<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2003
                                                 -------------

                                       OR

                 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                     For the transition period from <> to <>

                         Commission file number: 0-20167

                       NORTH COUNTRY FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

              MICHIGAN                                    38-2062816
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

130 SOUTH CEDAR STREET, MANISTIQUE, MI                      49854
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code:  (800) 200-7032


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                    Yes  X   No
                                        ---     ---


Indicated by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                    Yes      No  X
                                        ---     ---


As of July 31, 2003, there were outstanding 7,019,152 shares of the registrant's
common stock, no par value.




<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                                      INDEX

<TABLE>
<CAPTION>
PART 1.       FINANCIAL INFORMATION                                                                    Page No.
                                                                                                       --------
<S>                                                                                                    <C>
     Item 1.      Financial Statements

                  Condensed Consolidated Balance Sheets -
                  June 30, 2003 (Unaudited) and December 31, 2002....................................        1

                  Condensed Consolidated Statements of Operations - Three
                    And Six Months Ended June 30, 2003 (Unaudited) and
                    June 30, 2002 (Unaudited)........................................................        2

                  Condensed Consolidated Statements of Changes in Shareholders'
                    Equity - Three and Six Months Ended June 30, 2003
                    (Unaudited) and June 30, 2002 (Unaudited)........................................        3

                  Condensed Consolidated Statements of Cash Flows -
                    Six Months Ended June 30, 2003 (Unaudited) and
                    June 30, 2002 (Unaudited)........................................................        4

                  Notes to Condensed Consolidated Financial
                    Statements (Unaudited)...........................................................        5


     Item 2.      Management's Discussion and Analysis of Financial
                    Condition and Results of Operations..............................................       14


     Item 3.      Quantitative and Qualitative Disclosures About Market Risk.........................       26


     Item 4.      Controls and Procedures............................................................       29


PART II.      OTHER INFORMATION

     Item 1.      Legal Proceedings..................................................................       30


     Item 4.      Submission of Matters to a Vote of Security Holders................................       31


     Item 6.      Exhibits and Reports on Form 8-K...................................................       32


     SIGNATURES   ...................................................................................       33
</TABLE>

<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
                                                                                     (Unaudited)
<S>                                                                                 <C>              <C>
ASSETS
     Cash and due from banks                                                        $      11,035    $       17,542
     Federal funds sold                                                                    25,200            26,250
                                                                                    -------------    --------------
         Cash and cash equivalents                                                         36,235            43,792

     Interest-bearing deposits in other financial institutions                             11,837             2,010
     Securities available for sale                                                         55,071            67,955
     Federal Home Loan Bank stock                                                           4,433             4,375

     Total loans                                                                          358,398           435,043
         Allowance for loan losses                                                        (21,986)          (24,908)
                                                                                    -------------    --------------
     Net loans                                                                            336,412           410,135

     Premises and equipment                                                                14,545            15,592
     Other real estate held for sale                                                        4,781             5,409
     Other assets                                                                          12,624            16,038
                                                                                    -------------    --------------

         Total assets                                                               $     475,938    $      565,306
                                                                                    =============    ==============

LIABILITIES AND SHAREHOLDERS' EQUITY
     Liabilities:
         Non-interest-bearing deposits                                              $      30,707    $       40,797
         Interest-bearing deposits                                                        322,741           396,697
                                                                                    -------------    --------------
              Total deposits                                                              353,448           437,494

     Borrowings                                                                            87,483            87,815
     Other liabilities                                                                      6,218             7,044

     Guaranteed preferred beneficial interests in the Corporation's
       subordinated debentures                                                             12,450            12,450

     Shareholders' equity:
         Preferred stock - No par value:
           Authorized 500,000 shares, no shares outstanding
         Common stock - No par value:
           Authorized - 18,000,000 shares
           Issued and outstanding - 7,019,152                                              16,175            16,175
         Retained earnings (deficit)                                                       (1,076)            3,086
         Accumulated other comprehensive income                                             1,240             1,242
                                                                                    -------------    --------------
              Total shareholders' equity                                                   16,339            20,503
                                                                                    -------------    --------------

         Total liabilities and shareholders' equity                                 $     475,938    $      565,306
                                                                                    =============    ==============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                                                              1.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Dollars in Thousands, Except per Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended             Six Months Ended
                                                                   June 30,                      June 30,
                                                             2003           2002            2003           2002
                                                             ----           ----            ----           ----
<S>                                                       <C>            <C>            <C>             <C>
Interest income:
     Interest and fees on loans:
         Taxable                                          $     5,071    $     7,999    $    10,712     $    16,069
         Tax-exempt                                               429            618            851           1,174
     Interest on securities:
         Taxable                                                  520            970          1,212           1,949
         Tax-exempt                                                66             64            132             132
     Other interest income                                        160             29            312              78
                                                          -----------    -----------    -----------     -----------
         Total interest income                                  6,246          9,680         13,219          19,402
                                                          -----------    -----------    -----------     -----------

Interest expense:
     Deposits                                                   2,133          3,156          4,678           6,421
     Borrowings                                                 1,213          1,286          2,412           2,548
     Subordinated debentures                                      123            137            245             276
                                                          -----------    -----------    -----------     -----------
         Total interest expense                                 3,469          4,579          7,335           9,245
                                                          -----------    -----------    -----------     -----------

Net interest income                                             2,777          5,101          5,884          10,157
Provision for loan losses                                           0          4,000              0           4,050
                                                          -----------    -----------    -----------     -----------
Net interest income after provision for loan losses             2,777          1,101          5,884           6,107
                                                          -----------    -----------    -----------     -----------

Other income:
     Service fees                                                 413            468            843             869
     Net security gains                                           214            356            191             422
     Other loan and lease income                                   11            377             38             640
     Net gains on sale of loans                                    51            135            106             319
     Other operating income                                       356            331            769             488
                                                          -----------    -----------    -----------     -----------
         Total other income                                     1,045          1,667          1,947           2,738
                                                          -----------    -----------    -----------     -----------

Other expenses:
     Salaries, commissions, and related benefits                1,356          1,882          3,033           3,882
     Furniture and equipment expense                              355            341            721             702
     Occupancy expense                                            351            385            750             839
     Data processing                                              380            606            787           1,216
     Accounting, legal, and consulting fees                       836            316          1,666             620
     Loan and deposit expense                                     334            155            908             437
     Telephone                                                    364            349            697             609
     Impairment loss on intangible assets                          60              0             60               0
     Impairment loss on other real estate held for sale           216             35            216              35
     Loss (gain) on sale of premises, equipment, and
     other real estate                                            (94)            48           (113)            104
     Advertising expense                                           95            194            144             316
     Amortization of acquisition intangible                       128            155            256             155
     Other                                                        739            431          1,189             849
                                                          -----------    -----------    -----------     -----------
         Total other expenses                                   5,120          4,897         10,314           9,764
                                                          -----------    -----------    -----------     -----------

Loss before provision (credit) for income taxes                (1,298)        (2,129)        (2,483)           (919)
Provision (credit) for income taxes                             1,359         (1,022)         1,679            (815)
                                                          -----------    -----------    -----------     -----------
Net loss                                                  $    (2,657)   $    (1,107)   $    (4,162)    $      (104)
                                                          ===========    ===========    ===========     ===========
Loss per common share:
     Basic                                                $    (0.38)    $     (0.15)   $     (0.59)    $     (0.01)
                                                          ==========     ===========    ===========     ===========
     Diluted                                              $    (0.38)    $     (0.15)   $     (0.59)    $     (0.01)
                                                          ==========     ===========    ===========     ===========
Dividends declared per common share                       $     0.00     $      0.15    $      0.00     $      0.25
                                                          ==========     ===========    ===========     ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                                                              2.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended             Six Months Ended
                                                                   June 30,                      June 30,
                                                             2003           2002            2003            2002
                                                             ----           ----            ----            ----
<S>                                                       <C>            <C>            <C>             <C>
Balance, beginning of period                              $    18,896    $    47,616    $    20,503     $    47,889

Net loss for period                                            (2,657)        (1,107)        (4,162)           (104)
Net unrealized gain (loss) on securities
  available for sale                                              100            977             (2)            403
                                                          -----------    -----------    -----------     -----------
     Total comprehensive income (loss)                         (2,557)          (130)        (4,164)            299

Dividends declared                                                  0         (1,053)             0          (1,755)
                                                          -----------    ------------   -----------     -----------

Balance, end of period                                    $    16,339    $    46,433    $    16,339     $    46,433
                                                          ===========     ==========    ===========     ===========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                                                              3.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended
                                                                                                   June 30,
                                                                                          2003                2002
                                                                                          ----                ----
<S>                                                                                 <C>                   <C>
Increase (decrease) in cash and cash equivalents:

     Cash flows from operating activities:
         Net loss                                                                   $        (4,162)      $          (104)
         Adjustments to reconcile net loss to
           net cash provided by (used in) operating activities:
              Depreciation and amortization                                                   1,455                   917
              Provision for loan losses                                                           0                 4,050
              Provision for impairment of intangible assets                                      60                     0
              Provision for impairment of other real estate held for sale                       216                    35
              Gain on sales of securities                                                      (191)                 (422)
              (Gain) loss on sale of premises, equipment, and other real estate                (113)                  104
              FHLB stock dividend                                                               (58)                    0
              Change in other assets                                                          3,306                 1,350
              Change in other liabilities                                                      (826)                 (526)
                                                                                    ---------------       ---------------
     Net cash provided by (used in) operating activities                                       (313)                5,404
                                                                                    ---------------       ---------------

     Cash flows from investing activities:
         Net (increase) decrease in interest-bearing deposits in other
         financial institutions                                                              (9,827)                  634
         Purchase of securities available for sale                                                0               (48,158)
         Proceeds from sales of securities available for sale                                 6,543                46,548
         Proceeds from maturities, calls, or paydowns of securities available
         for sale                                                                             6,131                 4,408
         Net decrease in loans                                                               71,858                 4,373
         Purchase of premises and equipment                                                     (30)                 (335)
         Proceeds from sale of premises, equipment, and other real estate                     2,459                 1,009
                                                                                    ---------------       ---------------
     Net cash provided by investing activities                                               77,134                 8,479
                                                                                    ---------------       ---------------

     Cash flows from financing activities:
         Net decrease in deposits                                                           (84,046)              (15,079)
         Principal payments on borrowings                                                      (332)                 (313)
         Payment of cash dividends                                                                0                (1,404)
                                                                                    ---------------       ---------------
     Net cash used in financing activities                                                  (84,378)              (16,796)
                                                                                    ---------------       ---------------

Net change in cash and cash equivalents                                                      (7,557)               (2,913)
Cash and cash equivalents at beginning of period                                             43,792                36,747
                                                                                    ---------------       ---------------

Cash and cash equivalents at end of period                                          $        36,235       $        33,834
                                                                                    ===============       ===============


Supplemental cash flow information:

Cash paid (refunded) for:
     Interest                                                                       $         7,854       $         9,451
     Income taxes                                                                              (500)                  550

Noncash investing activities - Transfers of foreclosures from loans to other
real estate                                                                                   1,865                 5,431
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                                                              4.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The unaudited condensed consolidated financial statements of North Country
     Financial Corporation (the "Corporation") have been prepared in accordance
     with generally accepted accounting principles for interim financial
     information and the instructions to Form 10-Q and Rule 10-01 of Regulation
     S-X. Accordingly, they do not include all of the information and footnotes
     required by generally accepted accounting principles for complete financial
     statements. In the opinion of management, all adjustments (consisting of
     normal recurring accruals) considered necessary for a fair presentation
     have been included. Operating results for the six-month period ended June
     30, 2003, are not necessarily indicative of the results that may be
     expected for the year ending December 31, 2003. The unaudited consolidated
     financial statements and footnotes thereto should be read in conjunction
     with the audited consolidated financial statements and footnotes thereto
     included in the Corporation's Annual Report on Form 10-K for the year ended
     December 31, 2002.

     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 period. Actual results could differ from those estimates.
     Estimates that are particularly susceptible to significant change include
     the determination of the allowance for loan losses, impairment of
     intangible assets, impairment of other real estate held for sale, and
     income taxes.

     Allowance for Loan Losses

     The allowance for loan losses includes specific allowances related to
     commercial loans, which have been judged to be impaired. A loan is impaired
     when, based on current information, it is probable that the Corporation
     will not collect all amounts due in accordance with the contractual terms
     of the loan agreement. These specific allowances are based on discounted
     cash flows of expected future payments using the loan's initial effective
     interest rate or the fair value of the collateral if the loan is collateral
     dependent.

     The Corporation continues to maintain a general allowance for loan losses
     for loans not considered impaired. The allowance for loan losses is
     maintained at a level which management believes is adequate to provide for
     possible loan losses. Management periodically evaluates the adequacy of the
     allowance using the Corporation's past loan loss experience, known and
     inherent risks in the portfolio, composition of the portfolio, current
     economic conditions, and other factors. The allowance does not include the
     effects of expected losses related to future events or future changes in
     economic conditions. This evaluation is inherently subjective since it
     requires material estimates that may be susceptible to significant change.
     Loans are charged against the allowance for loan losses when management
     believes the collectibility of the principal is unlikely. In addition,
     various regulatory agencies periodically review the allowance for loan
     losses. These agencies may require additions to the allowance for loan
     losses based on their judgments of collectibility.

     In management's opinion, the allowance for loan losses is adequate to cover
     probable losses relating to specifically identified loans, as well as
     probable losses inherent in the balance of the loan portfolio as of the
     balance sheet date.

                                                                              5.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Stock Option Plans

     The Corporation sponsors three stock option plans. One plan was approved
     during 2000 and applies to officers, employees, and nonemployee directors.
     A total of 500,000 shares were made available for grant under this plan.
     The other two plans, one for officers and employees and the other for
     nonemployee directors, were approved in 1997. A total of 600,000 shares
     were made available for grant under these plans. Options under all of the
     plans are granted at the discretion of a committee of the Corporation's
     Board of Directors. Options to purchase shares of the Corporation's stock
     are granted at a price equal to the market price of the stock at the date
     of grant. The committee determines the vesting of the options when they are
     granted as established under the plan.

     The fair value of each option granted is estimated on the grant date using
     the Black-Scholes methodology. The following assumptions were made in
     estimating fair value for options granted for the six months ended June 30,
     2003:

<TABLE>
<CAPTION>
                                                                         June 30,
                                                                           2003
                                                                           ----
<S>                                                                        <C>
      Dividend yield                                                       0.00%
      Risk-free interest rate                                              1.25%
      Weighted average expected life (years)                                7.0
      Expected volatility                                                 29.85%
</TABLE>

     The weighted average fair value of options granted as of their grant date,
     using the assumptions shown above, was computed at $.75 per share for
     options granted in 2003. There were no options granted in 2002.

     The Corporation accounts for stock options using the intrinsic value
     method. For all options granted, the intrinsic value was zero; therefore,
     no compensation cost has been recognized for the plans. Had compensation
     cost been determined on the basis of fair value, net income and earnings
     per share would have been reduced for the six months ended June 30, 2003
     and the year ended December 31, 2002 (dollars in thousands, except per
     share data) as follows:

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
         Net loss:

           As reported                                                              $     (4,162)    $     (26,713)
           Total stock-based compensation expense
             determined under fair value-based method,
             net of tax                                                                      (23)              (94)
                                                                                    ------------     -------------
           Pro forma                                                                $     (4,185)    $     (26,807)
                                                                                    ============     =============

         Loss per share - Basic:

           As reported                                                              $      (0.59)    $       (3.81)
                                                                                    ============     =============
           Pro forma                                                                $      (0.60)    $       (3.82)
                                                                                    ============     =============

         Loss per share - Diluted:

           As reported                                                              $      (0.59)   $        (3.81)
                                                                                    ============    ===============
           Pro forma                                                                $      (0.60)   $        (3.82)
                                                                                    ============    ==============
</TABLE>

                                                                              6.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


2.   RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2002, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards (SFAS) No. 148, "Accounting for
     Stock-Based Compensation - Transition and Disclosure," as an amendment to
     SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 148
     provides alternative methods of transition for a voluntary change to the
     fair value-based method of accounting for stock-based employee
     compensation. The Corporation has not voluntarily changed to the fair
     value-based method of accounting for stock-based employee compensation.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
     Variable Interest Entities" (FIN 46). The objective of this interpretation
     is to provide guidance on how to identify a variable interest entity and
     determine when the assets, liabilities, noncontrolling interests, and
     results of operations of a variable interest entity need to be included in
     a company's consolidated financial statements. A company that holds
     variable interests in an entity will need to consolidate the entity if the
     company's interest in the variable interest entity is such that the company
     will absorb a majority of the variable interest entity's losses and/or
     receive a majority of the entity's expected residual returns, if they
     occur. FIN 46 also requires additional disclosures by primary beneficiaries
     and other significant variable interest holders. The provisions of this
     interpretation are effective upon issuance. The requirements of FIN 46 did
     not have a material impact on the results of operations, financial
     position, or liquidity.

     In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial
     Instruments with Characteristics of Both Liabilities and Equity." SFAS No.
     150 establishes standards for how an issuer classifies and measures certain
     financial instruments with characteristics of both liabilities and equity.
     It requires that an issuer classify a financial instrument that is within
     its scope as a liability (or an asset in some circumstances). Many of those
     instruments were previously classified as equity. SFAS No. 150 is effective
     for financial instruments entered into or modified after May 31, 2003, and
     otherwise is effective at the beginning of the first interim period
     beginning after June 15, 2003. The requirements of SFAS No. 150 did not
     have a material impact on the results of operations, financial position, or
     liquidity.

                                                                              7.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


3.   LOSS PER SHARE

     Loss per share is based upon the weighted average number of shares
     outstanding. The following shows the computation of basic and diluted loss
     per share for the three months and six months ended June 30, 2003 and 2002
     (in thousands, except per share data):


<TABLE>
<CAPTION>
                                                             Three Months Ended               Six Months Ended
                                                                   June 30,                       June 30,
                                                              2003         2002             2003            2002
                                                              ----         ----             ----            ----

<S>                                                       <C>            <C>            <C>             <C>
       Basic loss per common share:
         Net loss                                         $    (2,657)   $    (1,107)   $    (4,162)    $      (104)
                                                          ===========    ===========    ===========     ===========
         Weighted average common shares outstanding             7,019          7,019          7,019           7,019
                                                          ===========    ===========    ===========     ===========

           Basic loss per common share                    $     (0.38)   $     (0.15)   $     (.059)    $     (0.01)
                                                          ===========    ===========    ===========     ===========
       Diluted loss per common share:
         Net loss                                         $    (2,657)   $    (1,107)   $    (4,162)    $      (104)
                                                          ===========    ===========    ===========     ===========

         Weighted average common shares outstanding
           for basic loss per common share                      7,019          7,019          7,019           7,019
         Add:  Dilutive effect of assumed exercise
           of stock options                                         0              3              0               3
         Add:  Dilutive effect of directors' deferred
           stock compensation                                       0              0              0               0
                                                          -----------    -----------    -----------     -----------
           Average shares and dilutive potential
             common shares                                      7,019          7,022          7,019           7,022
                                                          ===========    ===========    ===========     ===========

              Diluted loss per common share               $     (0.38)   $     (0.15)   $    (0.59)     $     (0.01)
                                                          ===========    ===========    ==========      ===========
</TABLE>

4.   INVESTMENT SECURITIES

     The amortized cost and estimated fair value of investment securities
     available for sale as of June 30, 2003 and December 31, 2002, are as
     follows (in thousands):

<TABLE>
<CAPTION>
                                                                  June 30, 2003               December 31, 2002
                                                           Amortized      Estimated      Amortized      Estimated
                                                             Cost         Fair Value        Cost        Fair Value
                                                             ----         ----------        ----        ----------
<S>                                                       <C>            <C>            <C>             <C>
       Obligations of states and political
         subdivisions                                     $     5,057    $     5,743    $     5,172     $     5,632
       Corporate securities                                     3,761          4,253         10,593          11,264
       Mortgage-related securities                             44,374         45,075         50,355          51,059
                                                          -----------    -----------    -----------     -----------

         Total securities available for sale              $    53,192    $    55,071    $    66,120     $    67,955
                                                          ===========    ===========    ===========     ===========
</TABLE>

     The amortized cost and estimated fair value of investment securities
     pledged to treasury deposits and borrowings were $45,639,000 and
     $46,023,000 respectively, at June 30, 2003.

                                                                              8.
<PAGE>
                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


5.   LOANS

     The composition of loans at June 30, 2003 and December 31, 2002 (dollars in
     thousands) is as follows:


<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
       Commercial real estate                                                       $      46,100    $       61,556
       Commercial, financial, and agricultural                                            243,834           290,371
       One- to four-family residential real estate                                         63,558            74,366
       Consumer                                                                             4,217             5,706
       Construction                                                                           689             3,044
                                                                                    -------------    --------------

         Total loans                                                                $     358,398    $      435,043
                                                                                    =============    ==============
</TABLE>

     An analysis of the allowance for loan losses for the six months ended June,
     2003, and 2002 (dollars in thousands) is as follows:

<TABLE>
<CAPTION>
                                                                                      June 30,          June 30,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
       Balance at beginning of period                                               $      24,908    $       10,444
       Provision for loan losses                                                                0             4,050
       Recoveries on loans                                                                  1,581               199
       Loans charged off                                                                   (4,503)           (1,115)
                                                                                    -------------    --------------

         Balance at end of period                                                   $      21,986    $       13,578
                                                                                    =============    ==============
</TABLE>

     The aggregate amount of nonperforming residential and consumer loans was
     approximately $1,414,000 and $2,212,000 at June 30, 2003 and December 31,
     2002, respectively. Nonperforming loans are those which are contractually
     past due 90 days or more as to interest or principal payments, on
     nonaccrual status, or loans, the terms of which have been renegotiated to
     provide a reduction or deferral of interest or principal. The interest
     income recorded and that which would have been recorded had residential and
     consumer nonaccrual and renegotiated loans been current, or not troubled,
     are not material to the consolidated financial statements for the six
     months ended June 30, 2003 and 2002. The nonperforming commercial loans are
     reflected in the information regarding impaired loans.

     Information regarding impaired loans as of June 30, 2003 and December 31,
     2002 (dollars in thousands) is as follows:

<TABLE>
<CAPTION>
                                                                                      June 30,       December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
       Total impaired loans                                                         $      44,445    $       51,602
       Impaired loans with a valuation allowance                                           44,445            51,331
       Impaired loans on nonaccrual                                                        36,801            23,992
       Valuation allowance related to impaired loans                                        8,782             6,739
</TABLE>

     The average investment in impaired loans was approximately $47,990,000 and
     $25,073,000 for the six-months ended June 30, 2003 and the year ended
     December 31, 2002, respectively.

                                                                              9.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


5.   LOANS (CONTINUED)

     The Bank, in the ordinary course of business, grants loans to the
     Corporation's executive officers and directors, including their families
     and firms in which they are principal owners. Activity in such loans for
     the six months ended June 30, 2003, and the year ended December 31, 2002,
     is summarized below (dollars in thousands).

<TABLE>
<CAPTION>
                                                                                       June 30,            December 31,
                                                                                         2003                  2002
                                                                                         ----                  ----

<S>                                                                                    <C>                   <C>
         Loans outstanding beginning of period                                         $ 10,987              $ 16,625
         New loans                                                                          137                 1,622
         Net activity on revolving lines of credit                                           12                    23
         Repayment                                                                         (987)                 (991)
         Decrease related to retired executive officers and directors                      (186)               (6,292)
                                                                                       --------              --------

           Loans outstanding end of period                                             $  9,963              $ 10,987
                                                                                       ========              ========
</TABLE>

     Two related-party loans had balances of approximately $6,335,000 and
     $2,979,000 at June 30, 2003 and $6,608,000 and $3,025,000 at December 31,
     2002. Loans to related-parties of approximately $8,477,000 and $9,182,000
     were classified substandard at June 30, 2003 and December 31, 2002,
     respectively.

6.   BORROWINGS

     Borrowings consist of the following at June 30, 2003 and December 31, 2002
     (in thousands):

<TABLE>
<CAPTION>
                                                                                        June 30,        December 31,
                                                                                          2003              2002
                                                                                          ----              ----
<S>                                                                                     <C>             <C>
         Federal Home Loan Bank advances at rates ranging from 4.35% to 7.59% with
           maturities from less than one year to ten years                               $85,866           $86,198

         Farmers Home Administration, fixed rate note payable, maturing August
           24, 2024, interest payable at 1%                                                1,617             1,617
                                                                                         -------           -------

                                                                                         $87,483           $87,815
                                                                                         =======           =======
</TABLE>

     As of June 30, 2003, the Federal Home Loan Bank borrowings are
     collateralized by a specific collateral agreement on the Corporation's
     residential mortgage loans of $42,069,000; U.S. government and agency
     securities with an estimated fair value of $44,981,000; an interest-bearing
     deposit in the amount of $11,800,000; and Federal Home Loan Bank stock of
     $4,433,000. Prepayment of the advances is subject to the provisions and
     conditions of the credit policy of the Federal Home Loan Bank of
     Indianapolis in effect as of June 30, 2003. The Farmers Home Administration
     borrowing is collateralized by loans totaling $1,001,000 originated and
     held by the Corporation's wholly owned subsidiary, First Rural Relending,
     and guaranteed by the Corporation.

                                                                             10.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


7.   STOCK OPTION PLANS

     A summary of stock option transactions for the six months ended June 30,
     2003 and the year ended December 31, 2002, is as follows:

<TABLE>
<CAPTION>
                                                                                              Number of Shares
                                                                                              ----------------
                                                                                      June 30,                December 31,
                                                                                        2003                      2002
                                                                                        ----                      ----
<S>                                                                                   <C>                       <C>
      Outstanding shares at beginning of year                                          772,397                   894,797
      Granted during the period                                                         50,000                         0
      Expired during the period                                                        (57,400)                 (122,400)
                                                                                      --------                  --------

      Outstanding shares at end of period                                              764,997                   772,397
                                                                                      ========                  ========
      Weighted average exercise price per share
        at end of period                                                              $  13.63                  $  14.11
                                                                                      ========                  ========

      Shares available for grant at end of period                                      101,573                   135,573
                                                                                      ========                  ========
</TABLE>

     Options granted in 2003 were granted at a price of $2.95 per share. Under
     these plans, options expire ten years after the date of grant.

     Following is a summary of the options outstanding and exercisable at June
     30, 2003:

<TABLE>
<CAPTION>
                                                                              Weighted
                                                                              Average         Weighted
                                                                             Remaining         Average
          Exercise                                                          Contractual       Exercise
         Price Range                                        Number          Life-Years          Price
         -----------                                        ------          ----------          -----
<S>                                                     <C>                 <C>              <C>
            $2.95                                           33,000                 9.72      $     2.95
            $4.26                                            5,400                  .63            4.26
        $7.80 - $12.00                                     329,800                 5.98            9.23
       $15.00 - $20.33                                     396,797                 4.59           18.31
                                                        ----------           ----------      ----------

                                                           764,997                 5.38      $    13.63
                                                        ==========           ==========      ==========
</TABLE>

                                                                             11.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


8.   COMMITMENTS, CONTINGENCIES, AND CREDIT RISK

     Financial Instruments With Off-Balance-Sheet Risk

     The Corporation is a party to 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
     and standby letters of credit. Those instruments involve, to varying
     degrees, elements of credit risk in excess of the amount recognized in the
     consolidated balance sheets.

     The Corporation's exposure to credit loss, in the event of nonperformance
     by the other party to the financial instrument for commitments to extend
     credit and standby letters of credit, is represented by the contractual
     amount of those instruments. The Corporation uses the same credit policies
     in making commitments and conditional obligations as it does for
     on-balance-sheet instruments. These commitments are as follows (dollars in
     thousands):

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
       Commitments to extend credit:
         Fixed rate                                                                 $       7,289    $        7,980
         Variable rate                                                                     65,604            62,632
       Standby letters of credit - Variable rate                                           13,939            13,161
       Credit card commitments - Fixed rate                                                 3,627             4,111
                                                                                    -------------    --------------

                                                                                    $      90,459    $       87,884
                                                                                    =============    ==============
</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. Since many of the commitments are
     expected to expire without being drawn upon, the total commitment amounts
     do not necessarily represent future cash requirements. The Corporation
     evaluates each customer's creditworthiness on a case-by-case basis. The
     amount of collateral obtained, if deemed necessary by the Corporation upon
     extension of credit, is based on management's credit evaluation of the
     party. Collateral held varies but may include accounts receivable;
     inventory; property, plant, and equipment; and income-producing commercial
     properties.

     Standby letters of credit are conditional commitments issued by the
     Corporation to guarantee the performance of a customer to a third party.
     Those guarantees are primarily issued to support public and private
     borrowing arrangements. The credit risk involved in issuing letters of
     credit is essentially the same as that involved in extending loan
     facilities to customers. The commitments are structured to allow for 100%
     collateralization on all standby letters of credit.

     Credit card commitments are commitments on credit cards issued by the
     Corporation's subsidiary and serviced by other companies. These commitments
     are unsecured.

                                                                             12.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


8.   COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (CONTINUED)

     Contingencies

     Recently, the Corporation was served with process in a class action
     initiated by a shareholder of the Corporation, alleging violations of the
     Federal securities laws and seeking, among other things, compensatory
     damages. The complaint also named as defendants certain former directors
     and senior executive officers of the Corporation. The Corporation is aware
     that another similar action has been filed by a former shareholder of the
     Corporation. In addition, a shareholder's derivative action has been filed
     against the Corporation and certain current and former directors of the
     Corporation. All of these proceedings are described in Part II, Item 1 -
     Legal Proceedings. Litigation of the types involved in these actions can be
     complex, time-consuming, and often protracted. The Corporation anticipates
     that it will incur substantial additional expense for legal and other
     professional fees as a result of the filing of these actions. At this early
     stage of the proceedings, the Corporation cannot accurately assess the
     impact which these proceedings will have on the Corporation. An ultimate
     determination of any of these actions adverse to the Corporation could have
     a material adverse effect on the Corporation's financial condition and
     operations.

     In addition, in the normal course of business, the Corporation is involved
     in various other legal proceedings. In the opinion of management, any
     liability resulting from such other legal proceedings would not be expected
     to have a material adverse effect on the consolidated financial statements.

     Concentration of Credit Risk

     The Bank grants commercial, residential, agricultural, and consumer loans
     throughout Michigan. The Bank's most prominent concentration in the loan
     portfolio relates to commercial loans to entities within the hospitality
     and tourism industry. This concentration represents $80.4 million, or
     22.4%, of the commercial loan portfolio at June 30, 2003. The remainder of
     the commercial loan portfolio is diversified in such categories as gaming,
     petroleum, forestry, and agriculture. Due to the diversity of the Bank's
     locations, the ability of debtors of residential and consumer loans to
     honor their obligations is not tied to any particular economic sector.


                                                                             13.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


The following discussion and analysis of financial condition and results of
operations provides additional information to assess the condensed consolidated
financial statements of the Corporation and its subsidiaries through the second
quarter of 2003. The discussion should be read in conjunction with those
statements and their accompanying notes.

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Corporation intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995 and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, or expectations of the Corporation, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Corporation's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors that could cause actual results to differ from the
results in forward-looking statements include, but are not limited to:


     -    General economic conditions, either nationally or in the state(s) in
          which the Corporation does business;

     -    Legislation or regulatory changes which affect the business in which
          the Corporation is engaged;

     -    Changes in the interest rate environment which increase or decrease
          interest rate margins;

     -    Restrictions and requirements imposed on the Corporation and the Bank
          by formal action against them by bank regulatory agencies;

     -    Failure or inability of the Bank to comply with the terms of the Cease
          and Desist Order (the "Order") applicable to it;

     -    Changes in securities markets with respect to the market value of
          financial assets and the level of volatility in certain markets such
          as foreign exchange;

     -    Significant increases in competition in the banking and financial
          services industry resulting from industry consolidation, regulatory
          changes and other factors, as well as action taken by particular
          competitors;

     -    The ability of borrowers to repay loans;

     -    The effects on liquidity of unusual decreases in deposits;

     -    Changes in consumer spending, borrowing, and saving habits;

     -    Technological changes;

     -    Acquisitions and unanticipated occurrences which delay or reduce the
          expected benefits of acquisitions;

     -    Difficulties in hiring and retaining qualified management and banking
          personnel;

     -    The Corporation's ability to increase market share and control
          expenses;

     -    The effect of compliance with legislation or regulatory changes;

     -    The effect of changes in accounting policies and practices;

     -    The costs and effects of existing and future litigation and of adverse
          outcomes in such litigation; and

     -    The factors discussed in Item 1 in this Report and in the Management's
          Discussion and Analysis in Item 2, as well as those discussed
          elsewhere in this Report.

These risks and uncertainties should be considered in evaluating forward-looking
statements. Further information concerning the Corporation and its business,
including additional factors that could materially affect the Corporation's
financial results, is included in the Corporation's filings with the Securities
and Exchange Commission. All forward-looking statements contained in this report
are based upon information presently available and the Corporation assumes no
obligation to update any forward-looking statements.


                                                                             14.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


As discussed in the Capital and Regulatory section, the Corporation and the Bank
are subject to minimum regulatory capital requirements. The Bank is also subject
to minimum capital requirements of the Order. As of June 30, 2003, the capital
of the Corporation and the Bank were below those requirements. If the Bank does
not meet the minimum regulatory capital requirements, it could be subject to
material adverse actions taken by bank regulators.

Management's near term strategies are expected to be centered around downsizing
the Bank and returning the Corporation to profitability. This is expected to be
accomplished by a combination of alternatives that may include: addressing the
amount of nonperforming assets, the associated costs of servicing them, and a
potential sale of these assets; controlling the Bank's growth; and a potential
sale of certain branches. The sale of assets and certain branches may increase
the Corporation's capital ratios. The Corporation's strategies for increasing
its capital and that of the Bank are discussed further in the Capital and
Regulatory section.

Upon completion of these near-term strategies, the Corporation's long-term
strategy is expected to focus on profitable growth of loans and deposits in its
core markets in Michigan.

FINANCIAL OVERVIEW

Year-to-date consolidated net loss was $4.2 million through June 30, 2003,
compared to a net loss of $100,000 for the same period in 2002. Basic loss per
share was $0.59 for the six months ended June 30, 2003, compared to a loss of
$0.01 for the same period in 2002. The provision for loan losses was $0 for the
six months ended June 30, 2003 as compared to $4.1 million in the same period in
2002. Total assets declined $89.4 million from December 31, 2002 to June 30,
2003. The loan portfolio continued to experience declines through the second
quarter of 2003, decreasing $76.6 million from December 31, 2002 to June 30,
2003. Deposits have decreased $84.0 million since December 31, 2002.

FINANCIAL CONDITION

CASH AND CASH EQUIVALENTS

Cash and cash equivalents decreased $7.6 million through the second quarter of
2003. This was due to the employment of better cash management practices as well
as the decline in deposits. See further discussion of the change in cash in the
Liquidity section.

INVESTMENT SECURITIES

Available-for-sale securities decreased $12.9 million, or 19.0%, from December
31, 2002 to June 30, 2003, with the balance on June 30, 2003, totaling $55.1
million. Investment securities are utilized in an effort to manage interest rate
risk and liquidity. As of June 30, 2003, investment securities with an estimated
fair value of $46.0 million were pledged for purposes of securing Treasury Tax
and Loan deposits and FHLB advances.


                                                                             15.
<PAGE>
                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


LOANS

Through the second quarter of 2003, loan balances decreased by $76.6 million, or
17.6%. During the second quarter, loan balances decreased $33.2 million. This
continued decrease was in all loan types and was expected. Management expects
further reductions in loan balances in the near term as credit underwriting
continues to be tightened and the Corporation continues to look to reduce the
level of loans to the hotel and tourism industry. Future sales of loans and
branch locations also may occur as the Corporation enacts strategies to address
liquidity and capital needs. These sales could result in further decreases in
the loan portfolio. Enhancements are, from time to time, made to the loan
approval and exception reporting processes in order to provide for more
effective management of risk in the loan portfolio. Management continues to
actively manage the loan portfolio seeking to identify and resolve problem
assets at an early stage. Management believes a properly positioned loan
portfolio provides the most attractive earning asset yield available to the
Corporation and, with changes to the loan approval process and exception
reporting, management can more effectively manage the risk in the loan
portfolio. Management has continued to restructure the lending staff and credit
policies in an effort to meet the credit needs in its local market areas. These
changes are being made to enable the Corporation to eventually grow the loan
portfolio in its core markets as part of the long-term strategy to attain
profitability.

Following is a summary of the loan portfolio at June 30, 2003 and December 31,
2002 (dollars in thousands):

<TABLE>
<CAPTION>
                                                            June 30,          % of      December 31,        % of
                                                              2003            Total         2002            Total
                                                              ----            -----         ----            -----
<S>                                                       <C>            <C>            <C>             <C>
     Commercial real estate                               $    46,100           12.9    $    61,556            14.1
     Commercial, financial, and agricultural                  243,834           68.0        290,371            66.8
     1-4 family residential real estate                        63,558           17.7         74,366            17.1
     Consumer                                                   4,217            1.2          5,706             1.3
     Construction                                                 689            0.2          3,044             0.7
                                                          -----------    -----------    -----------     -----------

         Total loans                                      $   358,398          100.0    $   435,043           100.0
                                                          ===========    ===========    ===========     ===========
</TABLE>

Following is a table showing the significant industry types in the commercial
loan portfolio as of June 30, 2003 and December 31, 2002 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                 June 30, 2003               December 31, 2002
                                                           Outstanding        % of        Outstanding       % of
                                                             Balance         Capital        Balance        Capital
                                                           -----------       -------      -----------      -------
<S>                                                       <C>                <C>        <C>                <C>
     Hospitality and tourism                              $    80,363          486.3    $    86,802           423.4
     Gaming                                                    17,225          104.2         25,938           126.5
     Petroleum                                                  7,374           44.6         14,180            69.2
     Forestry                                                   3,759           22.7          5,677            27.7
</TABLE>

CREDIT QUALITY

The allowance for loan losses is maintained by management at a level considered
to be adequate to cover probable losses related to specifically identified
loans, as well as losses inherent in the balance of the loan portfolio. At June
30, 2003, the allowance for loan losses increased to 6.1% of total loans
outstanding from 5.7% at December 31, 2002. The increase of the allowance as a
percentage of total loans is due to the decrease in total loans from December
31, 2002 to June 30, 2003.


                                                                             16.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


Management analyzes the allowance for loan losses in detail on a quarterly basis
to determine whether the losses inherent in the portfolio are properly reserved
for. Net charge-offs to gross loans outstanding increased to 0.82% from 0.19%
for the six months ended June 30, 2003 and 2002, respectively. Net charge-offs
for the six-month period ended June 30, 2003, were $2.9 million compared to
$916,000 for the same period in 2002. Of the $2.9 million of net charge-offs in
2003, $1.1 million occurred in the second quarter. The amount of loans charged
off in the second quarter was $2.8 million compared to $1.7 million in the first
quarter. This increase is primarily the result of continued efforts to resolve
problem credits identified in 2002. Also, as a result of the continued
collection efforts, the Corporation realized recoveries on previously
charged-off loans of $1.4 million in the second quarter compared to $137,000 in
the first quarter. The Corporation will continue its aggressive efforts to
collect on previously charged-off loans.

Based on management's analysis of the loan portfolio, the Corporation has not
identified any new significant problem loans. As a result, the Corporation did
not recognize a provision for loan losses for the six months ended June 30,
2003, a decrease of $4.1 million when compared to the same period in 2002.

Following is the allocation of the allowance for loan losses as of June 30, 2003
and December 31, 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
       Commercial loans and leases                                                  $      19,148    $       22,514
       Real estate and mortgages                                                            1,834             2,250
       Consumer                                                                               178               144
       Unallocated                                                                            826               -0-
                                                                                    -------------    -------------

       Totals                                                                       $      21,986    $       24,908
                                                                                    =============    ==============
</TABLE>

The following ratios assist management in the evaluation of the Corporation's
credit quality:

<TABLE>
<CAPTION>
                                                                                         June 30,        December 31,
                                                                                           2003              2002
                                                                                           ----              ----
<S>                                                                                      <C>             <C>
     Allowance to total loans                                                               6.1%             5.7%
     Net charge-offs to average outstanding loans                                           1.5%             2.6%
     Nonperforming loans to gross loans                                                    11.1%             6.3%
</TABLE>

The table presented below shows the balance of nonperforming loans, which
include nonaccrual loans and loans 90 or more days past due and still accruing,
at June 30, 2003 and December 31, 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                                      June 30,        December 31,
                                                                                        2003              2002
                                                                                        ----              ----
<S>                                                                                 <C>              <C>
     Nonaccrual loans                                                               $      38,324    $       26,814
     Loans 90 days or more past due and still accruing                                      1,572               401
</TABLE>

While nonperforming loans have increased $12.7 million since December 31, 2002,
with an increase of $496,000 in the second quarter of 2003, management had
identified these credits as substandard as of December 31, 2002, and had
reserved for them accordingly.

Management continues to consider market issues impacting its loan customer base.
Ratings for the commercial loan portfolio are continually reviewed and
management closely monitors the commercial loan portfolio to timely identify
nonperforming loans.


                                                                             17.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


As part of the process of resolving problem credits, the Corporation may acquire
ownership of collateral which secured such credits. The Corporation carries this
collateral in other real estate which is grouped with other assets on the
condensed consolidated balance sheet. The following table represents the
activity in other real estate (in thousands):

<TABLE>
<S>                                                                    <C>
         Balance at January 1, 2002                                    $       4,211
         Other real estate transferred from loans                              4,705
         Other real estate transferred from premises                           1,226
         Write-downs of other real estate                                     (2,418)
         Other real estate sold                                               (2,315)
                                                                       -------------

         Balance at December 31, 2002                                          5,409
         Other real estate transferred from loans                              1,865
         Write-downs of other real estate                                       (216)
         Other real estate sold                                               (2,277)
                                                                       -------------

         Balance at June 30, 2003                                      $       4,781
                                                                       =============
</TABLE>

During the first six months of 2003, the Corporation received real estate in
lieu of loan payments of $1.9 million of which $55,000 occurred in the second
quarter. Other real estate is initially valued at the lower of cost or the fair
value less selling costs. After the initial receipt, management periodically
reevaluates the recorded balance. Any additional reductions in the fair value
result in a write-down of other real estate. Write-downs on other real estate
may be recorded based on future reevaluations of current realizable fair values.

DEPOSITS

The Corporation continued to experience a substantial reduction in deposits in
the second quarter of 2003. Total deposits decreased by $84.0 million, or 19.2%,
since December 31, 2002, including a decline of $41.8 million in the second
quarter of 2003. Due to the reduction in the loan portfolio, management was able
to reduce its reliance on brokered deposits. Brokered deposits decreased by
$25.0 million through the second quarter of 2003 to $30.0 million at June 30,
2003, while certificates of deposit over $100,000 decreased by $10.2 million
through the second quarter of 2003 to $25.4 million at June 30, 2003. The
Corporation's other deposit categories decreased by $48.8 million through the
second quarter of 2003. Core deposits decreased $83.2 million, which was
partially offset by an increase in internet deposits of $27.7 million. Due to
the high cost of brokered and Internet deposits, management introduced a new
deposit product to its local markets during 2003.

BORROWINGS

The Corporation has used alternative funding sources to provide long-term,
stable sources of funds. Total borrowings have remained relatively stable from
December 31, 2002 to June, 2003. At June 30, 2003, total borrowings were $87.5
million, of which $85.9 million were from the Federal Home Loan Bank of
Indianapolis (FHLB). The FHLB borrowings carry fixed interest rates and stated
maturities ranging through 2011. Fixed rate borrowings totaling $80 million are
callable quarterly at the option of the FHLB and can also be converted to
variable rates, at the option of the FHLB, should rates rise above certain index
levels. These borrowings are secured by a blanket collateral agreement on the
Bank's residential mortgage loans and specific assignment of other assets.
Management does not anticipate increasing the FHLB borrowings in the near
future.


                                                                             18.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE CORPORATION'S SUBORDINATED
DEBENTURES

In 1999, the Corporation completed a private offering of capital, or trust
preferred, securities in the amount of $12,450,000. Under regulatory guidelines,
guaranteed preferred beneficial interests in the Corporation's subordinated
debentures are eligible as regulatory capital, as defined, subject to certain
limitations. As of June 30, 2003, the Corporation has suspended three quarterly
payments of interest on its subordinated debentures that fund quarterly
distributions on the trust preferred securities issued by its trust subsidiary,
North Country Capital Trust. The debenture agreement allows for suspension of
payments for up to 20 quarterly payments. It is expected that distributions will
continue to be deferred until the Board of Directors determines it is prudent to
resume payments based upon returning to profitability and the capital needs of
the Corporation and the Bank.

SHAREHOLDERS' EQUITY

Total shareholders' equity decreased $4.2 million from December 31, 2002 to June
30, 2003. The decrease represents the net loss of $4.2 million for the six
months ended June 30, 2003. The Board of Directors does not anticipate declaring
any dividends in the near future. The declaration of dividends is contingent on
a variety of factors, including satisfaction of requirements in the Order and
receipt of approval by the Federal Reserve Bank of Chicago.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income before provision for loan losses for the quarter ended June
30, 2003, decreased by $2.3 million, or 45.6% compared to the same period one
year ago. Loans and total assets declined $135 million and $146 million,
respectively, when compared to June 30, 2002, balances. The decrease in loan
volume offset by the decrease in deposit volume during the past twelve months,
combined with increases in nonaccrual loans, and a continued decline in
prevailing market rates, have resulted in the decline in net interest income.
Loan and deposit balances and margins have declined for the past seven quarters.
If the decline in deposits continues and if that decline continues to be funded
with a decline in loans as anticipated by management, then management
anticipates margins will continue to decline in both dollars and as a percent of
assets.

PROVISION FOR LOAN LOSSES

The Corporation records a provision for loan losses at a level it believes is
necessary to maintain the allowance at an adequate level after considering
factors such as loan charge-offs and recoveries, changes in the mix of loans in
the portfolio, loan growth, and other economic factors. The provision for loan
losses decreased by $4.1 million for the quarter ended June 30, 2003, compared
to the same period in 2002. Management continues to monitor the loan portfolio
for changes which may impact the required allowance for loan losses. Additional
provisions for loan losses are possible.

OTHER INCOME

Other income decreased by $622,000 for the quarter ended June 30, 2003, compared
to the quarter ended June 30, 2002. Service charge revenue decreased $55,000 due
to the decline in deposits. Loan and lease income decreased $366,000 as a result
of a decline in mortgage subsidiary fee income and leasing subsidiary fee
income, as well as a significant drop in new loan activity compared to the same
period in 2002. Gain on sale of loans decreased $84,000 due to a lower volume of
mortgage loans sold compared to the second quarter of 2002. A decrease of
$142,000 in security gains also contributed to the decline in other income in
comparison to the second quarter of 2002.


                                                                             19.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


OTHER EXPENSES

Other expenses increased $223,000 for the quarter ended June 30, 2003, compared
to the same period of 2002. Salaries, commissions, and related benefits
decreased by $526,000 during the second quarter of 2003 compared to the second
quarter of 2002 due to fewer personnel. This decrease was offset by an increase
in professional services expenses of $520,000 during the second quarter of 2003
and an increase in loan collection expense of $181,000. The increases in the
costs of these outside services is due to changes in the Corporation's internal
staff and the need to address the Order and other regulatory issues. The
Corporation is taking action to reduce its reliance on external collection
resources by recruiting qualified personnel who will be able to assume certain
tasks currently being outsourced.

FEDERAL INCOME TAXES

The income tax provision of $1.7 million is the result of an addition to the
valuation allowance provided against the deferred tax asset. This provision
increases the valuation allowance to $8.7 million at June 30, 2003, from $7.0
million at December 31, 2002. The increase in the valuation allowance represents
an alternative minimum tax credit carryforward that can only be realized if the
Corporation generates taxable income. The Corporation's current year net loss
carryover may expire prior to its utilization; therefore, no tax credit is being
recorded in anticipation of a future tax benefit from the use of loss
carryovers.

LIQUIDITY

As a result of the Corporation's 2002 annual and year-to-date 2003 results,
sources of liquidity, such as lines of credit from correspondent banks,
borrowings from the Federal Home Loan Bank, and the issuance of stock, which
were historically available, are currently not short-term sources of liquidity.

The liquidity issues faced, the Corporation's actions taken to address them, and
the liquidity plan for 2003, are discussed below.

Through the second quarter of 2003, the Corporation decreased cash and cash
equivalents by $7.6 million. As shown on the Corporation's condensed
consolidated statement of cash flows, despite the net loss of $4.2 million
through the second quarter of 2003, the Corporation used only $313,000 of cash
in operations, due to the noncash expenses such as the depreciation and
amortization of $1.5 million and the change in other assets and liabilities.
Other significant factors impacting cash flow were the $71.9 million of cash
received from the decrease in loans and $12.7 million in proceeds from sales and
maturities of securities. These cash inflows were offset by the $84.0 million of
cash used due to the decrease in deposits.

It is anticipated that during the remainder of 2003, cash generated from
decreases in certain segments of the loan portfolio will be reinvested in
securities and local market loans to meet the collateral requirements of
borrowings, and may also be used to fund further declines in deposits.

The Corporation's liquidity plan for 2003 includes strategies to increase core
deposits in the Corporation's local markets. New products and advertising
commenced in 2003, with a goal of increasing core deposits to reduce the
dependency on noncore deposits, although efforts to generate local deposits have
not been as effective as management anticipated. The Corporation's liquidity
plan for 2003 calls for augmenting local deposit growth efforts with Internet CD
funding, which increased $36.4 million during the second quarter. However, a
substantial percent of these Internet CDs will mature in the fourth quarter of
2003, and there is no assurance that Internet CDs will be available in adequate
amounts or at economically feasible pricing.

The 2003 plan includes the possible sale of certain segments of the loan
portfolio to maintain certain loan to asset and loan to deposit ratios as well
as to reduce the concentration of loans in particular industries, such as
hospitality and gaming.


                                                                             20.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


During the fourth quarter of 2002, the unsecured lines of credit the Corporation
had with two correspondent banks were closed by those banks. In the first
quarter of 2003, the Corporation established a secondary borrowing arrangement
collateralized by loans with the Federal Reserve Bank.

CAPITAL AND REGULATORY

Through the second quarter of 2003, capital decreased by $4.2 million as a
result of the net loss of the Corporation. This compares to a decrease in
capital during the same period in the previous year of $1.5 million resulting
primarily from the net loss, changes in the unrealized gain on securities
available for sale, and dividends declared.

As a bank holding company, the Corporation is required to maintain certain
levels of capital under government regulation. There are several measurements of
regulatory capital and the Corporation is required to meet minimum requirements
under each measurement. The federal banking regulators have also established
capital classifications beyond the minimum requirements in order to risk-rate
deposit insurance premiums and to provide trigger points for prompt corrective
action in the event an institution becomes financially troubled. As of June 30,
2003, the Corporation, and as of December 31, 2002, the Corporation and the
Bank, were undercapitalized. See discussions on the following pages of the
regulatory requirements and the Corporation's plans for increasing its capital
ratios.

Regulatory capital is not the same as shareholders' equity reported in the
accompanying condensed consolidated financial statements. Certain assets cannot
be considered assets for regulatory purposes. The Corporation's acquisition
intangibles and a portion of the deferred tax asset are examples of such assets.



Presented below is a summary of the capital position in comparison to generally
applicable regulatory requirements:

<TABLE>
<CAPTION>
                                                                    Tier I          Tier I              Total
                                                                  Capital to      Capital to         Capital to
                                                                    Average      Risk-Weighted      Risk-Weighted
                                                                    Assets          Assets             Assets
                                                                    ------          ------             ------
<S>                                                               <C>            <C>                <C>
     Regulatory minimum for capital adequacy purposes                4.0%            4.0%                8.0%

     The Corporation:
         June 30, 2003                                               3.6%            5.0%                8.5%
         December 31, 2002                                           3.8%            5.3%                8.2%

     The Bank:
         June 30, 2003                                               5.2%            7.2%                8.5%
         December 31, 2002                                           4.8%            6.6%                7.9%
</TABLE>


The capital levels include trust preferred securities, issued in May 1999,
subject to certain limitations. Federal Reserve guidelines limit the amount of
trust preferred securities which can be included in Tier I capital to 25% of
total Tier I capital. As of June 30, 2003 and December 31, 2002, $4,451,000 and
$5,706,000, respectively, of the $12,450,000 of trust preferred securities were
available as Tier I capital of the Corporation.

In September 2002, a safety and soundness examination of the Bank was conducted
by its principal regulators, the Michigan Office of Financial and Insurance
Services (OFIS) and the FDIC. During the course of that examination, the FDIC,
the OFIS, and the Federal Reserve Bank of Chicago (FRB) requested that the
Corporation and the Bank take certain actions, including suspending the payment
of dividends and conserving the liquidity of the Corporation.


                                                                             21.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


In response to the concerns expressed by the regulators, the Board of Directors
of the Corporation and the Bank adopted resolutions providing for prior
regulatory approval of the declaration or payment of any dividend by the
Corporation or the Bank, and suspension of interest payments by the Corporation
in connection with its trust preferred securities.

The agreements relating to the trust preferred securities allow for the
suspension of payments for up to 20 quarters. Therefore, the suspension of the
interest payments does not violate the agreement. However, while interest on the
Corporation's subordinated debentures that Fund the distribution on the trust
preferred securities are suspended, no dividends can be paid on the
Corporation's common stock, and certain other restrictions apply. These other
restrictions include a prohibition on the sale of assets except in the ordinary
course of business or in immaterial amounts.

Following the completion of the safety and soundness examination of the Bank by
the FDIC and the OFIS, and the Bank's receipt of the related Joint Report of
Examination ("Report"), the FDIC and the OFIS, with the consent of the Bank, on
March 26, 2003, entered a formal Cease and Desist Order (the "Order") under
federal and state banking laws. The Order became effective on April 5, 2003, and
will remain in effect until modified or terminated by action of the FDIC and the
OFIS. The Order identifies deficiencies in the Bank's policies and procedures
for safe and sound operation, including its directorate and management personnel
and practices, credit underwriting, credit administration, and policies
regarding asset/liability management, liquidity, funds management and
investments, and its compliance with all applicable laws and regulations,
including Regulations O and U of the Board of Governors of the Federal Reserve
System (the "Board"), the FDIC Rules and Regulations, and the Michigan Banking
Code of 1999. The Order also requires the Bank to maintain specified capital
ratios during the life of the Order.

The Order further requires the Bank and its directors to take the following
specific steps, again within time periods specified in the Order. For the
calendar quarters ending March 31, 2003, and June 30, 2003, the Bank must have a
ratio of Tier 1 capital to total assets ("Tier 1 Capital Ratio") equal to at
least 6.4%. Commencing with the calendar quarter ending September 30, 2003, and
for each calendar quarter thereafter, the Bank must have a Tier 1 Capital Ratio
equal to at least 8.0%. If the Bank's Tier 1 Capital Ratio is below the required
percentage for any such quarter, the Bank must take steps to bring its Tier 1
Capital Ratio to the required level within 60 days. The Order also requires the
Bank to maintain its total risk-based capital ratio at 10.0% or greater for each
calendar quarter ending after the effective date of the Order. If the Bank's
total risk-based capital ratio for any such quarter is less than 10.0%, the Bank
must take steps to bring its total risk-based capital ratio to the required
level within 60 days.

As of June 30, 2003, the Bank's capital ratios do not meet the minimum
requirements of the Order. Following is a summary of the strategies which
management is considering in order to restore the Bank's capital to the levels
required by the Order.

The Corporation may sell or close certain branches to reduce the size of the
Bank. In conjunction with the possible sale of the branches, the Bank would sell
a select portion of its loan portfolio. It is anticipated that the cash received
from the sale of the loans would provide the necessary liquidity to fund the
branch sales. Any sales of the branches and loans will require prior regulatory
approval, and may require approval by holders of the trust preferred securities.

The potential branch and loan sales would not reduce the overall size of the
Bank sufficiently, based on current capital levels, to achieve the required
regulatory capital ratios. Therefore, the Corporation is anticipating additional
capital will need to be raised to attain the 8% Tier 1 Capital Ratio.



                                                                             22.
<PAGE>
                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


The Corporation has and continues to explore a possible capital infusion from
outside investors which may also include an opportunity for existing
shareholders to participate. In addition, the Board of Directors has pursued and
expects to continue to pursue the sale of the Corporation to other financial
institutions. If no outside investor is found or a sale does not materialize,
the Corporation will consider other alternatives for raising additional capital.
Among the options that the Corporation would consider is a rights offering for
existing shareholders. It is possible that any new stock issuance could be at a
price below the Corporation's current book value, resulting in a dilution of the
existing shareholders' ownership interests.

Noncompliance with the minimum capital requirements of the Order may impact the
ability of the Corporation and the Bank to remain as ongoing operating entities.

Recruiting firms have been utilized to attract additional skilled and
experienced banking professionals who are assisting the senior management team
in addressing the regulatory issues facing the Corporation. By strengthening the
infrastructure of the Corporation, management can place more emphasis on
addressing problem loans, financial matters, and moving forward with and
implementing the daily strategies of the Corporation. In the future, this may
decrease the dependence on outsourced services, which in turn should decrease
expenses associated with these services. The expense reduction and improvement
in the loan portfolio would be significant steps toward returning the
Corporation to profitability, which in turn could further improve the capital
ratios.

The Order imposes specific prohibitions and limitations on the Bank and its
directors regarding certain matters. Without the prior approval of the FDIC and
the OFIS, the Bank may not (i) enter into any material transaction that is not
in the ordinary course of business (including any material acquisition or
disposition of assets), (ii) declare or pay any cash dividend, (iii) extend any
credit, directly or indirectly, to any borrower obligated to the Bank on any
credit which has been charged off or classified loss by bank examiners so long
as such credit remains uncollected, or (iv) authorize any "golden parachute"
payment to any person, within the meaning of the applicable FDIC regulation. In
addition, the Bank is required to notify the FDIC and the OFIS in writing of any
change in the Bank's directors or senior executive officers, and to obtain the
prior approval of the OFIS of the addition of any person as a director or senior
executive officer of the Bank. The Bank is also prohibited from permitting its
director and former Chairman, Ronald G. Ford, from negotiating or making any
loan, overdraft, or extension of credit, serving as a member of the Bank's loan
committee, or participating in credit underwriting, other than voting as a
director on matters presented to the Board of Directors.

The Order requires the Bank and its directors to take specific steps, within
time periods specified in the Order, to address the operational deficiencies,
including certain violations of law and regulations, identified by the FDIC and
the OFIS in the Order and the Report. Among other things, the Bank must
establish, and submit to the FDIC and the OFIS for comment, written plans (i) to
reduce the Bank's risk position with respect to certain classified loans
identified in the Report or any subsequent Report of Examination during the life
of the Order, (ii) to reduce identified concentrations of loans to one industry
in excess of 100% of the Bank's Tier 1 capital, (iii) to reduce and collect
delinquent loans, (iv) to eliminate the classified amounts of loans to
directors, executive officers, principal shareholders of the Bank and their
respective related interests, (v) to address the Bank's relationship of volatile
liabilities to temporary investments, rate sensitivity objectives, and
asset/liability management, (vi) setting forth the Bank's strategic plan,
including financial goals and strategies to maintain adequate capital and
liquidity, to reduce problem loans, and to attract and keep qualified
management, (vii) covering the policies and procedures for review and approval
of reimbursement of customer entertainment and business development expenses of
the Bank's directors, officers and employees, (viii) for a realistic budget for
calendar year 2003 and each subsequent year during the life of the Order,
including strategies to improve the Bank's net interest margin, (ix) to reduce
the Bank's portfolio of other real estate owned as a result of foreclosure or
surrender of collateral for loans, and (x) to address procedures for the
directors to monitor, and management to implement, the requirements of the
Order.


                                                                             23.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


Further actions the Bank must take within periods specified in the Order include
correcting all deficiencies noted in the Report with respect to certain
categories of loans, and all technical exceptions and all violations of law
noted in the Report. The Bank's loan committee, which must include at least
three outside directors who are independent of management and any principal
shareholder, is required to meet at least monthly, and to act with respect to
specified categories of loans and loan applications, including all such
applications involving directors and executive officers of the Bank and their
respective related interests. The Bank's Board of Directors is required to
review and revise the Bank's written loan policy, to submit the revised policy
to the FDIC and OFIS for review and comment, and to conduct an annual review of
the policy. The Bank's Board of Directors is also required to review and revise
the Bank's investment policy, and to submit the revised policy for comment to
the FDIC and the OFIS. The Order mandates the Bank's Board of Directors (i) to
adopt resolutions acknowledging the Bank's designation as a troubled institution
by the FDIC, (ii) to review all agreements for the provision of goods and
services between the Bank and any of its current or former directors, officers,
or employees, and their respective related interests, and to determine whether
such agreements remain in the best interest of the Bank, and (iii) to seek
restitution from Ronald G. Ford of all amounts paid by the Bank pursuant to the
Chairman Agreement entered into as of April 12, 2002, between Mr. Ford and the
Corporation. The Order also requires the Bank to submit to the FDIC and the OFIS
written reports regarding its progress under the Order, signed by each director
of the Bank, every three months following the effective date of the Order.

The Bank has complied with the requirements of the Order to develop policies and
plans to address the operating deficiencies noted in the report.

If the Bank fails or is unable to timely comply with the Order, there could be
material adverse effects on the Bank and the Corporation. Since the entry of the
Order, the Corporation has determined that the Bank was not in compliance with
the minimum capital ratios specified in the Order for the calendar quarter ended
June 30, 2003. There can be no assurance that the Corporation can take steps in
the time limits prescribed by the Order to restore the Bank's capital ratios to
the required levels.

The Corporation and the Bank have been addressing the requirements of the Order
as the Board of Directors and management believe it is in the best interests for
the long-term financial health of the Corporation to address the issues
promptly.

The Order requires development of a comprehensive strategic plan, financial
plan, and profit plan. The development of these plans will provide the Board of
Directors and management with a road map to strengthen the Corporation in many
areas, reduce risk, and improve liquidity, all in an effort to return the
Corporation to profitability. By implementing these strategic plans, improved
policies and resolution of nonperforming assets, the Corporation believes it can
more effectively serve its customers, grow in its markets, return to
profitability, and increase shareholder value. Management and the Board of
Directors are developing a strategic plan, financial plan, and profit plan that
are intended to strengthen the operations of the Corporation and the Bank to
return the Corporation to profitable and sound operations.

Addressing the requirements of the Order, carrying out the objectives of the
strategic plan, and returning the Corporation to profitability will require the
strengthening of the executive management team. The Board of Directors hired C.
James Bess, President and Chief Executive Officer, effective July 28, 2003. Mr.
Bess has 40 years of banking experience and has successfully led the turnaround
of eight banks over the last 25 years.

The Corporation will be seeking to add additional management with experience in
turnaround situations, loan portfolio, credit and problem loan administration,
and financial management expertise commensurate with the issues the Corporation
must address. The addition of management may increase expense in the short term.
However, the additional management expertise is expected to help the Corporation
resolve many of its issues more quickly, and improve customer service and
financial performance.


                                                                             24.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                      AND RESULTS OF OPERATIONS (Continued)


The Board of Directors is further required to address the overall
asset/liability management practices of the Bank, interest rate risk management,
and liquidity management. Strengthening the Bank's policies, risk limits, and
procedures in these areas should increase overall liquidity and consistency of
income through interest rate cycles and reduce risk to capital.

OTHER MATTERS

Recently, the Corporation was served with process in a class action initiated by
a shareholder of the Corporation, alleging violations of the Federal securities
laws and seeking, among other things, compensatory damages. The complaint also
named as defendants certain former directors and senior executive officers of
the Corporation. The Corporation is aware that another similar action has been
filed by a former shareholder of the Corporation. In addition, a shareholder's
derivative action has been filed against the Corporation and certain current and
former directors of the Corporation. All of these proceedings are described in
Part II, Item 1 - Legal Proceedings. Litigation of the types involved in these
actions can be complex, time-consuming, and often protracted. The Corporation
anticipates that it will incur substantial additional expense for legal and
other professional fees as a result of the filing of these actions. At this
early stage of the proceedings, the Corporation cannot accurately assess the
impact which these proceedings will have on the Corporation. An ultimate
determination of any of these actions adverse to the Corporation could have a
material adverse effect on the Corporation's financial condition and operations.

SUBSEQUENT EVENTS

The Bank has received regulatory approval to close four branches with deposits
totaling approximately $8 million effective September 5, 2003.


                                                                             25.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
       ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


INTEREST RATE RISK

In general, the Corporation attempts to manage interest rate risk by investing
in a variety of assets which afford it an opportunity to reprice assets and
increase interest income at a rate equal to or greater than the interest expense
associated with repricing liabilities.

Interest rate risk is the exposure of the Corporation to adverse movements in
interest rates. The Corporation derives its income primarily from the excess of
interest collected on its interest-earning assets over the interest paid on its
interest-bearing obligations. The rates of interest the Corporation earns on its
assets and owes on its obligations generally are established contractually for a
period of time. Since market interest rates change over time, the Corporation is
exposed to lower profitability if it cannot adapt to interest rate changes.
Accepting interest rate risk can be an important source of profitability and
shareholder value; however, excess levels of interest rate risk could pose a
significant threat to the Corporation's earnings and capital base. Accordingly,
effective risk management that maintains interest rate risk at prudent levels is
essential to the Corporation's safety and soundness.

Loans are the most significant earning asset. Management offers commercial and
real estate loans priced at interest rates which fluctuate with various indices
such as the prime rate or rates paid on various government issued securities. In
addition the Corporation prices loans so it has an opportunity to reprice the
loan within 12 to 36 months.

The Corporation has $55.1 million of securities, of which $45.1 million are
mortgage-backed securities providing for scheduled monthly principal and
interest payments as well as unanticipated prepayments of principal. These cash
flows are then reinvested into other earning assets at current market rates.

The Corporation also has federal funds sold to correspondent banks as well as
other interest-bearing deposits with correspondent banks. These funds are
generally repriced on a daily basis.

The Corporation offers deposit products with a variety of terms ranging from
deposits whose interest rates can change on a weekly basis to certificates of
deposit with repricing terms of up to five years.

Beyond general efforts to shorten the loan pricing periods and extend deposit
maturities, management can manage interest rate risk by the maturity periods of
securities purchased, selling securities available for sale, and borrowing funds
with targeted maturity periods, among other strategies. Also, the rate of
interest rate changes can impact the actions taken since the speed of change
affects borrowers and depositors differently.

Exposure to interest rate risk is reviewed on a regular basis. Interest rate
risk is the potential of economic losses due to future interest rate changes.
These economic losses can be reflected as a loss of future net interest income
and/or a loss of current fair market values. The objective is to measure the
effect of interest rate changes on net interest income and to structure the
composition of the balance sheet to minimize interest rate risk and at the same
time maximize income. Management realizes certain risks are inherent and that
the goal is to identify and minimize the risks. Tools used by management include
maturity and repricing analysis and interest rate sensitivity analysis.

The difference between repricing assets and liabilities for a specific period is
referred to as the gap. An excess of repriceable assets over liabilities is
referred to as a positive gap. An excess of repriceable liabilities over assets
is referred to as a negative gap. The cumulative gap is the summation of the gap
for all periods to the end of the period for which the cumulative gap is being
measured.

Assets and liabilities scheduled to reprice are reported in the following time
frames. Those instruments with a variable interest rate tied to an index and
considered immediately repriceable are reported in the 1- to 90-day time frame.
The estimates of principal amortization and prepayments are assigned to the
following time frames.

                                                                             26.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)


The following is the Corporation's repricing opportunities at June 30, 2003
(dollars in thousands):

<TABLE>
<CAPTION>
                                                           1 - 90         91 - 365          2 - 5           Over 5
                                                            Days            Days            Years           Years            Total
                                                            ----            ----            -----           -----            -----
<S>                                                      <C>             <C>              <C>             <C>              <C>
Interest-earning assets:
   Loans                                                 $ 192,493       $  56,358        $  62,245       $  47,302        $ 358,398
   Securities                                                3,896           8,877           32,750           9,548           55,071
   Other                                                    41,470             -0-              -0-             -0-           41,470
                                                         ---------       ---------        ---------       ---------        ---------

   Total interest-earning assets                           237,859          65,235           94,995          56,850          454,939
                                                         ---------       ---------        ---------       ---------        ---------

Interest-bearing obligations:
   Savings deposits                                        105,113             -0-              -0-             -0-          105,113
   Time deposits                                            28,452         137,136           51,261             779          217,628
   Borrowings                                                  -0-             881           15,459          71,143           87,483
   Subordinated debentures                                  12,450             -0-              -0-             -0-           12,450
                                                         ---------       ---------        ---------       ---------        ---------

   Total interest-bearing obligations                      146,015         138,017           66,720          71,922          422,674
                                                         ---------       ---------        ---------       ---------        ---------

Gap                                                      $  91,844       $ (72,782)       $  28,275       $ (15,072)       $  32,265
                                                         =========       =========        =========       =========        =========

Cumulative gap                                           $  91,844       $  19,062        $  47,337       $  32,265        $  32,265
                                                         =========       =========        =========       =========        =========
</TABLE>

The above analysis indicates that at June 30, 2003, the Corporation had a
cumulative asset sensitivity gap position of $19.1 million within the one-year
time frame. The Corporation's cumulative asset sensitive gap suggests that if
market interest rates increase in the next twelve months, the Corporation's net
interest income could increase. Conversely, if market interest rates continue to
decrease over the next twelve months, the above GAP position suggests the
Corporation's net interest income would decrease.

At December 31, 2002, the Corporation had a cumulative asset sensitivity gap
position of $20.1 million within the one-year time frame. The Corporation's
cumulative asset sensitive gap suggested that if market interest rates increased
in the next twelve months, the Corporation had the potential to earn more net
interest income. Conversely, if market interest rates continued to decrease over
a twelve-month period, the December 31, 2002, gap position suggested the
Corporation's net interest income would decrease.

The change in the gap position from December 31, 2002 to June 30, 2003, is a
result of the decreases experienced in the loans and deposits with a greater
dollar amount of the loan portfolio reductions in the one-year time frame than
the deposit reductions. A limitation of the traditional gap analysis is that it
does not consider the timing or magnitude of noncontractual repricing or
expected prepayments. In addition, the gap analysis treats savings, NOW, and
money market accounts as repricing within 90 days.

The borrowings in the gap analysis include FHLB advances as fixed-rate advances.
A significant portion of these advances give the FHLB the option to convert from
a fixed-rate advance to an adjustable rate advance with quarterly repricing at
three-month LIBOR Flat. The exercise of this conversion feature by the FHLB
would impact the repricing dates currently assumed in the analysis.

The Corporation's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk and foreign exchange risk. The Corporation has no
market risk sensitive instruments held for trading purposes. The Corporation has
limited agricultural-related loan assets and therefore has minimal significant
exposure to changes in commodity prices. Any impact that changes in foreign
exchange rates and commodity prices would have on interest rates are assumed to
be insignificant.

                                                                             27.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)


Evaluating the exposure to changes in interest rates includes assessing both the
adequacy of the process used to control interest rate risk and the quantitative
level of exposure. The Corporation's interest rate risk management process seeks
to ensure that appropriate policies, procedures, management information systems,
and internal controls are in place to maintain interest rate risk at prudent
levels with consistency and continuity. In evaluating the quantitative level of
interest rate risk, the Corporation assesses the existing and potential future
effects of changes in interest rates on its financial condition, including
capital adequacy, earnings, liquidity, and asset quality.

In addition to changes in interest rates, the level of future net interest
income is also dependent on a number of variables, including: the growth,
composition and levels of loans, deposits, and other earning assets and
interest-bearing obligations, and economic and competitive conditions; potential
changes in lending, investing, and deposit strategies; customer preferences; and
other factors.

FOREIGN EXCHANGE RISK

In addition to managing interest rate risk, management also actively manages
risk associated with foreign exchange. The Corporation provides foreign exchange
services, makes loans to, and accepts deposits from, Canadian customers
primarily at its banking offices in Sault Ste. Marie. To protect against foreign
exchange risk, the Corporation monitors the volume of Canadian deposits it takes
in and then invests these Canadian funds in Canadian commercial loans and
securities. As of June 30, 2003, the Corporation had excess Canadian assets of
$2.7 million (or $2.0 million in U.S. dollars). Management believes the exposure
to short-term foreign exchange risk is minimal and at an acceptable level for
the Corporation.

OFF-BALANCE-SHEET RISK

Derivative financial instruments include futures, forwards, interest rate swaps,
option contracts and other financial instruments with similar characteristics.
The Corporation currently does not enter into futures, forwards, swaps or
options. However, the Corporation is party to 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 and standby letters of credit and involve to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in
the condensed consolidated balance sheets. 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 and may require collateral from the borrower if deemed
necessary by the Corporation. Standby letters of credit are conditional
commitments issued by the Corporation to guarantee the performance of a customer
to a third party up to a stipulated amount and with specified terms and
conditions.

Commitments to extend credit and standby letters of credit are not recorded as
an asset or liability by the Corporation until the instrument is exercised.

IMPACT OF INFLATION AND CHANGING PRICES

The accompanying condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles, which require the
measurement of financial position and results of operations in historical
dollars without considering the change in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
increased cost of the Corporation's operations. Nearly all the assets and
liabilities of the Corporation are financial, unlike industrial or commercial
companies. As a result, the Corporation's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. The Corporation's ability to match the interest sensitivity of its
financial assets to the interest sensitivity of its financial liabilities tends
to minimize the effect of changes in interest rates on the Corporation's
performance. Changes in interest rates do not necessarily move to the same
extent as changes in the price of goods and services.


                                                                             28.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                   ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES


As of June 30, 2003, an evaluation was performed under the supervision of and
with the participation of the Corporation's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Corporation's disclosure controls and procedures.
Based on that evaluation, the Corporation's management, including the Chief
Executive Officer and Chief Financial Officer, concluded that the Corporation's
disclosure controls and procedures were effective as of June 30, 2003. There
have been no significant changes in the Corporation's internal controls or in
other factors that could significantly affect internal controls since March 31,
2003.



                                                                             29.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

As of the date hereof, except for the Order and the three lawsuits referred to
below, there were no material pending legal proceedings, other than routine
litigation incidental to the business of banking to which the Corporation or any
of its subsidiaries is a party or of which any of its properties is the subject.
Information pertaining to the Order is contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" under the caption
"Capital and Regulatory" on this Form 10-Q, and is incorporated here by
reference.

In an action styled Lanctot v. Littlejohn, et al., filed in the U.S. District
Court for the Western District of Michigan on June 13, 2003, a shareholder of
the Corporation has brought a class action against the Corporation and its
former chief executive officers, Ronald G. Ford and Sherry L. Littlejohn, for
alleged violations of Federal securities laws. The Complaint, which demands a
jury trial, is brought on behalf of all persons, subject to certain exceptions,
who purchased the Corporation's common stock during the period from November 13,
2000, through April 15, 2003. It alleges that the Corporation and the individual
defendants violated section 10(b) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rule 10b-5 of the SEC issued under the Exchange Act, by
disseminating materially false and misleading statements and/or concealing
material adverse facts concerning the financial condition and operations of the
Corporation, with knowledge, or in reckless disregard, of the materially false
and misleading character thereof. The Complaint also alleges violations of
Section 20 of the Exchange Act by the individual defendants, by reason of their
control, at relevant times, of the Corporation. Among other things, the
Complaint is based upon allegations of deficiencies in the Corporation's
policies and procedures for safe and sound operation, including its directorate
and management personnel and practices, credit underwriting, credit
administration, and policies regarding asset/liability management, liquidity,
funds management and investments, and its compliance with all applicable laws
and regulations, including Regulations O and U of the Board of Governors of the
Federal Reserve System (the "Board"), the Federal Deposit Insurance Corporation
("FDIC") Rules and Regulations, and the Michigan Banking Code of 1999. The
Complaint seeks certification of a class consisting of all persons who purchased
the common stock of the Corporation on the open market between the dates noted
above, compensatory damages, and costs and attorney's fees.

In an action styled Rosen v. North Country Financial Corporation, et al., filed
in the U.S. District Court for the Western District of Michigan on June 23,
2003, a former shareholder of the Corporation has brought a class action against
the Corporation and its former chief executive officers, Ronald G. Ford and
Sherry L. Littlejohn, for alleged violations of Federal securities laws. The
Complaint, which demands a jury trial, is brought on behalf of all persons,
subject to certain exceptions, who purchased the Corporation's common stock
during the period from November 13, 2000, through April 15, 2003. It alleges
that the Corporation and the individual defendants violated section 10(b) of the
Exchange Act and Rule 10b-5, by disseminating materially false and misleading
statements and/or concealing material adverse facts concerning the financial
condition and operations of the Corporation, with knowledge, or in reckless
disregard, of the materially false and misleading character thereof. The
Complaint also alleges violations of Section 20 of the Exchange Act by the
individual defendants, by reason of their control, at relevant times, of the
Corporation. Among other things, the Complaint is based upon allegations of
deficiencies in the Corporation's policies and procedures for safe and sound
operation, including its directorate and management personnel and practices,
credit underwriting, credit administration, and policies regarding
asset/liability management, liquidity, funds management and investments, and its
compliance with all applicable laws and regulations, including Regulations O and
U of the Board, FDIC Rules and Regulations, and the Michigan Banking Code of
1999. The Complaint seeks certification of a class consisting of all persons who
purchased the common stock of the Corporation on the open market between the
dates noted above, compensatory damages, and costs and attorney's fees.

                                                                             30.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                     PART II - OTHER INFORMATION (continued)


In an action styled Virginia M. Damon Trust v. North Country Financial
Corporation, Nominal Defendant, and Dennis Bittner, Bernard A. Bouschor, Ronald
G. Ford, Sherry L. Littlejohn, Stanley J. Gerou II, John D. Lindroth, Stephen
Madigan, Spencer Shunk, Michael Henrickson, Glen Tolksdorf, and Wesley Hoffman,
filed in the U.S. District Court for the Western District of Michigan on July 1,
2003, a shareholder of the Corporation has brought a shareholder's derivative
action under Section 27 of the Exchange Act against the Corporation and certain
of its current and former directors and senior executive officers. The
Complaint, which demands a jury trial, is brought on behalf of the Corporation
against the individual defendants. It alleges that the individual defendants
have caused loss and damage to the Corporation through breaches of their
fiduciary duties of oversight and supervision by failing (i) to adequately
safeguard the assets of the Corporation, (ii) to ensure that adequate
administrative, operating, and internal controls were in place and implemented,
(iii) to ensure that the Corporation was operated in accordance with
legally-prescribed procedures, and (iv) to oversee the audit process to ensure
that the Corporation's assets were properly accounted for and preserved. The
Complaint further alleges that the individual defendants violated Section 14(a)
of the Exchange Act by making materially false and misleading statements in the
proxy statement mailed to shareholders in connection with the annual meeting of
the Corporation held May 29, 2000, and the adoption by the shareholders at that
meeting of the Corporation's 2000 Stock Incentive Plan. The Complaint also
alleges that Mr. Ford and Ms. Littlejohn, through a series of compensation
arrangements, stock options, and employment agreements obtained by them through
improper means resulting from the offices they held with the Corporation,
received excessive compensation, to the injury of the Corporation. Among other
things, the Complaint is based upon allegations of material misstatements or
omissions in filings made by the Corporation with the SEC, and deficiencies in
the Corporation's policies and procedures for safe and sound operation,
including its directorate and management personnel and practices, credit
underwriting, credit administration, and policies regarding asset/liability
management, liquidity, funds management and investments, and its compliance with
all applicable laws and regulations, including Regulations O and U of the Board,
FDIC Rules and Regulations, and the Michigan Banking Code of 1999. The Complaint
seeks (i) rescission of the approval of the 2000 Stock Incentive Plan and return
of all stock and options granted thereunder, (ii) a declaration that the
individual defendants breached their fiduciary duty to the Corporation, (iii) an
order to the individual defendants to account to the Corporation for all losses
and/or damages by reason of the acts and omissions alleged, (iv) an order to
each of the individual defendants to remit to the Corporation all salaries and
other compensation received for periods during which they breached their
fiduciary duties, (v) compensatory damages in favor of the Corporation, (vi)
injunctive relief, and (vii) interest, costs, and attorney's and expert's fees.

Litigation of the types in the three actions described above can be complex,
time-consuming, and often protracted. The Corporation anticipates that it will
incur substantial additional expense for legal and other professional fees as a
result of the filing of these actions. At this early stage of the proceedings,
the Corporation cannot accurately assess the impact which these proceedings will
have on the Corporation. An ultimate determination of any of these actions
adverse to the Corporation could have a material adverse effect on the
Corporation's financial condition and operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The annual meeting of the Registrant's shareholders was held on May 29, 2003.
The purpose of the meeting was to elect directors, each for a three-year term
expiring in 2006. The number of shares voted is presented in the table below.

<Table>
<Caption>
                                     FOR                           WITHHELD
<S>                                <C>                             <C>
Dennis Bittner                     2,593,465                       1,253,266
Bernard A. Bouschor                2,467,017                       1,379,714
</Table>
                                                                             31.
<PAGE>
                       NORTH COUNTRY FINANCIAL CORPORATION
                     PART II - OTHER INFORMATION (continued)


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

   Exhibit 3.1    Articles of Incorporation, as amended, incorporated herein
                  by reference to exhibit 3.1 of the Corporation's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 1999.

   Exhibit 3.2    Amended and Restated Bylaws, incorporated herein by
                  reference to exhibit 3.1 of the Corporation's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 2001.

   Exhibit 10.1   Agreement dated August 1, 2003 between North Country Financial
                  Corporation and C. James Bess.

   Exhibit 31.1   Rule 13a-14(a) Certification of Chief Executive Officer.

   Exhibit 31.2   Rule 13a-14(a) Certification of Chief Financial Officer.

   Exhibit 32.1   Section 1350 Certification of Chief Executive Officer.

   Exhibit 32.2   Section 1350 Certification of Chief Financial Officer.

(b) The following Form 8-K filings were made during the quarter for which this
report is filed:

     -    Form 8-K dated April 5, 2003, disclosure of the Order to Cease and
          Desist entered by the Federal Deposit Insurance Corporation and the
          Michigan Office of Financial and Insurance Services, with the consent
          of the Bank.

     -    Form 8-K dated April 21, 2003, disclosure of the employment of Mr.
          Robert Taylor as Executive Vice President - Chief Financial Officer.

     -    Form 8-K dated May 12, 2003, disclosure of the resignation of Mr.
          Robert Taylor as Executive Vice President - Chief Financial Officer.

     -    Form 8-K dated May 21, 2003, disclosure of the resignation of Ms.
          Sherry L. Littlejohn as President and Chief Executive Officer.

     -    Form 8-K dated May 29, 2003, disclosure of the following appointments:
          Mr. John D. Lindroth as Chairman and Interim Chief Executive Officer;
          Mr. Louis J. Hollow as President; Ms. Jani Blake as Chief Operating
          Officer; and Mr. William T. Fitzgerald as Chief Financial Officer.


                                                                             32.
<PAGE>


                       NORTH COUNTRY FINANCIAL CORPORATION
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                       NORTH COUNTRY FINANCIAL CORPORATION
                                       -----------------------------------
                                                   (Registrant)



8/11/03                                By: /s/ C. James Bess
---------                                ---------------------------------------
Date                                       C. JAMES BESS
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                           (principal executive officer)


                                       By: /s/ William T. Fitzgerald, Jr.
                                         ---------------------------------------
                                           WILLIAM T. FITZGERALD, JR.
                                           CHIEF FINANCIAL OFFICER
                                           (principal financial officer)




                                                                             33.
<PAGE>

                               10-Q EXHIBIT INDEX

   EXHIBIT NO.                     DESCRIPTION

   Exhibit 3.1    Articles of Incorporation, as amended, incorporated herein
                  by reference to exhibit 3.1 of the Corporation's Quarterly
                  Report on Form 10-Q for the quarter ended September 30, 1999.

   Exhibit 3.2    Amended and Restated Bylaws, incorporated herein by
                  reference to exhibit 3.1 of the Corporation's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 2001.

   Exhibit 10.1   Agreement dated August 1, 2003 between North Country Financial
                  Corporation and C. James Bess.

   Exhibit 31.1   Rule 13a-14(a) Certification of Chief Executive Officer.

   Exhibit 31.2   Rule 13a-14(a) Certification of Chief Financial Officer.

   Exhibit 32.1   Section 1350 Certification of Chief Executive Officer.

   Exhibit 32.2   Section 1350 Certification of Chief Financial Officer.