                                    --------------------       -----------------------------------------
                                                                                                Average
                                    Actual       Yield/         Average                          Yield/
                                    Balance       Cost          Balance     Interest              Cost
                                    -------       ----          -------     --------              ----
Interest-earning assets:
<S>                                 <C>           <C>           <C>         <C>                   <C>
Mortgage loans ..................   $137,380      7.51%         $163,807    $ 12,435              7.59%
Non-mortgage loans ..............     41,346      8.39            38,119       3,326              8.73
Mortgage-backed securities(1) ...      1,934      6.39             2,143         140              6.53
Investment securities(1) ........     21,260      4.92            16,704         916              5.48
Other investments ...............     25,312      2.41            15,856         769              4.85
                                    --------                     -------      ------
Total interest-earning assets ...    227,232      6.85           236,629      17,586              7.43
Non-interest earning assets .....     14,240
                                    --------
Total assets ....................   $241,472                      13,469    $250,098
                                    ========                     =======    ========
Interest-bearing liabilities:
Deposits ........................   $166,538      4.13          $165,642       7,906              4.77
Borrowed funds ..................     52,120      5.77            60,461       3,533              5.84
                                    --------                    --------    --------
Total interest-bearing
      liabilities ...............    218,658      4.52           226,103      11,439              5.06
                                                                            --------
Non-interest bearing
     liabilities ................      2,217                       4,291
                                     -------                     -------
Total liabilities ...............    220,875                     230,394
Stockholders equity .............     20,597                      19,704
                                     -------                     -------

Total liabilities and
     stockholders equity ........   $241,472                    $250,098
                                    ========                    ========
Net interest income .............                                           $  6,147
                                                                            ========
Interest rate spread ............                 2.33%                                           2.37%
                                                  ====                                            ====
Net interest margin (1) .........                 2.50%                                           2.60%
                                                  ====                                            ====
Ratio of average interest-earning
     assets to average interest-
     bearing liabilities ........               103.92%                                          104.66%
                                                ======                                           ======


<CAPTION>

                                                      Average Consolidated Statements of Condition
                                                              For Years Ended December 31,
                                     --------------------------------------------------------------------------------
                                                    2000                                    1999
                                     ------------------------------------   -----------------------------------------
Interest-earning assets:
<S>                                  <C>        <C>                  <C>        <C>        <C>                  <C>
Mortgage loans ..................    $199,159   $ 14,954             7.51%      $199,037   $ 14,406             7.24%
Non-mortgage loans ..............      25,702      2,271             8.84         15,926      1,278             8.02
Mortgage-backed securities(1) ...       1,523        104             6.83          1,859        119             6.40
Investment securities(1) ........      11,120        789             7.10         14,791      1,018             6.88
Other investments ...............       6,110        536             8.77          3,741        238             6.36
                                      -------     ------                         -------     ------
Total interest-earning assets ...     243,614     18,654             7.25        235,354     17,607             7.48
Non-interest earning assets .....      14,388     ------                          14,496     ------
                                     --------                                   --------
Total assets ....................    $258,002                                   $249,850
                                     ========                                   ========
Interest-bearing liabilities:
Deposits ........................    $155,735      7,596             4.88       $152,714      7,281             4.77
Borrowed funds ..................      80,317      4,962             6.18         76,337      4,445             5.82
                                     --------      -----                        --------     ------
Total interest-bearing
      liabilities ...............     236,052     12,558             5.32        229,051     11,726             5.12
                                                  ------                                     ------
Non-interest bearing
     liabilities ................       3,271                                     3,889
                                      -------                                   -------
Total liabilities ...............     239,323                                   232,940
Stockholders equity .............      18,679                                    16,910
                                      -------                                   -------

Total liabilities and
     stockholders equity ........   $258,002                                   $249,850
                                    ========                                   ========
Net interest income .............               $  6,096                                   $  5,881
                                                ========                                   ========
Interest rate spread ............                                    2.34%                                      2.13%
                                                                     ====                                       ====
Net interest margin (1) .........                                    2.50%                                      2.27%
                                                                     ====                                       ====
Ratio of average interest-earning
     assets to average interest-
     bearing liabilities ........                                  103.20%                                    102.75%
                                                                   ======                                     ======
</TABLE>



------------------------------------

(1) Net interest margin represents net interest income divided by average
    interest-earning assets.

                                       9
<PAGE>
RATE/VOLUME ANALYSIS

         The following table sets forth certain information regarding changes in
interest income and interest expense of the Company during the periods
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided in each category with respect to (i)
changes attributable to changes in volume (change in volume multiplied by prior
rate), (ii) changes in rates (changes in rate multiplied by prior average
volume), and (iii) the net change. Changes attributable to the combined impact
of volume and rate have been allocated proportionately to the changes due to
volume and the changes due to rate.

<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------------------
                                                        2001 VS. 2000                   2000 VS. 1999
                                               -----------------------------    ----------------------------
                                                    INCREASE/(DECREASE)              INCREASE/(DECREASE)
                                                         DUE TO                            DUE TO
                                               -----------------------------    ----------------------------
                                                VOLUME     RATE        NET      VOLUME      RATE       NET
                                               -------    -------    -------    -------    -------   -------
                                                       (IN THOUSANDS)
<S>                                            <C>        <C>        <C>        <C>        <C>       <C>

Interest income:
        Loans receivable ...................   $(1,794)   $   330    $(1,464)   $   686    $   855   $ 1,541
        Mortgage-backed securities .........        41         (5)        36        (23)         8       (15)
        Investment securities ..............       335       (208)       127         21         60        81
        Interest-earning deposits ..........       557       (324)       233       (119)       107       (12)
                                               -------    -------    -------    -------    -------   -------

        Total interest-earning assets ......      (861)      (207)    (1,068)       565      1,030     1,595
                                               -------    -------    -------    -------    -------   -------


Interest expense:
        Deposits ...........................       482       (172)       310        146        169       315
        Borrowed funds .....................    (1,169)      (260)    (1,429)       241        276       517
                                               -------    -------    -------    -------    -------   -------

        Total interest-bearing liabilities .      (687)      (432)    (1,119)       387        445       832
                                               -------    -------    -------    -------    -------   -------

Net change in interest income ..............   $  (174)   $   225    $    51    $   178    $   585   $   763
                                               =======    =======    =======    =======    =======   =======
</TABLE>

------------------------------------
(1) Includes one- to four-family residential real estate and commercial real
    estate loans.


ASSET AND LIABILITY MANAGEMENT - INTEREST RATE SENSITIVITY ANALYSIS

         The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest rate sensitivity
gap is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities. A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income while a
positive gap would tend to positively affect net interest income. Similarly,
during a period of falling interest rates, a negative gap would tend to
positively affect net interest income while a positive gap would tend to
adversely affect net interest income.

         Historically the Company has been almost exclusively a fixed-rate
lender and the Company's policy has been to reduce its exposure to interest rate
risk generally by better matching the maturities and interest rates of its
interest rate sensitive assets and liabilities by originating and retaining for
the portfolio balloon mortgage loans with three and five year terms, shorter
term home equity loans and selling longer term 15 and 30 year fixed rate
mortgages. While the Company has not purchased mortgage-backed securities since
1990, such securities have generally been adjustable-rate mortgage-backed
securities, which are more liquid than mortgage loans held in portfolio.
Finally, the Company also maintains a significant percentage of its assets in
cash and other liquid investments, which permits the Company to reinvest such
assets more quickly in response to changes in market interest rates. In
addition, the Company offers


                                       10
<PAGE>
competitive rates on deposit accounts and prices certificates of deposit to
provide customers with incentives to choose certificates of deposit with longer
terms. To reduce the potential volatility of the Company's earnings in a
changing interest rate environment, the Company has sought to manage interest
rate risk by retaining for the portfolio certain originated residential mortgage
loans (primarily adjustable rate, balloon and shorter term fixed rate mortgages)
and generally selling the remainder in the secondary market, by originating
shorter-term home equity loans, and by investing in adjustable-rate
mortgage-backed securities, short- and medium-term agency securities, and
short-term investments such as interest-bearing deposits in other financial
institutions.

         Net Portfolio Value. The OTS incorporated an interest rate risk
component into the risk-based capital rules. The IRR component is a dollar
amount that will be deducted from total capital for the purpose of calculating
an institution's risk-based capital requirement and is measured in terms of the
sensitivity of its net portfolio value ("NPV") to changes in interest rates. NPV
is the difference between incoming and outgoing discounted cash flows from
assets, liabilities, and off-balance sheet contracts. An institution's IRR is
measured as the change to its NPV as a result of a hypothetical 200 basis point
change in market interest rates. A resulting change in NPV of more than 2% of
the estimated market value of its assets will require the institution to deduct
from its capital 50% of that excess change.

         The Company utilizes NPV to supplement its gap analysis in managing
interest rate risk. Unlike gap analysis, the NPV model utilized by the OTS
updates cash flow assumptions (by changing prepayment estimates) for different
rate scenarios. The following table presents the Company's NPV as of December
31, 2001, as calculated by the OTS, based on information provided to the OTS by
the Company. For the December 31, 2001 reporting cycle, the OTS has suppressed
all model outputs associated with the (300) and (200) basis point scenarios
because of the abnormally low prevailing interest rate environment.

<TABLE>
<CAPTION>
                       CHANGE IN
                    INTEREST RATES                           NET PORTFOLIO VALUE
                    IN BASIS POINTS                 -------------------------------------
                     (RATE SHOCK)                           AMOUNT                RATIO
                     ------------                           ------                -----
                                                    (DOLLARS IN THOUSANDS)

<S>                                                 <C>                         <C>
                           +300                        $  17,939                   7.56%
                           +200                           20,342                   8.41
                           +100                           22,561                   9.15
                         Static                           24,131                   9.62
                           (100)                          23,948                   9.44
                           (200)                               -                   -
                           (300)                               -                   -
</TABLE>

As indicated above, management has structured its assets and liabilities to
minimize its exposure to interest rate risk. The Company's NPV would fall from
9.62% to 7.56% with a 300 basis point increase in interest rates.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of funds are deposits, FHLB advances, and
proceeds from principal and interest payments and prepayments on loans and
mortgage-backed and investment securities. While maturities and scheduled
amortization of loans and mortgage-backed securities are a predictable source of
funds, deposit flows and mortgage prepayments are greatly influenced by general
interest rates, economic conditions and competition. The Company manages the
pricing of its deposits to maintain a desired deposit balance. In addition, the
Company invests in short-term interest-earning assets, which provide liquidity
to meet lending requirements. At December 31, 2001, $18.7 million, or 82.5%, of
the Company's investment securities were scheduled to mature in less than five
years, and $4.0 million, or 17.5%, were scheduled to mature in over five years.

Liquidity represents the amount of an institution's assets that can be quickly
and easily converted into cash without significant loss. The most liquid assets
are cash, short-term U.S. Government securities, U.S. Government agency
guaranteed securities and certificates of deposit. The Company is required to
maintain sufficient levels of liquidity as


                                       11
<PAGE>
defined by the OTS regulations. This requirement may be varied at the direction
of the OTS. Regulations currently in effect require that the Company maintain
sufficient liquidity to ensure its safe and sound operation. The Company's
objective for liquidity is to be above 6%. Liquidity as of December 31, 2001
averaged $37.2 million, or 17.3%, compared to $15.9 million, or 7.68% at
December 31, 2000. The levels of these assets are dependent on the Company's
operating, financing, lending and investing activities during any given period.

The Company intends to retain for the portfolio certain originated residential
mortgage loans (primarily adjustable rate, balloon and shorter term fixed rate
mortgage loans) and to generally sell the remainder in the secondary market. The
Company will from time to time participate in or originate commercial real
estate loans, including real estate development loans. During the twelve months
ended December 31, 2001 the Company originated $96.6 million in residential
mortgage loans, of which $18.9 million were retained in the portfolio while the
remainder were sold in the secondary market or are being held for sale. This
compares to $44.9 million in originations during 2000 of which $27.0 million
were retained in the portfolio. The Company also originated $18.2 million of
commercial loans and $12.4 million of consumer loans in 2001 compared to $8.1
million of commercial loans and $14.7 million of consumer loans for 2000. Of
total loans receivable, excluding loans held for sale, mortgage loans comprised
76.6% and 84.0%, commercial loans 11.4% and 4.8% and consumer loans 12.0% and
11.2% at December 31, 2001 and December 31, 2000, respectively. At December 31,
2001, the Company had outstanding loan commitments of $12.5 million. This amount
did not include $3.0 million for construction of 1-4 family dwellings, $1.4
million of undisbursed lines of credit on home equity loans, and $4.6 million of
unused commercial lines of credit.

         Deposits are a primary source of; funds for use in lending and for
other general business purposes. At December 31, 2001, deposits funded 69.0% of
the Company's total assets compared to 61.0% at December 31, 2000. Certificates
of deposit scheduled to mature in less than one year at December 31, 2001
totaled $66.2 million. Management believes that a significant portion of such
deposits will remain with the Company. Borrowings may be used to compensate for
seasonal or other reductions in normal sources of funds or for deposit outflows
at more than projected levels. Borrowings may also be used on a longer-term
basis to support increased lending or investment activities. At December 31,
2001, the Company had $52.1 million in FHLB advances. Total borrowings as a
percentage of total assets were 21.6% at December 31, 2001 as compared to 30.9%
at December 31, 2000. The Company has sufficient available collateral to obtain
additional advances from the FHLB, and, based upon current FHLB stock ownership,
could obtain up to a total of approximately $85 million in such advances.

SAFE HARBOR STATEMENT

         When used in this annual report or future filings by Alpena Bancshares,
Inc. with the Securities Exchange Commission), in the Company's press releases
or other public or stockholder communications, or in oral statements made with
the approval of an authorized executive officer, the words or phrases "would
be," "will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.

         The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
to advise readers that various factors, including regional and national economic
conditions, changes in levels of market interest rates, credit and other risks
of lending and investment activities and competitive and regulatory factors,
could affect the Company's financial performance and could cause the Company's
actual results for future periods to differ materially from those anticipated or
projected.

         The Company does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.


                                       12
<PAGE>
                        [PLANTE & MORAN, LLP LETTERHEAD]


                          Independent Auditor's Report



To the Board of Directors
Alpena Bancshares, Inc. and Subsidiaries

We have audited the accompanying consolidated statement of financial condition
of Alpena Bancshares, Inc. and subsidiaries as of December 31, 2001 and 2000 and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for each year in the two-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements
of Alpena Bancshares, Inc. and subsidiaries for the year ended December 31, 1999
were audited by other auditors, whose report dated February 14, 2000 expressed
an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the 2001 and 2000 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Alpena Bancshares, Inc. and subsidiaries as of December 31, 2001 and
2000 and the consolidated results of their operations and their cash flows for
each year in the two-year period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.


                                                       PLANTE & MORAN, LLP

Auburn Hills, Michigan
January 31, 2002




                                       13
<PAGE>

ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                   CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                                           (000S OMITTED, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                                            December 31
                                                                                      ---------------------
                                                                                        2001         2000
                                                                                      ---------   ---------
<S>                                                                                   <C>         <C>
                                      ASSETS

         Cash and cash equivalents                                                    $   3,972   $   4,528
         Overnight deposits with Federal Home Loan Bank                                  21,018      12,299
                                                                                      ---------   ---------
                 Total cash and cash equivalents                                         24,990      16,827

         Securities available for sale (Note 2)                                          23,212      15,425
         Loans - Net (Note 3)                                                           176,146     218,957
         Loans held for sale                                                              1,891         850
         Foreclosed assets                                                                  197         150
         Real estate held for sale (Note 4)                                                 770       1,113
         Federal Home Loan Bank stock                                                     4,294       4,294
         Property and equipment (Note 5)                                                  4,844       4,486
         Accrued interest receivable                                                      1,350       1,490
         Core deposit intangible                                                          1,903       2,141
         Other assets (Note 6)                                                            1,875       1,276
                                                                                      ---------   ---------
                 Total assets                                                         $ 241,472   $ 267,009
                                                                                      =========   =========
                         LIABILITIES AND STOCKHOLDERS' EQUITY

         LIABILITIES
              Customer deposits (Note 7)                                              $ 166,538   $ 162,771
              Advances from borrowers for taxes and insurance                               103         255
              Advances from Federal Home Loan Bank (Note 8)                              52,120      82,435
              Accrued expenses and other liabilities (Note 12)                            1,759       1,879
              Deferred income taxes (Note 9)                                                355         199
                                                                                      ---------   ---------
                 Total liabilities                                                      220,875     247,539

         STOCKHOLDERS' EQUITY (Note 11)
              Common stock - $1 par value:
                    Authorized - 20,000,000 shares
                    Issued and outstanding - 1,641,579 shares in 2001
                    and 1,642,200 in 2000                                                 1,641       1,642
              Additional paid-in capital                                                  5,179       5,122
              Retained earnings - Restricted                                              3,887       3,427
              Retained earnings                                                           9,524       9,059
              Shares purchased by Recognition and Retention Plan                              -          (5)
              Accumulated other comprehensive income                                        366         225
                                                                                      ---------   ---------
                 Total stockholders' equity                                              20,597      19,470
                                                                                      ---------   ---------
                 Total liabilities and stockholders' equity                           $ 241,472   $ 267,009
                                                                                      =========   =========
</TABLE>




See Notes to Consolidated Financial Statements.


                                       14
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                                CONSOLIDATED STATEMENT OF INCOME
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                  Year Ended December 31
                                                                              --------------------------------
                                                                                2001        2000       1999
                                                                              --------    --------    --------
<S>                                                                           <C>         <C>         <C>
         INTEREST INCOME
                 Loans, including fees                                        $ 15,761    $ 17,225    $ 15,684
                 Investments                                                     1,685       1,325       1,256
                 Mortgage-backed securities                                        140         104         119
                                                                              --------    --------    --------
                         Total interest income                                  17,586      18,654      17,059

         INTEREST EXPENSE
                 Deposits (Note 7)                                               7,906       7,596       7,281
                 Other borrowings                                                3,533       4,962       4,445
                                                                              --------    --------    --------
                 Total interest expense                                         11,439      12,558      11,726
                                                                              ========    ========    ========
         NET INTEREST INCOME - Before provision for loan losses                  6,147       6,096       5,333

         PROVISION FOR LOAN LOSSES (Note 3)                                        255         280         120
                                                                              --------    --------    --------
         NET INTEREST INCOME - After provision for loan losses                   5,892       5,816       5,213

         OTHER INCOME (EXPENSES)
                 Service charges and other fees                                    740         462         600
                 Net gain on sale of loans                                         782         107           -
                 Loan servicing fees                                               570         136           -
                 Gain on sale of investment securities                             183       2,028           -
                 Gain (loss) on sale of real estate                               (107)        (46)         35
                 Loss on impairment of real estate held for sale (Note 4)            -        (211)          -
                 Loss on abandonment of fixed assets                               (88)       (258)          -
                 Other                                                             125         158         405
                                                                              ========    ========    ========
                         Total other income                                      2,205       2,376       1,040

         OPERATING EXPENSES
                 Compensation and employee benefits (Note 12)                    3,362       2,723       2,460
                 Amortization of intangible assets                                 239         196         199
                 Advertising                                                       133         184         193
                 Occupancy and equipment                                         1,056         868         787
                 Other                                                           1,376       1,062       1,238
                                                                              ========    ========    ========
                         Total operating expenses                                6,166       5,033       4,877

         INCOME - Before federal income tax                                      1,931       3,159       1,376

         FEDERAL INCOME TAX (Note 9)                                               646       1,035         452
                                                                              --------    --------    --------
         NET INCOME                                                           $  1,285    $  2,124    $    924
                                                                              ========    ========    ========
         PER SHARE DATA
                 Basic earnings per share                                     $   0.78    $   1.29    $   0.56
                 Fully diluted earnings per share                                 0.78        1.29        0.56
                 Dividends per common share                                       0.50        0.53        0.60
</TABLE>



See Notes to Consolidated Financial Statements.


                                       15
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                                           Accumulated
                                                             Additional                ESOP       Shares      Other        Total
                                                  Common      Paid-in     Retained     Debt     Acquired Comprehensive Stockholders'
                                                   Stock      Capital     Earnings   Guaranty     by RRP   Income (Loss)    Equity
                                                   -------     -------     -------     -------     -------    --------   ---------
<S>                                               <C>        <C>          <C>        <C>        <C>         <C>         <C>
BALANCE - January 1, 1999                         $  1,641    $  5,011    $ 10,241    $    (75)   $    (16)   $  1,862    $ 18,664
Comprehensive income:
    Net income                                           -           -         924           -           -           -         924
    Unrealized depreciation on
      available-for-sale
      securities - Net of tax of  $263                   -           -           -           -           -        (510)       (510)
                                                                                                                          --------

                Total comprehensive income                                                                                     414

Stock options exercised                                  1          11           -           -           -           -          12
RRP stock release                                        -          53           -           -           -           -          53
ESOP stock release                                       -          82           -           -           5           -          87
Principal payment son ESOP loan                          -         (75)          -          75           -           -           -
Dividends paid                                           -           -        (426)          -           -           -        (426)
                                                   -------     -------     -------     -------     -------    --------   ---------


BALANCE - December 31, 1999                          1,642       5,082      10,739           -         (11)      1,352      18,804
Comprehensive income:
    Net income                                           -           -       2,124           -           -           -       2,124
    Other comprehensive income:
       Unrealized appreciation on available-for-
         sale securities - Net of tax of $109            -           -           -           -           -         211         211
    Less reclassification adjustment for
         realized gains included in net income -
         Net of tax of $690                              -           -           -           -           -      (1,338)     (1,338)


                Total comprehensive income                                                                                     997

Stock options exercised                                  -           2           -           -           -           -           2
RRP stock release                                        -          38           -           -           6           -          44
Dividends paid                                           -           -        (377)          -           -           -        (377)
                                                   -------     -------     -------     -------     -------    --------   ---------

BALANCE - December 31, 2000                          1,642       5,122      12,486           -          (5)        225      19,470

Comprehensive income:
    Net income                                           -           -       1,285           -           -           -       1,285
    Other comprehensive income:
       Unrealized appreciation on available-for-
         sale securities - Net of tax of $134            -           -           -           -           -         262         262
       Less reclassification adjustment for
         realized gains included in net income -
         Net of tax of $62                               -           -           -           -           -        (121)       (121)


Total comprehensive income                               -           -           -           -           -           -       1,426
Forfeiture of shares in connect ion
   with RRP                                             (1)          -           -           -           1           -           -
RRP stock release                                        -          57           -           -           4           -          61
Dividends paid                                           -           -        (360)          -           -           -        (360)
                                                   -------     -------     -------     -------     -------    --------   ---------
BALANCE - December 31, 2001                       $  1,641    $  5,179    $ 13,411         $ -       $   -    $    366    $ 20,597
                                                   =======     =======     =======     =======     =======    ========   =========
</TABLE>


See Notes to Consolidated Financial Statements.



                                       16
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                            CONSOLIDATED STATEMENT OF CASH FLOWS
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                           Years Ended December 31
                                                                                      -----------------------------------
                                                                                        2001          2000        1999
                                                                                      ---------    ---------    ---------
<S>                                                                                   <C>          <C>          <C>
     CASH FLOWS FROM OPERATING ACTIVITIES
         Net income                                                                   $   1,285    $   2,124    $     924
         Adjustments to reconcile net income to net cash from operating activities:
                    Depreciation and amortization                                           665          576          493
                    Provision for loan losses                                               255          280          120
                    Amortization and accretion on securities                                 47           48          267
                    Gain on sale of investment securities                                  (183)      (2,028)           -
                    Originations of loans held for sale                                 (78,667)     (18,712)           -
                    Principal amount of loans sold                                       77,626       17,862            -
                    Loss (gain) on sale of real estate                                      107           47          (35)
                    Loss on impairment of real estate held for sale                           -          210            -
                    Loss on abandonment of fixed assets                                      88          258            -
                    Changes in accrued interest receivable                                  140         (175)         (40)
                    Change in other assets                                                 (599)        (149)          90
                    Change in accrued expenses and other liabilities                        (59)         639         (317)
                    Change in deferred income taxes                                          84         (154)         (19)
                                                                                      ---------    ---------    ---------
                           Net cash provided by operating activities                        789          826        1,483

     CASH FLOWS FROM INVESTING ACTIVITIES
                 Net (increase) decrease in loans                                        42,556        4,102      (18,590)
                 Purchase of real estate held for sale                                     (150)           -         (187)
                 Proceeds from sale of real estate                                          339          601          432
                 Proceeds from maturity of available-for-sale securities                  9,542            -            -
                 Proceeds from maturity of held-to-maturity securities                        -          249        3,456
                 Proceeds from sale of securities available for sale                        186        2,066            -
                 Purchase of securities available for sale                              (17,166)      (2,712)          (3)
                 Purchase of investment securities to be held to maturity                     -            -       (3,000)
                 Purchase of Federal Home Loan Bank stock                                     -            -         (564)
                 Purchase of premises and equipment                                        (873)        (836)        (396)
                                                                                      ---------    ---------    ---------
                           Net cash provided by (used in) investing activities           34,434        3,470      (18,852)

     CASH FLOWS FROM FINANCING ACTIVITIES
                 Net increase in deposits                                                 3,767        6,365        9,248
                 Dividends paid on common stock                                            (360)        (377)        (426)
                 Net increase (decrease) in advances from borrowers                        (152)           4         (165)
                 Additions to advances from Federal Home Loan Bank                       22,500      139,500       37,000
                 Repayments of advances from Federal Home Loan Bank                     (52,815)    (142,937)     (25,218)
                 Proceeds from exercise of stock options                                      -            2           12
                 Net decrease in loans to Employee Stock Ownership Plan (ESOP)                -            -          (75)
                 Contribution for shares acquired by ESOP                                     -            -           75
                 ESOP stock rebate                                                            -            -           61
                                                                                      ---------    ---------    ---------
                           Net cash provided by (used in) financing activities          (27,060)       2,557       20,512
                                                                                      ---------    ---------    ---------

     NET INCREASE IN CASH AND CASH EQUIVALENTS                                            8,163        6,853        3,143

     CASH AND CASH EQUIVALENTS - Beginning of year                                       16,827        9,974        6,831
                                                                                      ---------    ---------    ---------

     CASH AND CASH EQUIVALENTS - End of year                                          $  24,990    $  16,827    $   9,974
                                                                                      =========    =========    =========
     SUPPLEMENTAL CASH FLOW AND NONCASH INFORMATION
                 Cash paid for income taxes                                           $     475    $     925    $     532
                 Cash paid for interest on deposits and borrowing                        11,465       12,555       11,726
                 Stock issued to employees                                                   61           44            6

</TABLE>



See Notes to Consolidated Financial Statements.


                                       17
<PAGE>
ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         NATURE OF OPERATIONS - Alpena Bancshares, Inc. (the "Company") and its
         subsidiary, First Federal of Northern Michigan (the "Bank"), conduct
         operations in the northeastern lower peninsula of Michigan. The Bank is
         primarily engaged in the business of attracting deposits from the
         general public in its market area and investing those deposits in one-
         to four-family residential real estate mortgages and, to a lesser
         extent, commercial real estate loans and consumer loans.

         Alpena Bancshares, Inc. was formed on November 14, 2000 pursuant to a
         plan of reorganization adopted by the Bank and its stockholders.
         Pursuant to the reorganization, each share of First Federal Savings and
         Loan Association of Alpena stock held by existing stockholders of the
         Bank was exchanged for a share of common stock of Alpena Bancshares,
         Inc., by operation of law. The reorganization had no financial
         statement impact and is reflected for all prior periods presented.
         Approximately 56 percent of the Company's capital stock is owned by
         Alpena Bancshares M.H.C., a mutual holding company. The remaining 44
         percent of the Company's stock is owned by the general public,
         including the Bank's Employee Stock Ownership Plan.

         PRINCIPLES OF CONSOLIDATION AND ORGANIZATION - The consolidated
         financial statements include the accounts of Alpena Bancshares, Inc.,
         First Federal of Northern Michigan, and the Bank's wholly owned
         subsidiary, Financial Services & Mortgage Corporation ("FSMC"). FSMC
         invests in real estate, which includes leasing, selling, developing,
         and maintaining real estate properties. All significant intercompany
         balances and transactions have been eliminated in the consolidation.

         CASH AND CASH EQUIVALENTS - For presentation purposes on both the
         consolidated statement of financial condition and the consolidated
         statement of cash flows, the Bank considers all highly liquid debt
         instruments purchased with a maturity of three months or less to be
         cash equivalents.

         SECURITIES - Securities are classified as available for sale and are
         reported at fair value, with unrealized gains and losses, net of
         related deferred income taxes, included in equity as a component of
         accumulated other comprehensive income. Federal Home Loan Bank stock is
         considered restricted investment security and is carried at cost.


                                       18
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - In June 1998, Statement
         of Financial Account Standards No. 133, Accounting for Derivative
         Instruments and Hedging Activities ("SFAS 133"), was issued. SFAS 133
         requires all derivative instruments to be recorded on the balance sheet
         at estimated fair value. Changes in the fair value of derivative
         instruments are to be reported each period either in current earnings
         or other comprehensive income, depending on whether a derivative is
         designated as part of a hedge transaction and, if it is, on the type of
         hedge transaction. SFAS 133 was adopted by the Bank in October 2000 and
         implementation did not have a material effect on the consolidated
         financial position or results of operation. Concurrently with adoption
         of SFAS 133, $12,457 of held-to-maturity securities was transferred to
         available for sale. The unrealized loss at the time of transfer was
         $183.

         SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK - Most of the Company's
         activities are with customers located within Michigan. Note 2 discusses
         the types of securities in which the Company invests. Note 3 discusses
         the types of lending in which the Company engages. The Company does not
         have any significant concentrations to any one industry or customer.

         LOANS - The Company grants mortgage, commercial, and consumer loans to
         customers. Loans are reported at their outstanding unpaid principal
         balances adjusted for charge-offs, the allowance for loan losses, and
         any deferred fees or costs on originated loans. Interest income is
         accrued on the unpaid principal balance. Loan origination fees, net of
         certain direct origination costs, are deferred and recognized as an
         adjustment of the related loan yield using the interest method.

         The accrual of interest on loans is discontinued at the time the loan
         is 90 days' delinquent unless the credit is well-secured and in process
         of collection. In all cases, loans are placed on nonaccrual or charged
         off at an earlier date if collection of principal or interest is
         considered doubtful.

         All interest accrued but not collected, for loans that are placed on
         nonaccrual or charged off, is reversed against interest income. The
         interest on these loans is accounted for on the cash basis or cost
         recovery method, until qualifying for return to accrual. Loans are
         returned to accrual status when all the principal and interest amounts
         contractually due are brought current and future payments are
         reasonably assured.


                                       19
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is
         established as losses are estimated to have occurred through a
         provision for loan losses charged to earnings. Loan losses are charged
         against the allowance when management believes the uncollectibility of
         a loan balance is confirmed. Subsequent recoveries, if any, are
         credited to the allowance.

         The allowance for loan losses is evaluated on a regular basis by
         management and is based on management's periodic review of the
         collectibility of the loans in light of historical experience, the
         nature and volume of the loan portfolio, adverse situations that may
         affect the borrower's ability to repay, estimated value of any
         underlying collateral, and prevailing economic conditions. This
         evaluation is inherently subjective as it requires estimates that are
         susceptible to significant revision as more information becomes
         available.

         A loan is considered impaired when, based on current information and
         events, it is probable that the Company will be unable to collect the
         scheduled payments of principal or interest when due according to the
         contractual terms of the loan agreement. Factors considered by
         management in determining impairment include payment status, collateral
         value, and the probability of collecting scheduled principal and
         interest payments when due. Loans that experience insignificant payment
         delays and payment shortfalls generally are not classified as impaired.
         Management determines the significance of payment delays and payment
         shortfalls on a case-by-case basis, taking into consideration all of
         the circumstances surrounding the loan and the borrower, including
         length of the delay, the reasons for the delay, the borrower's prior
         payment record, and the amount of the shortfall in relation to the
         principal and interest owed. Impairment is measured on a loan-by-loan
         basis for commercial and construction loans by either the present value
         of expected future cash flows discounted at the loan's effective
         interest rate, the loan's obtainable market price, or the fair value of
         the collateral if the loan is collateral dependent.

         Large groups of homogeneous loans are collectively evaluated for
         impairment. Accordingly, the Company does not separately identify
         individual consumer and residential loans for impairment disclosures.

         LOANS HELD FOR SALE - The Bank routinely sells to investors its
         long-term fixed rate residential mortgages. These loans are identified
         as held for sale and are accounted for at the lower of cost or market
         on an aggregate basis. The lower of cost or market allowance for loans
         held for sale was $0 at December 31, 2001 and 2000.


                                       20
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         FORECLOSED ASSETS - Assets acquired in settlement of loans are recorded
         at the lower of the loan balance or fair value, minus estimated costs
         to sell, plus capital improvements made thereafter to facilitate sale.
         Adjustments are made to reflect declines, if any, in the fair value
         below the recorded amounts. Costs of holding real estate acquired in
         settlement of loans are reflected in income currently.

         REAL ESTATE HELD FOR SALE - FSMC is engaged in the development and sale
         of real estate. Land held for sale or development is carried at cost,
         including development costs not in excess of fair value, less costs to
         sell, determined on an individual project basis.

         FEDERAL HOME LOAN BANK STOCK - The Bank is required to maintain an
         investment in the stock of the Federal Home Loan Bank of Indianapolis
         (FHLB) in an amount equal to at least 1 percent of the unpaid principal
         balances of the Bank's residential mortgage loans or 0.3 percent of its
         total assets, whichever is greater. Purchases and sales of stock are
         made directly with the FHLB at par value.

         PROPERTY AND EQUIPMENT - These assets are recorded at cost, less
         accumulated depreciation. The Bank uses the straight-line method of
         recording depreciation for financial reporting. Maintenance and repairs
         are charged to expense and improvements are capitalized.

         CORE DEPOSIT INTANGIBLE - In connection with the purchase of certain
         branches, the excess of purchase price over fair value of net assets
         acquired has been allocated to intangible assets, which is being
         amortized over 5 years to 15 years.

         INCOME TAXES - The Company records income tax expense based on the
         amount of taxes due on its tax return plus deferred taxes computed
         based on the expected future tax consequences of temporary differences
         between the carrying amounts and tax bases of assets and liabilities,
         using enacted tax rates. As changes in tax laws or rates are enacted,
         deferred tax assets and liabilities are adjusted through the provision
         for income taxes.


                                       21
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         SERVICING - Servicing assets are recognized as separate assets when
         rights are acquired through purchase or through sale of financial
         assets. Capitalized servicing rights are reported in other assets and
         are amortized into noninterest income in proportion to, and over the
         period of, the estimated future net servicing income of the underlying
         financial assets. Servicing assets are evaluated for impairment based
         on the fair value of the rights as compared to amortized cost.
         Impairment is determined by stratifying rights by predominant
         characteristics, such as interest rates and terms. Fair value is
         determined using prices for similar assets with similar
         characteristics, when available, or based on discounted cash flows
         using market-based assumptions. Impairment is recognized through a
         valuation allowance for an individual stratum, to the extent that fair
         value is less than the capitalized amount for the stratum.

         CREDIT-RELATED FINANCIAL INSTRUMENTS - In the ordinary course of
         business, the Company has entered into commitments to extend credit,
         including commitments under credit card arrangements, commercial
         letters of credit, standby letters of credit, and forward sales
         commitments to various credit card trusts. Such financial instruments
         are recorded when they are funded.

         OTHER COMPREHENSIVE INCOME - Accounting principles generally require
         that recognized revenue, expenses, gains, and losses be included in net
         income. Certain changes in assets and liabilities, however, such as
         unrealized gains and losses on available-for-sale securities, are
         reported as a separate component in the equity section of the
         consolidated statement of financial condition. Such items, along with
         net income, are components of comprehensive income.

         USE OF ESTIMATES - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosure of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenue and expenses during the reporting period.
         Actual results could differ from those estimates.



                                       22
<PAGE>

ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         STOCK COMPENSATION PLANS - The Company has chosen to measure
         compensation cost for employee stock compensation plans using the
         intrinsic value based method of accounting, whereby compensation cost
         is the excess, if any, of the quoted market price of the stock at the
         grant date (or other measurement date) over the amount an employee must
         pay to acquire the stock. Stock options issued under the Company's
         stock option plan have no intrinsic value at the grant date, and no
         compensation cost is recognized for them. The fair value-based method
         of accounting for employee stock compensation plans measures
         compensation cost at the grant date based on the value of the award and
         is recognized over the service period, which is usually the vesting
         period. The Company has not provided pro forma disclosures of net
         income and earnings per share and other disclosures, as no additional
         shares became vested during the periods presented.

         EARNINGS PER COMMON SHARE - Basic earnings per share represents income
         available to common stockholders divided by the weighted-average number
         of common shares outstanding during the period. Diluted earnings per
         share reflects additional common shares that would have been
         outstanding if dilutive potential common shares had been issued, as
         well as any adjustment to income that would result from the assumed
         issuance. Potential common shares that may be issued by the Company
         relate solely to outstanding stock options and are determined using the
         treasury stock method.

         Earnings per common share have been computed based on the following
         (000s omitted):

<TABLE>
<CAPTION>
                                                           2001           2000            1999
                                                       -----------     -----------     ---------
<S>                                                    <C>             <C>             <C>
        Net income                                     $     1,285     $    2,124      $      924
                                                       ===========     ==========      ==========
        Average number of common shares
           outstanding                                   1,641,702      1,642,181       1,641,848
        Effect of dilutive options                           3,122              -           8,793
                                                       -----------      ---------      ----------
        Average number of common shares
           outstanding used to calculate diluted
           earnings per common share                     1,644,824      1,642,181       1,650,641
                                                       ===========     ==========      ==========
</TABLE>





         RECLASSIFICATIONS - Certain items from December 31, 1999 and 2000 have
         been reclassified to conform with the December 31, 2001 presentation.


                                       23
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         RECENT ACCOUNTING PRONOUNCEMENTS - In July 2001, Statement of Financial
         Accounting Standards No. 142, Goodwill and Other Intangibles (FAS 142),
         was issued. FAS 142 changes the accounting treatment for goodwill
         effective January 1, 2002. The entire amount of intangible assets
         reported by the Company is attributable to core deposit intangible.
         Therefore, the adoption of FAS 142 has no impact on the Company.

NOTE 2 - INVESTMENT SECURITIES

         Investment securities have been classified according to management's
         intent. The carrying value and estimated fair value of securities at
         December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                      2001
                                                    -----------------------------------------
                                                                Gross       Gross
                                                    Amortized Unrealized  Unrealized   Market
                                                      Cost      Gains       Losses     Value
                                                    --------- ----------  ----------   ------
<S>                                                  <C>       <C>          <C>        <C>

         SECURITIES AVAILABLE FOR SALE
         U.S. Treasury securities and obligations
           of U.S. government corporations
           and agencies                              $13,614   $   256   $     -       $13,870
         Municipal notes                               3,686        54        10         3,730
         Corporation securities                        3,403        56         5         3,454
         Mortgage-backed securities                    1,934        43         1         1,976
         Other securities                                 21       161         -           182
                                                     -------   -------   -------       -------
              Total                                  $22,658   $   570   $    16       $23,212
                                                     =======   =======   =======       =======
</TABLE>


<TABLE>
<CAPTION>
                                                                      2000
                                                     ----------------------------------------
                                                                  Gross      Gross
                                                     Amortized  Unrealized Unrealized   Market
                                                        Cost      Gains      Losses     Value
                                                    --------- ----------  ----------   ------
<S>                                                    <C>       <C>       <C>          <C>
         SECURITIES AVAILABLE FOR SALE
         U.S. Treasury securities and obligations
            of U.S. government corporations
            and agencies                               $11,996   $    19   $    61      $11,954
         Municipal notes                                   721         -         -          721
         Corporation securities                            947         -         -          947
         Mortgage-backed securities                      1,395        17         7        1,405
         Other securities                                   25       373         -          398
                                                       -------   -------   -------      -------
                 Total                                 $15,084   $   409   $    68      $15,425
                                                       =======   =======   =======      =======

</TABLE>



                                       24
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

         The amortized cost and estimated market value of securities at December
         31, 2001, by contractual maturity, are shown below. Expected maturities
         will differ from contractual maturities because issuers may have the
         right to call or prepay obligations with or without call or prepayment
         penalties:

<TABLE>
<CAPTION>
                                                               Amortized  Market
                                                                 Cost     Value
                                                               ---------  -------
<S>                                                             <C>       <C>
         Due in one year or less                                $ 2,434   $ 2,634
         Due after one year through five years                   16,254    16,560
         Due after five years                                     2,036     2,042
                                                                -------   -------
                Subtotal                                         20,724    21,236
         Mortgage-backed securities                               1,934     1,976
                                                                -------   -------
                 Total                                          $22,658   $23,212
                                                                =======   =======
</TABLE>

         At December 31, 2001, securities with a carrying and fair value of
         $3,112 were pledged to secure certain deposit accounts.

         Gross proceeds from the sale of available-for-sale securities during
         2001 and 2000 were $186 and $2,066, respectively, resulting in gross
         gains of $183 and $2,028, respectively. There were no sales of
         securities in 1999.

NOTE 3 - LOANS

         Loans at December 31, 2001 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
                                                                 2001       2000
                                                               --------   --------
<S>                                                            <C>        <C>
         Real estate loans - One- to four-family residential   $135,489   $179,024
         Commercial loans:
           Secured by real estate                                14,152     10,681
           Other                                                  6,022      1,143
                                                               --------   --------
                  Total commercial loans                         20,174     11,824
         Consumer loans                                          21,172     28,758
                                                               --------   --------
                  Total gross loans                             176,835    219,606
         Less allowance for loan losses                             689        649
                                                               --------   --------
                  Total loans - Net                            $176,146   $218,957
                                                               ========   ========
</TABLE>



                                       25
<PAGE>
ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 3 - LOANS (CONTINUED)

         Final loan maturities and rate sensitivity of the loan portfolio at
         December 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                       One Year     After
                                           Less Than    to Five     Five
                                            One Year     Years      Years     Total
                                            --------     -----      -----     -----
<S>                                         <C>        <C>        <C>        <C>
         Loans at fixed interest rates      $ 24,807   $ 60,463   $ 77,025   $162,295
         Loans at variable interest rates      5,994      8,546          -     14,540
                                            --------   --------   --------   --------
                 Total                      $ 30,801   $ 69,009   $ 77,025   $176,835
                                            ========   ========   ========   ========
</TABLE>


         Certain directors and executive officers of the Company were loan
         customers during 2001 and 2000. Such loans were made in the ordinary
         course of business and do not involve more than a normal risk of
         collectibility. An analysis of aggregate loans outstanding to directors
         and executive officers for the years ended December 31, 2001 and 2000
         is as follows:

<TABLE>
<CAPTION>
                                              2001       2000
                                            -------    -------
<S>                                         <C>        <C>
         Aggregate balance - January 1      $   872    $ 1,014

         New loans                              212         59
         Repayments                            (368)      (201)
                                            -------    -------
         Aggregate balance - December 31    $   716    $   872
                                            =======    =======
</TABLE>




         The Bank did not have any impaired loans in 2001, 2000, and 1999.

         An analysis of the allowance for loan losses is as follows:


<TABLE>
<CAPTION>
                                        2001      2000     1999
                                        ----      ----     ----
<S>                                     <C>      <C>      <C>
         Balance - Beginning of year    $ 649    $ 448    $ 478

         Provision for losses             255      280      120
         Loans - Charged off             (289)    (106)    (184)
         Recoveries                        74       27       34
                                        -----    -----    -----
         Balance - End of year          $ 689    $ 649    $ 448
                                        =====    =====    =====
</TABLE>



                                       26
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 4 - REAL ESTATE HELD FOR SALE

         In 2000, the real estate held for sale was determined to be impaired
         and was written down to fair value. The cost associated with the
         project exceeded fair value, which was determined based on recent sales
         of comparable real estate and existing real estate listings, by
         approximately $170 and $211 at December 31, 2001 and 2000,
         respectively. An impairment loss of $211 was charged to operations
         during the year ended December 31, 2000.

NOTE 5 - PROPERTY AND EQUIPMENT

         A summary of property and equipment for the years ended December 31,
         2001 and 2000 is as follows:


<TABLE>
<CAPTION>
                                                 2001      2000
                                                 ----      ----
<S>                                             <C>      <C>
         Land                                   $  838   $  768
         Land improvements                          20       17
         Buildings                               3,125    3,067
         Equipment                               2,484    1,908
                                                ------   ------
                 Total property and equipment    6,467    5,760

         Less accumulated depreciation           1,623    1,274
                                                ------   ------
                 Net property and equipment     $4,844   $4,486
                                                ======   ======
</TABLE>



NOTE 6 - SERVICING

         Loans serviced for others are not included in the accompanying
         consolidated statement of financial condition. The unpaid principal
         balances of mortgage and other loans serviced for others were $82,123
         and $17,509 at December 31, 2001 and 2000, respectively.

         The balance of capitalized servicing rights, net of valuation
         allowance, is included in other assets at December 31, 2001 and 2000.




                                       27
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 6 - SERVICING (CONTINUED)

         The following summarizes mortgage servicing rights capitalized and
         amortized, along with the aggregate activity in related valuation
         allowances (000s omitted):

<TABLE>
<CAPTION>
                                                            2001      2000
                                                          --------  --------
<S>                                                        <C>       <C>
         Carrying amount - Beginning of year                $ 145     $  -

         Originated mortgage servicing rights capitalized     629      156
         Amortization of mortgage servicing rights           (144)     (11)
                                                           ------    -----
                        Subtotal                              630      145
         Valuation allowances:
            Balance at beginning of year                        -        -
               Additions                                        -        -
               Reductions                                       -        -
               Write-downs                                      -        -
                                                           ------    -----
            Balance at end of year                          $ 630    $ 145
                                                           ======    =====
</TABLE>



NOTE 7 - DEPOSITS

         Deposit accounts, by type and range of rates at December 31, 2001 and
         2000, consist of the following:

<TABLE>
<CAPTION>
                   Account Type                          2001       2000
      ------------------------------------------------------------------------
<S>                                                   <C>        <C>
         Noninterest-bearing demand                   $  3,422   $  2,287
         NOW accounts and MMDA                          22,126     19,781
         Regular savings accounts                       30,922     26,322
                                                      --------   --------
                      Total                             56,470     48,390

                  Certificate of Deposit Rates
      ------------------------------------------
         1.74 percent to 4.99 percent                   40,720      2,770
         5.00 percent to 6.99 percent                   62,037     94,030
         7.00 percent to 8.99 percent                    7,311     17,581
                                                      --------   --------
                      Total certificate of deposits    110,068    114,381
                                                      --------   --------
                      Total deposits                  $166,538   $162,771
                                                      ========   ========
</TABLE>



         Certificates of deposit and savings accounts $100,000 or greater at
         December 31, 2001 and 2000 were $51,660 and $22,936, respectively.



                                       28
<PAGE>



ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 7 - DEPOSITS (CONTINUED)

         The following table sets forth the amount and maturities of
         certificates of deposit at December 31, 2001:

<TABLE>
<CAPTION>
                                                   Amount Due
                          ----------------------------------------------------------------
                                                                       Greater
                          Less than     1-2        2-3        3-5        than
             Rate           1 Year     Years      Years      Years     5 Years      Total
         ---------------  ----------  -------    --------   -------   ---------   --------
<S>                       <C>         <C>        <C>        <C>       <C>         <C>
         1.74 percent to
            4.99 percent   $ 35,660   $  2,761   $    598   $  1,440   $    261   $ 40,720
         5.00 percent to
            6.99 percent     27,939     14,819      6,328      6,794      6,157     62,037
         7.00 percent to
            8.99 percent      2,573      1,783        329      1,233      1,393      7,311
                           --------   --------   --------   --------   --------   --------
                 Total     $ 66,172   $ 19,363   $  7,255   $  9,467   $  7,811   $110,068
                           ========   ========   ========   ========   ========   ========
</TABLE>



         Interest expense on deposits for the years ended December 31, 2001,
         2000, and 1999 is summarized as follows:

<TABLE>
<CAPTION>
                                    2001      2000    1999
                                   ------    ------  ------
<S>                                <C>      <C>      <C>
         NOW and MMDAs             $  132   $  488   $  425
         Regular savings            5,723      737      720
         Certificates of deposit    2,051    6,371    6,136
                                   ------   ------   ------
                      Total        $7,906   $7,596   $7,281
                                   ======   ======   ======
</TABLE>




         Deposits from related parties held by the Bank at December 31, 2001 and
         2000 amounted to $149 and $202, respectively.

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES

         Advances outstanding from the Federal Home Loan Bank (FHLB) bear
         interest that is payable monthly. Pursuant to blanket collateral
         agreements with the FHLB, advances are collateralized by one- to
         four-family whole mortgage loans, government agency securities, and
         highly rated private mortgage-backed securities. The FHLB requires
         eligible collateral to have a market value equal to 145 percent of
         advances.



                                       29
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES (CONTINUED)

         The advances are subject to prepayment penalties subject to the
         provisions and conditions of the credit policy of the Federal Home Loan
         Bank. Future maturities of the advances are as follows:

<TABLE>
<CAPTION>
             Years Ending                        Weighted Average
              December 31                 Amount  Interest Rate
              -----------                 ------  -------------
<S>                                      <C>      <C>
                  2002                   $ 3,000      6.34
                  2003                    11,500      5.31
                  2004                     6,120      6.06
                  2005                    11,000      6.15
                  2008                     4,500      5.62
                  2010                    16,000      5.66
                                         -------
                           Total         $52,120      5.77
                                         =======
</TABLE>




NOTE 9 - FEDERAL INCOME TAX

         The analysis of the consolidated provision for federal income tax for
         the years ended December 31, 2001, 2000, and 1999 is as follows:

<TABLE>
<CAPTION>
                                         2001      2000      1999
                                         ----      ----      ----
<S>                                    <C>       <C>        <C>
         Current provision             $   562   $ 1,189    $   471
         Deferred provision (credit)        84      (154)       (19)
                                       -------   -------    -------
                 Total                 $   646   $ 1,035    $   452
                                       =======   =======    =======

</TABLE>



         A reconciliation of the federal income tax expense and the amount
         computed by applying the statutory federal income tax rate (34 percent)
         to income before federal income tax for the years ended December 31,
         2001, 2000, and 1999 is as follows:

<TABLE>
<CAPTION>
                                        2001       2000     1999
                                        ----       ----     ----
<S>                                   <C>        <C>        <C>
         Tax at statutory rate        $   657    $ 1,074    $   468
         Nontaxable dividend              (19)       (32)        (6)
         Tax-exempt interest              (16)         -         (5)
         Other                             24         (7)        (5)
                                      -------    -------    -------
                 Federal income tax   $   646    $ 1,035    $   452
                                      =======    =======    =======
</TABLE>




                                       30
<PAGE>




ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 9 - FEDERAL INCOME TAX (CONTINUED)

         The net deferred tax liability was comprised of the following temporary
         differences at December 31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                          2001   2000
                                                          ----   ----
<S>                                                       <C>    <C>
         Deferred tax assets:
             Allowance for loan losses                    $206   $199
             Valuation allowance for real estate held
                 for sale                                   58     70
             Deferred compensation - Key employees          21     20
             Directors' benefit plan                       156    130
                                                          ----   ----
                         Total deferred tax assets         441    419

         Valuation allowance for deferred tax assets         -      -

         Deferred tax liabilities:
             Bad debt recapture                             48     72
             Mortgage servicing rights                     211     50
             Partnership losses                             54     40
             Depreciation                                  279    266
             Other                                          16     74
             Unrealized gains on available-for-sale
                  securities                               188    116
                                                          ----   ----
                         Total deferred tax liabilities    796    618
                                                          ----   ----
                         Net deferred tax liability       $355   $199
                                                          ====   ====
</TABLE>


         For tax years beginning prior to January 1, 1996, a qualified thrift
         institution was allowed a bad debt deduction for tax purposes based on
         a percentage of taxable income or on actual experience. The Bank used
         the percentage of taxable income method through December 31, 1995.

         The Small Business Job Protection Act of 1996 (the "Act") requires
         qualified thrift institutions, such as the Bank, to recapture the
         portion of their tax bad debt reserves at January 1, 1996 that exceeds
         the December 31, 1987 ("base year") reserve balance. The amount of this
         excess reserve is $422, which will be taken into taxable income ratably
         over a six-year period beginning in 1998.

                                       31
<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE  9  - FEDERAL INCOME TAX (CONTINUED)

         A deferred tax liability has not been recognized for the tax bad debt
         base year reserves of the Bank. The base year reserves are the balance
         of reserves as of December 31, 1987. At December 31, 2001, the amount
         of those reserves was approximately $60. The amount of the unrecognized
         deferred tax liability at December 31, 2001 was approximately $20.

NOTE 10 - OFF-BALANCE-SHEET RISK COMMITMENTS AND CONTINGENCIES

         CREDIT-RELATED FINANCIAL INSTRUMENTS - The Company is a party to
         credit-related financial instruments with off-balance-sheet risk in the
         normal course of business to meet the financing needs of its customers.
         These financial instruments include commitments to extend credit,
         standby letters of credit, and commercial letters of credit. Such
         commitments involve, to varying degrees, elements of credit and
         interest rate risk in excess of the amount recognized in the
         consolidated statement of financial condition.

         The Company's exposure to credit loss is represented by the contractual
         amount of these commitments. The Company follows the same credit
         policies in making commitments as it does for on-balance-sheet
         instruments.

         At December 31, 2001 and 2000, the following financial instruments were
         outstanding whose contract amounts represent credit risk (000s
         omitted):


<TABLE>
<CAPTION>
                                                        Contract Amount
                                                       ----------------
                                                        2001      2000
                                                       -------   -------
<S>                                                    <C>       <C>
         Commitments to grant loans                    $12,547   $ 9,562
         Unfunded commitments under lines of credit     11,789     7,635
         Commercial and standby letters of credit           12         -
</TABLE>


         Commitments to extend credit are agreements to lend to a customer as
         long as there is no violation of any condition established in the
         contract. Commitments generally have fixed expiration dates or other
         termination clauses and may require payment of a fee. The commitments
         for equity lines of credit may expire without being drawn upon.
         Therefore, the total commitment amounts do not necessarily represent
         future cash requirements. The amount of collateral obtained, if it is
         deemed necessary by the Company, is based on management's credit
         evaluation of the customer.



                                       32
<PAGE>
ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 10 - OFF-BALANCE-SHEET RISK COMMITMENTS AND CONTINGENCIES (CONTINUED)

                  Unfunded commitments under commercial lines of credit,
                  revolving credit lines, and overdraft protection agreements
                  are commitments for possible future extensions of credit to
                  existing customers. These lines of credit are collateralized
                  and may not be drawn upon to the total extent to which the
                  Company is committed.

                  Commercial and standby letters of credit are conditional
                  commitments issued by the Company to guarantee the performance
                  of a customer to a third party. Those letters of credit are
                  primarily used to support public and private borrowing
                  arrangements. Essentially all letters of credit issued have
                  expiration dates within one year. The Company generally holds
                  collateral supporting those commitments if deemed necessary.

                  COLLATERAL REQUIREMENTS - To reduce credit risk related to the
                  use of credit-related financial instruments, the Company might
                  deem it necessary to obtain collateral. The amount and nature
                  of the collateral obtained is based on the Company's credit
                  evaluation of the customer. Collateral held varies but may
                  include cash, securities, accounts receivable, inventory,
                  property, plant, and equipment, and real estate.

                  If the counterparty does not have the right and ability to
                  redeem the collateral or if the Company is permitted to sell
                  or repledge the collateral on short notice, the Company
                  records the collateral in its statement of financial condition
                  at fair value with a corresponding obligation to return it.

NOTE 11 - STOCKHOLDERS' EQUITY

                  The Company declared $.50, $.525, and $.60 regular cash
                  dividends on its shares of common stock for the years ended
                  December 31, 2001, 2000, and 1999, respectively. Payment of
                  dividends on the common stock is subject to determination and
                  declaration by the Board of Directors and depends on a number
                  of factors, including capital requirements, regulatory
                  limitation on payment of dividends, the Bank's results of
                  operations and financial condition, tax considerations, and
                  general economic conditions.

                  The Bank filed a notice with the Office of Thrift Supervision
                  (OTS) and the Federal Deposit Insurance Company (FDIC)
                  requesting approval to waive payment of cash dividends to
                  Alpena Bancshares M.H.C. (the "M.H.C.") (majority stockholder
                  of the Company). The OTS and FDIC did not object to the
                  dividend waiver request subject to the following conditions:

                                       33

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

                  (1) For as long as the Company and the Bank are controlled by
                      the M.H.C., the amount of dividends waived by the M.H.C.
                      must be segregated and considered as a restriction on
                      retained earnings of the Company;

                  (2) The amount of the dividend waived by the M.H.C. shall be
                      available for declaration as a dividend solely to the
                      M.H.C.; and

                  (3) The amount of the dividend waived by the M.H.C. must be
                      considered as having been paid by the Company in
                      evaluating any proposed dividend.

                  In addition, the OTS may rescind its non-objection to the
                  waiver of dividends for subsequent periods if, based on
                  subsequent developments, the proposed waivers are determined
                  to be detrimental to the safe and sound operation of the Bank.

                  If management determines that it is probable that the waived
                  dividends will be paid, it will be necessary to record a
                  liability in accordance with Statement of Financial Accounting
                  Standards No. 5. In management's opinion, it is not probable
                  that the waived dividends will be paid; therefore, a liability
                  has not been recorded in the financial statements of the
                  Company.

                  The Bank is subject to various regulatory capital requirements
                  administered by the OTS. Failure to meet certain capital
                  requirements can initiate certain mandatory and possibly
                  additional discretionary action by regulators that, if
                  undertaken, could have a direct material effect on the
                  Company's financial statements. Under capital adequacy
                  guidelines and the regulatory framework for prompt corrective
                  action, the Bank must meet specific capital guidelines that
                  involve quantitative measures of the Bank's assets,
                  liabilities, and certain off-balance-sheet items as calculated
                  under regulatory accounting practices. The Bank's capital
                  amounts and classification are also subject to qualitative
                  judgments by the regulators regarding components,
                  risk-weightings, and other factors.

                  As of December 31, 2001 and 2000, the OTS categorized the Bank
                  as "well-capitalized" per definition of 12 CFR Section
                  565.4(b)(1). To be categorized as well-capitalized, the Bank
                  must maintain minimum total risk-based, Tier 1 risk-based, and
                  Tier 1 leverage ratios as set forth in the table. There are no
                  conditions or events since that notification that management
                  believes have changed the Bank's categorization.

                                       34

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 11 - STOCKHOLDERS' EQUITY (CONTINUED)

<TABLE>
<CAPTION>
                                                                                           To be Categorized as
                                                                                          Well-capitalized Under
                                                                    For Capital             Prompt Corrective
                                                  Actual          Adequacy Purposes         Action Provisions
                                           ------------------------------------------------------------------------
                                             Amount    Ratio     Amount       Ratio       Amount        Ratio
                                           ------------------------------------------------------------------------
                                                        (Dollars in Thousands)
               <S>                        <C>          <C>       <C>         <C>         <C>          <C>

               December 31, 2001:
                  Total capital (to risk-
                      weighted assets)         $   17,974    13.11%   $ 10,972     8.00%      $ 13,715     10.00%
                  Tier 1 capital (to risk-
                      weighted assets)         $   17,212    12.55%   $  5,486     4.00%      $  8,229      6.00%
                  Tier 1 capital (to total
                      assets)                  $   17,212     7.24%   $  9,516     4.00%      $ 11,895      5.00%

               December 31, 2000:
                  Total capital (to risk-
                      weighted assets)         $   16,579    10.70%   $ 12,399     8.00%      $ 15,499     10.00%
                  Tier 1 capital (to risk-
                      weighted assets)         $   15,760    10.17%   $  6,200     4.00%      $  9,299      6.00%
                  Tier 1 capital (to total
                      assets)                  $   15,760     5.99%   $ 10,527     4.00%      $ 13,159      5.00%

       </TABLE>


NOTE 12 - EMPLOYEE BENEFIT PLANS

               RETIREMENT PLANS

               The Bank is a participant in the multiemployer Financial
               Institutions Retirement Fund (FIRF or the "Plan"), which covers
               substantially all of its officers and employees. The defined
               benefit plan covers all employees who have completed one year of
               service, attained age 21, and worked at least 1,000 hours during
               the year. Normal retirement age is 65, with reduced benefits
               available at age 55. The Bank's contributions are determined by
               FIRF and generally represent the normal cost of the Plan.
               Specific Plan assets and accumulated benefit information for the
               Bank's portion of the Plan are not available. Under the Employee
               Retirement Income Security Act of 1974 (ERISA), a contributor to
               a multiemployer pension plan may be liable in the event of
               complete or partial withdrawal for the benefit payments
               guaranteed under ERISA. The Bank was fully funded in the Plan as
               of December 31, 2001. The expense of the Plan allocated to the
               Bank for the years ended December 31, 2001, 2000, and 1999 was
               $168, $137, and $93, respectively.

                                       35

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 12 - EMPLOYEE BENEFIT PLANS (CONTINUED)

                In 1999, the Bank instituted a Section 401(k) savings plan
                covering substantially all of its employees who meet certain age
                and service requirements. Under the plan, the Bank matches 50
                percent of participant contributions up to 3 percent of each
                participant's compensation during the year. This contribution is
                dependent upon availability of sufficient net earnings from
                current or prior years. Additional contributions may be made as
                approved by the Board of Directors. The expense under the plan
                for the years ended December 31, 2001, 2000, and 1999 was $56,
                $47, and $72, respectively.

                The Bank has a nonqualified deferred compensation plan for its
                directors. Through 1998, each director could voluntarily defer
                all or part of his or her director's fees to participate in the
                program. The plan is currently unfunded and amounts deferred are
                unsecured and remain subject to claims of the Bank's general
                creditors. Directors are paid once they reach normal retirement
                age or sooner for reason of death, total disability, or
                termination. The Bank may terminate the plan at any time. The
                amount recorded under the plan totaled approximately $460 and
                $383 at December 31, 2001 and 2000, respectively. The expense
                associated with the plan was $77, $67, and $55 for the years
                ended December 31, 2001, 2000, and 1999, respectively.

                EMPLOYEE STOCK OWNERSHIP PLAN

                Effective January 1, 1994, the Bank implemented an employee
                stock ownership plan (ESOP). The ESOP covers substantially all
                employees with more than one year of service who have completed
                at least 1,000 hours of service and who have attained the age of
                21. To fund the ESOP, the Bank borrowed $480 from an outside
                party to purchase 48,000 shares of the Company's common stock at
                $10 per share. The ESOP note was payable quarterly with interest
                (New York prime) and was retired in 1999. All shares were
                allocated as of December 31, 1999. Compensation expense,
                measured by the fair value of ESOP shares allocated to
                participants during a fiscal year, amounted to $0, $0, and $75
                in compensation expense for the years ended December 31, 2001,
                2000, and 1999, respectively.

                                       36

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 12 - EMPLOYEE BENEFIT PLANS (CONTINUED)

                STOCK AWARD PLAN

                The 1996 Recognition and Retention Plan for employees and
                outside directors authorized the issuance of authorized, but
                unissued shares of common stock of the Company in an aggregate
                amount of 27,600 shares of common stock, of which amount, 17,940
                shares were available to be awarded to employees and 9,660
                shares were available to be awarded to nonemployee directors.
                Restricted stock awards are nontransferable and nonassignable.
                Awards to non-employee directors vest at the rate of 20 percent
                of the amount awarded commencing one year from the date of the
                award, which was April 17, 1996. Awards to executive officers
                and employees would become fully vested upon termination of
                employment or service due to death, disability, or normal
                retirement. Upon termination of employment or service for any
                other reason, unvested shares are forfeited. A provision of $16,
                $54, and $54 was charged to expense for the years ended December
                31, 2001, 2000, and 1999, respectively.

                A summary of shares relating to the Recognition and Retention
                Plan is as follows:

<TABLE>
<CAPTION>
                <S>                                                     <C>

                Outstanding - January 1, 1999                            $    16,520
                   Vested in 1999                                             (6,200)
                   Forfeited in 1999                                            (340)
                                                                         -----------

                Outstanding - December 31, 1999                                9,980
                   Vested in 2000                                             (5,587)
                   Forfeited in 2000                                            (200)
                                                                         -----------

                Outstanding - December 31, 2000                                4,193
                   Vested in 2001                                             (3,472)
                   Forfeited in 2001                                            (721)


                Outstanding - December 31, 2001                          $        -
                                                                         ===========
</TABLE>

                                       37

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                              DECEMBER 31, 2001, 2000, AND 1999
                                          (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 12 - EMPLOYEE BENEFIT PLANS (CONTINUED)

          STOCK OPTION PLAN

          The 1996 stock option plan for certain employees and nonemployee
          directors authorized the grant of stock options and limited rights to
          purchase 69,000 shares of common stock of the Company. Pursuant to the
          stock option plan, grants may be made of incentive stock options,
          nonstatutory stock options, and limited rights. Nonemployee directors
          are only eligible to receive nonstatutory options. Under the terms of
          the plan, fully vested incentive stock options have been granted at
          fair market value as of the date of the grant that are exercisable any
          time prior to 10 years from the grant date. Nonstatutory stock options
          have been granted at fair market value on the date the option is
          granted and are exercisable prior to 10 years from the date of grant.


<TABLE>
<CAPTION>

                                                 2001                    2000                   1999
                                       --------------------------------------------------------------------------
                                                         Weighted             Weighted                 Weighted
                                                          Average              Average                 Average
                                           Number of     Exercise  Number of  Exercise     Number of  Exercise
                                            Shares        Price    Shares       Price       Shares      Price
                                       --------------------------------------------------------------------------
            <S>                         <C>              <C>        <C>       <C>        <C>          <C>

          Options outstanding at
            beginning of year               46,256        $10.03    60,589      $ 9.94     63,329     $ 9.92
          Options granted                       -             -         -           -          -          -
          Options exercised                     -             -       (200)       9.63     (1,200)      9.63
          Options forfeited                (6,743)        11.07    (14,133)       9.63     (1,540)      9.63
                                         --------                   ------               --------
          Options outstanding at end
            of year                        39,513          9.85     46,256       10.03     60,589       9.94
                                         ========                   ======               ========

          Exercisable at end of year       39,513          9.85     46,256       10.03     60,589       9.94

          Weighted average estimated
             fair value of options
             granted during the year          N/A          N /A                   N /A                   N/A

</TABLE>


          At December 31, 2001, options outstanding had exercise prices
          ranging between $9.63 and $10.00 per share and a weighted
          average remaining contractual life of 4.4 years.



                                       38

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
--------------------------------------------------------------------------------
                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                              DECEMBER 31, 2001, 2000, AND 1999
                                          (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS

                 The fair value of a financial instrument is the current amount
                 that would be exchanged between willing parties, other than in
                 a forced liquidation. Fair value is best determined based on
                 quoted market prices. However, in many instances, there are no
                 quoted market prices for the Company's various financial
                 instruments. In cases where quoted market prices are not
                 available, fair values are based on estimates using present
                 value or other valuation techniques. Those techniques are
                 significantly affected by the assumptions used, including the
                 discount rate and estimates of future cash flows. Accordingly,
                 the fair value estimates may not be realized in an immediate
                 settlement of the instrument. SFAS 107 excludes certain
                 financial instruments and all nonfinancial instruments from its
                 disclosure requirements. Accordingly, the aggregate fair value
                 amounts presented may not necessarily represent the underlying
                 fair value of the Company.

                 The following methods and assumptions were used by the Company
                 in estimating fair value disclosures for financial instruments:

                 CASH AND CASH EQUIVALENTS - The carrying amounts of cash and
                 short-term instruments approximate fair values.

                 SECURITIES - Fair values for securities, excluding Federal Home
                 Loan Bank stock, are based on quoted market prices. The
                 carrying value of Federal Home Loan Bank stock approximates
                 fair value based on the redemption provisions of the Federal
                 Home Loan Bank.

                 LOANS HELD FOR SALE - Fair values of mortgage loans held for
                 sale are based on commitments on hand from investors or
                 prevailing market prices.

                 LOANS RECEIVABLE - For variable-rate loans that reprice
                 frequently and with no significant change in credit risk, fair
                 values are based on carrying values. Fair values for certain
                 mortgage loans (e.g., one- to four-family residential), credit
                 card loans, and other consumer loans are based on quoted market
                 prices of similar loans sold in conjunction with securitization
                 transactions, adjusted for differences in loan characteristics.
                 Fair values for other loans (e.g., commercial real estate and
                 investment property mortgage loans, commercial, and industrial
                 loans) are estimated using discounted cash flow analyses, using
                 interest rates currently being offered for loans with similar
                 terms to borrowers of similar credit quality. Fair values for
                 nonperforming loans are estimated using discounted cash flow
                 analyses or underlying collateral values, where applicable.


                                       39
<PAGE>
ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)

NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

         DEPOSIT LIABILITIES - The fair values disclosed for demand deposits
         (e.g., interest and noninterest checking, passbook savings, and certain
         types of money market accounts) are, by definition, equal to the amount
         payable on demand at the reporting date (i.e., their carrying amounts).
         The carrying amounts of variable-rate, fixed-term money market accounts
         and certificates of deposit approximate their fair values at the
         reporting date. Fair values for fixed-rate certificates of deposit are
         estimated using a discounted cash flow calculation that applies
         interest rates currently being offered on certificates to a schedule of
         aggregated expected monthly maturities on time deposits

         LONG-TERM BORROWINGS - The fair values of the Company's long-term
         borrowings are estimated using discounted cash flow analyses based on
         the Company's current incremental borrowing rates for similar types of
         borrowing arrangements.

         ACCRUED INTEREST - The carrying amounts of accrued interest approximate
         fair value.

         The estimated fair values, and related carrying or notional amounts, of
         the Company's financial instruments are as follows (000s omitted):

<TABLE>
<CAPTION>
                                                               2001                  2000
                                                        --------------------  --------------------
                                                        Carrying  Estimated   Carrying  Estimated
                                                         Amounts  Fair Value   Amounts  Fair Value
                                                         -------  ----------   -------  ----------
<S>                                                     <C>        <C>        <C>        <C>
         Financial assets:
                 Cash and cash equivalents              $ 24,990   $ 24,990   $ 16,827   $ 16,827
                 Securities                               23,212     23,212     15,425     15,425
                 Loans and loans held for sale - Net     178,037    184,574    219,807    215,998
                 Federal Home Loan Bank stock              4,294      4,294      4,294      4,294
                 Accrued interest receivable               1,350      1,350      1,490      1,490

         Financial liabilities:
                 Customer deposits                       166,538    168,518    162,771    158,988
                 Advances from borrowers for
                     taxes and insurance                     103        103        255        255
                 Federal Home Loan Bank advances          52,120     56,071     82,435     81,478
                 Accrued interest payable                    240        240        267        267
</TABLE>



                                       40



<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 14 - PARENT-ONLY FINANCIAL STATEMENTS

         The following represents the condensed financial statements of Alpena
         Bancshares, Inc. ("Parent") only. The Parent-only financial information
         should be read in conjunction with the Company's consolidated financial
         statements.

         The condensed balance sheet at December 31, 2001 and 2000 is as
         follows:

<TABLE>
<CAPTION>
                                                                                2001      2000
                                                                                ----      ----
<S>                                                                            <C>       <C>
                                           ASSETS

         Cash at subsidiary bank                                               $    22   $    47
         Investment in subsidiary                                               20,644    19,513
                                                                               -------   -------
                     Total assets                                              $20,666   $19,560
                                                                               =======   =======

                             LIABILITIES AND STOCKHOLDERS' EQUITY

         Liabilities                                                           $    69   $    90
         Stockholder's equity                                                   20,597    19,470
                                                                               -------   -------
                     Total liabilities and stockholders' equity                $20,666   $19,560
                                                                               =======   =======
</TABLE>



         The condensed statement of operations for the years ended December 31,
         2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                 2001      2000
                                                                                 ----      ----
<S>                                                                            <C>        <C>
         Operating income                                                      $     -    $     -
         Operating expense                                                          67          2
                                                                               -------    -------
         Loss - Before income taxes and equity in undistributed
                     net income of subsidiary                                      (67)        (2)

         Income tax benefit                                                         23          -
                                                                               -------    -------
         Loss - Before equity in undistributed net income of
                     subsidiary                                                    (44)        (2)

         Equity in undistributed net income of subsidiary                        1,329      2,126
                                                                               -------    -------
         Net income                                                            $ 1,285    $ 2,124
                                                                               =======    =======
</TABLE>



                                       41

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)



NOTE 14 - PARENT-ONLY FINANCIAL STATEMENTS (CONTINUED)

         The condensed statement of cash flows for the years ended December 31,
         2001 and 2000 is as follows:

<TABLE>
<CAPTION>

                                                                     2001       2000
                                                                     ----       ----
<S>                                                                 <C>        <C>
         CASH FLOWS FROM OPERATING ACTIVITIES
                 Net income                                         $ 1,285    $ 2,124
                 Adjustments to reconcile net income to net cash
                       from operating activities:
                            Equity in undistributed net income of
                                subsidiary                           (1,329)    (2,127)
                            Net change in other liabilities             (21)        90
                                                                    -------    -------

                                 Net cash provided by (used in)
                                    operating activities                (65)        87

         CASH FLOWS FROM INVESTING ACTIVITIES - Upstream
                 dividend from subsidiary                               400         50

         CASH FLOWS FROM FINANCING ACTIVITIES - Dividends
                 paid                                                  (360)       (90)
                                                                    -------    -------
         NET INCREASE (DECREASE) IN CASH AND CASH
                 EQUIVALENTS                                            (25)        47

         CASH AND CASH EQUIVALENTS - Beginning of year                   47          -
                                                                    -------    -------
         CASH AND CASH EQUIVALENTS - End of year                    $    22    $    47
                                                                    =======    =======
</TABLE>




                                       42

<PAGE>


ALPENA BANCSHARES, INC. AND SUBSIDIARIES
================================================================================
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                               DECEMBER 31, 2001, 2000, AND 1999
                                           (000S OMITTED, EXCEPT PER SHARE DATA)


NOTE 15 - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

         The following tables summarize the Company's quarterly results for the
         fiscal years ended December 31, 2001 and 2000:

<TABLE>
<CAPTION>

                                                                For the Three-month Periods Ending
                                                         -------------------------------------------------------
                                                         March 31,      June 30,    September 30,   December 31,
                                                           2001           2001           2001          2001
                                                         ---------      --------    -------------   ------------
<S>                                                       <C>            <C>            <C>            <C>
         Interest income                                  $4,669         $4,504         $4,304         $4,109
         Interest expense                                  3,123          2,923          2,790          2,603
                                                         -------        -------      ---------     ----------

         Net interest income                               1,546          1,581          1,514          1,506
         Provision for losses on loans                        45             60             75             75
         Other income                                        379            540            556            730
         Other expenses                                    1,361          1,531          1,600          1,674
                                                         -------        -------      ---------     ----------

         Income - Before income taxes                        519            530            395            487
         Federal income taxes                                184            193            148            121
                                                         -------        -------      ---------     ----------
         Net income                                       $  335         $  337         $  247         $  366
                                                         =======        =======      =========     ==========

         Basic earnings per share                         $ 0.20         $ 0.21         $ 0.15         $ 0.22

         Fully diluted earnings per share                 $ 0.20         $ 0.21         $ 0.15         $ 0.22
         Weighted average number of shares outstanding     1,642          1,642          1,642          1,642
         Weighted average number of shares outstanding,
         including dilutive stock options                  1,642          1,642          1,643          1,653
         Cash dividends declared per common share         $0.125         $0.125         $0.125         $0.125


<CAPTION>

                                                                  For the Three-month Periods Ending
                                                          ---------------------------------------------------
                                                          March 31,    June 30,     September 30,  December 31,
                                                            2000         2000           2000          2000
                                                         -----------   --------     ------------- ------------

<S>                                                       <C>            <C>            <C>            <C>
         Interest income                                  $4,510         $4,695         $4,673         $4,776
         Interest expense                                  2,999          3,084          3,212          3,263
                                                         -------        -------      ---------     ----------

         Net interest income                               1,511          1,611          1,461          1,513
         Provision for losses on loans                        45             45             45            145
         Other income                                        348            276            665          1,087
         Other expenses                                    1,237          1,206          1,204          1,386
                                                         -------        -------      ---------     ----------

         Income - Before income taxes                        577            636            877          1,069
         Federal income taxes                                198            213            301            323
                                                         -------        -------      ---------     ----------
         Net income                                       $  379         $  423         $  576         $  746
                                                         =======        =======      =========     ==========

         Basic earnings per share                         $ 0.23         $ 0.26         $ 0.35         $ 0.45

         Fully diluted earnings per share                 $ 0.23         $ 0.26         $ 0.35         $ 0.45
         Weighted average number of shares outstanding     1,642          1,642          1,642          1,642
         Weighted average number of shares outstanding,
         including dilutive stock options                  1,642          1,642          1,643          1,653
         Cash dividends declared per common share         $0.150         $0.125         $0.125         $0.125

</TABLE>



                                       43
<PAGE>

--------------------------------------------------------------------------------
                       DIRECTORS AND EXECUTIVE OFFICERS OF
         ALPENA BANCSHARES, INC. AND FIRST FEDERAL OF NORTHERN MICHIGAN
--------------------------------------------------------------------------------


         Directors -

         Gary W. Bensinger is owner of Bensinger's Western Auto Store in Alpena,
Michigan. Mr. Bensinger has been a director of the Company since 1985.

         Keith D. Wallace is the senior partner of the law firm of Isackson and
Wallace, located in Alpena, Michigan. Mr. Wallace has acted as general counsel
to the Company since 1988. Mr. Wallace has been a director of the Company since
1988.

         James C. Rapin is a pharmacist with LeFave Pharmacy, Alpena, Michigan.
Mr. Rapin has been a director of the Company since 1985.

         Gary C. VanMassenhove is a partner in VanMassenhove, Kearly, Taphouse &
Faulman, CPAs. Mr. VanMassenhove has been a Certified Public Accountant for 31
years. He has been a director of the Company and the Bank since September 2001.

         Duane I. Dickey is Chairman of the Board of Directors of the Company.
Mr. Dickey was made Chairman of the Board of Directors in 1988. Mr. Dickey
retired from his position as Chief Executive Officer of the Company on November
9, 1998 and as President as of December 31, 1998. Mr. Dickey joined the Company
in 1970. He has been a member of the Board of Directors since 1976.

         Martin A. Thomson was named Acting President and Chief Executive
Officer of the Company and Bank in May 2001 and later named President and Chief
Executive Officer in October 2001. Prior to this appointment, Mr. Thomson served
as Executive Vice President and General Manager of Presque Isle Electric and Gas
Cooperative, Inc., Onaway, Michigan. Mr. Thomson has been a director of the
Company since 1986.

         Executive Officers -

         Thomas S. Davis was named Senior Vice President, Operations of the Bank
in April 2001, after serving as Vice President of Operations since joining the
Bank in July 1999. Prior to joining the Bank Mr. Davis served as the Chief
Financial Officer of Bank of Ann Arbor, Ann Arbor, Michigan. Mr. Davis also
previously held operations and financial officer positions at other banks since
1987.

         Jerome W. Tracey was named Senior Vice President, Senior Lender of the
Bank in September 2001, after serving as Vice President of Commercial Services
since joining the Bank in November 1999. Prior to joining the Bank, Mr. Tracey
served as Vice President of Commercial Lending for National City Bank, Alpena,
Michigan, a position he held since 1996. Mr. Tracey has been in the banking
profession since 1981.

         James D. Hubinger was named Chief Financial Officer of the Company and
the Bank in February 2001 after serving as the Controller since joining the
Company and the Bank in November of 1999. Prior to joining the Bank, Mr.
Hubinger served as Assistant Vice President - External Reporting Manager with
the former Mutual Savings Bank, Bay City, Michigan, a position he held since
1993. Mr. Hubinger has been in the banking industry since 1978.

         Debra S. Weiss was named Vice President, Retail Services of the Bank in
September 2001, after serving as the Gaylord Branch Manager since joining the
Bank in May 2001. Prior to joining the Bank, Ms. Weiss served as Secondary
Market Officer and Compliance Officer for Alden State Bank, Alden, Michigan.


                                       44
<PAGE>
         Joseph W. Gentry was named Vice President, Human Resources in February
2002, after serving as Director of Human Resources since joining the Bank in
October 2001. Prior to joining the Bank, Mr. Gentry served as Manager --
Industrial Relations / Safety for Lafarge -- Presque Isle Corporation since
1991.

         James I. Malaski is Vice President of Corporate Relations and Corporate
Secretary of the Company and the Bank. Mr. Malaski joined the Bank as Vice
President in 1983 and was made Secretary of the Company and the Bank in October
1999. Mr. Malaski has previously filled the positions of Executive Vice
President and Chief Operations Officer for the Bank.

--------------------------------------------------------------------------------
                             STOCKHOLDER INFORMATION
--------------------------------------------------------------------------------

         The Annual Meeting of Stockholders will be held at 1:00 p.m., April 16,
2002 at the Thunder Bay Recreational Center, 701 Woodward Avenue, Alpena,
Michigan.

STOCK LISTING

         The Company's common stock is traded over-the-counter through the
National Daily Quotation System "pink sheets" published by the National
Quotation Bureau, Inc.

PRICE RANGE OF COMMON STOCK

         There are no uniformly quoted prices for the Company's common stock.
Stockbrokers can provide recent price ranges using information contained in the
National Daily Quotation System "pink sheets."

GENERAL COUNSEL                                  INDEPENDENT AUDITOR

Isackson & Wallace, P.C.                         Plante & Moran, LLP
114 S. Second Avenue                             2601 Cambridge Ct.
Alpena, MI  49707                                Auburn Hills, Michigan 48326

SPECIAL COUNSEL                                  TRANSFER AGENT

Luse Lehman Gorman Pomerenk & Schick             Registrar and Transfer Company
5335 Wisconsin Avenue, N.W.                      10 Commerce Drive
Suite 400                                        Cranford, New Jersey 07016
Washington, D.C.  20015                          800-346-6084

ANNUAL REPORT ON FORM 10-KSB

         A COPY OF THE COMPANY'S FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
2001 WILL BE FURNISHED WITHOUT CHARGE UPON WRITTEN REQUEST TO JAMES I. MALASKI,
CORPORATE SECRETARY, ALPENA BANCSHARES, INC., 100 S. SECOND AVENUE, ALPENA,
MICHIGAN 49707.

                                       45