<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 March 31, 2004

                                       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 April 30, 2004, there were outstanding 7,019,152 shares of the
registrant's common stock, no par value.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION
                                      INDEX

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

      Item 1.        Financial Statements

                     Condensed Consolidated Balance Sheets -
                     March 31, 2004 (Unaudited) and December 31, 2003..................................................      1

                     Condensed Consolidated Statements of Operations - Three
                       Months Ended March 31, 2004 (Unaudited) and
                       March 31, 2003 (Unaudited)......................................................................      2

                     Condensed Consolidated Statements of Changes in Shareholders'
                       Equity - Three Months Ended March 31, 2004
                       (Unaudited) and March 31, 2003 (Unaudited)......................................................      3

                     Condensed Consolidated Statements of Cash Flows -
                       Three Months Ended March 31, 2004 (Unaudited) and
                       March 31, 2003 (Unaudited)......................................................................      4

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

      Item 2.        Management's Discussion and Analysis of Financial
                       Condition and Results of Operations.............................................................     12

      Item 3.        Quantitative and Qualitative Disclosures About Market Risk........................................     24

      Item 4.        Controls and Procedures...........................................................................     27

PART II.        OTHER INFORMATION

      Item 1.        Legal Proceedings.................................................................................     28

      Item 6.        Exhibits and Reports on Form 8-K..................................................................     31

      SIGNATURES     ..................................................................................................     32
</TABLE>

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
                                                                               (Unaudited)
<S>                                                                            <C>              <C>
ASSETS
      Cash and due from banks                                                  $      5,421     $      7,433
      Federal funds sold                                                             40,698           15,600
                                                                               ------------     ------------
           Cash and cash equivalents                                                 46,119           23,033

      Interest-bearing deposits in other financial institutions                      12,695            6,048
      Securities available for sale                                                  65,305           84,774
      Federal Home Loan Bank stock                                                    4,601            4,544

      Total loans                                                                   255,021          297,846
           Allowance for loan losses                                                (12,730)         (22,005)
                                                                               ------------     ------------
      Net loans                                                                     242,291          275,841

      Premises and equipment                                                         13,222           13,747
      Other real estate held for sale                                                 3,861            4,356
      Other assets                                                                   12,335           10,196
                                                                               ------------     ------------

           Total assets                                                        $    400,429     $    422,539
                                                                               ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
      Liabilities:
           Non-interest-bearing deposits                                       $     24,378     $     26,179
           Interest-bearing deposits                                                262,694          279,615
                                                                               ------------     ------------
                Total deposits                                                      287,072          305,794

      Borrowings                                                                     87,026           87,026
      Subordinated debentures                                                        12,450           12,450
      Other liabilities                                                               4,510            6,569
                                                                               ------------     ------------
           Total liabilities                                                        391,058          411,839

      Shareholders' equity:
           Preferred stock - No par value:
             Authorized 500,000 shares, no shares outstanding                           -0-              -0-
           Common stock - No par value:
             Authorized - 18,000,000 shares
             Issued and outstanding - 7,019,152                                      16,175           16,175
           Accumulated deficit                                                       (8,169)          (6,502)
           Accumulated other comprehensive income                                     1,365            1,027
                                                                               ------------     ------------

                Total shareholders' equity                                            9,371           10,700
                                                                               ------------     ------------

           Total liabilities and shareholders' equity                          $    400,429     $    422,539
                                                                               ============     ============
</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
                                                                                         March 31,
                                                                               -----------------------------
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Interest income:
      Interest and fees on loans:
           Taxable                                                             $      3,796     $      5,641
           Tax-exempt                                                                   319              422
      Interest on securities:
           Taxable                                                                      698              692
           Tax-exempt                                                                    43               66
      Other interest income                                                             120              152
                                                                               ------------     ------------
           Total interest income                                                      4,976            6,973
                                                                               ------------     ------------

Interest expense:
      Deposits                                                                        1,665            2,545
      Borrowings                                                                      1,181            1,199
      Subordinated debentures                                                           119              122
                                                                               ------------     ------------
           Total interest expense                                                     2,965            3,866
                                                                               ------------     ------------

Net interest income                                                                   2,011            3,107
Provision for loan losses                                                               -0-                0
                                                                               ------------     ------------
Net interest income after provision for loan losses                                   2,011            3,107
                                                                               ------------     ------------

Other income:
      Service fees                                                                      293              430
      Net security (losses)                                                             -0-              (23)
      Other loan and lease income                                                         5               27
      Net gains on sale of loans                                                         12               55
      Gain (loss) on sale of property and equipment                                      48              (58)
      Other operating income                                                            353              413
                                                                               ------------     ------------
           Total other income                                                           711              844
                                                                               ------------     ------------

Other expenses:
      Salaries, commissions, and related benefits                                     1,499            1,677
      Furniture and equipment expense                                                   258              366
      Occupancy expense                                                                 347              399
      Data processing                                                                   355              407
      Accounting, legal, and consulting fees                                            406              830
      Loan and deposit expense                                                          493              574
      Telephone                                                                         213              333
      Advertising expense                                                                17               49
      Other                                                                             801              501
                                                                               ------------     ------------
           Total other expenses                                                       4,389            5,136
                                                                               ------------     ------------

Loss before provision for  income taxes                                              (1,667)          (1,185)
Provision for income taxes                                                              -0-              320
                                                                               ------------     ------------

Net (loss)                                                                     $     (1,667)    $     (1,505)
                                                                               ============     ============

Loss per common share:
      Basic                                                                    $       (.24)    $       (.21)
                                                                               ============     ============
      Diluted                                                                  $       (.24)    $       (.21)
                                                                               ============     ============
</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
                                                                                         March 31,
                                                                               -----------------------------
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Balance, beginning of period                                                   $     10,700     $     20,503

Net (loss) for period                                                                (1,667)          (1,505)
Net unrealized gain (loss) on securities
  available for sale                                                                    338             (102)
                                                                               ------------     ------------
      Total comprehensive (loss)                                                     (1,329)          (1,607)

Dividends declared                                                                      -0-              -0-
                                                                               ------------     ------------

Balance, end of period                                                         $      9,371     $     18,896
                                                                               ============     ============
</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>
                                                                                                    Three Months Ended
                                                                                                        March 31,
                                                                                              -----------------------------
                                                                                                  2004             2003
                                                                                              ------------     ------------
<S>                                                                                           <C>              <C>
Increase (decrease) in cash and cash equivalents:

      Cash flows from operating activities:
           Net (loss)                                                                         $     (1,667)    $     (1,505)
           Adjustments to reconcile net income (loss) to
             net cash provided by (used in) operating activities:
                Depreciation and amortization                                                          456              578
                Provision for impairment of other real estate held for sale                             15              -0-
                Provision for impairment of bank premises and equipment                                193              -0-
                Loss on sales of securities                                                            -0-               23
                (Gain) loss on sale of premises, equipment, and other real estate                       24              (19)
                Change in other assets                                                              (2,199)             836
                Change in other liabilities                                                         (2,059)             320
                                                                                              ------------     ------------
      Net cash provided by (used in) operating activities                                           (5,237)             233
                                                                                              ------------     ------------

      Cash flows from investing activities:
           Net increase in interest-bearing deposits in other financial institutions                (6,647)              (6)
           Purchase of securities available for sale                                                (5,000)             -0-
           Purchase of Federal Home Loan Bank stock                                                    (57)             -0-
           Proceeds from sales of securities available for sale                                        -0-            2,978
           Proceeds from maturities, calls, or paydowns of securities available for sale            24,713            2,267
           Net decrease in loans                                                                    33,236           39,768
           Purchase of premises and equipment                                                          (19)             (19)
           Proceeds from sale of premises, equipment, and other real estate                            819            2,076
                                                                                              ------------     ------------
      Net cash provided by investing activities                                                     47,045           47,064
                                                                                              ------------     ------------

      Cash flows from financing activities:
           Net decrease in deposits                                                                (18,722)         (42,251)
                                                                                              ------------     ------------

           Net cash used in financing activities                                                   (18,722)         (42,251)
                                                                                              ------------     ------------

Net change in cash and cash equivalents                                                             23,086            5,046
Cash and cash equivalents at beginning of period                                                    23,033           43,792
                                                                                              ------------     ------------

Cash and cash equivalents at end of period                                                    $     46,119     $     48,838
                                                                                              ============     ============

Supplemental cash flow information:

Cash paid (refunded) for:
      Interest                                                                                $      2,973     $      4,140
      Income taxes                                                                                     -0-             (500)

Transfers of foreclosures from loans to other real estate held for sale                                314            1,810
</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 three-month
      period ended March 31, 2004, are not necessarily indicative of the results
      that may be expected for the year ending December 31, 2004. 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, 2003.

      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.

      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.

      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.

                                                                              5.

<PAGE>

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

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      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 three months ended March
      31, 2003. There were no options granted in 2004.

<TABLE>
<CAPTION>
                                                  March 31,
                                                    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.

      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 three months ended March 31,
      2004 and the year ended December 31, 2003 as follows (dollars in
      thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                 March 31,        March 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Net loss:

  As reported                                                                  $     (1,667)    $     (1,505)
  Total stock-based compensation expense
    determined under fair value-based method,
    net of tax                                                                          -0-              (14)
                                                                               ------------     ------------

  Pro forma                                                                    $     (1,667)    $     (1,519)
                                                                               ============     ============

Loss per share - Basic:

  As reported                                                                  $       (.24)    $       (.21)
                                                                               ============     ============

  Pro forma                                                                    $       (.24)    $       (.22)
                                                                               ============     ============

Loss per share - Diluted:

  As reported                                                                  $       (.24)    $       (.21)
                                                                               ============     ============

  Pro forma                                                                    $       (.24)    $       (.22)
                                                                               ============     ============
</TABLE>

2.    RECENT ACCOUNTING PRONOUNCEMENT

      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.

                                                                              6.

<PAGE>

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

3.    EARNINGS (LOSS) PER SHARE

      Earnings (loss) per share are based upon the weighted average number of
      shares outstanding.

      The following shows the computation of basic and diluted earnings (loss)
      per share for the three months ended March 31, 2004 and 2003 (dollars in
      thousands, except per share data):

<TABLE>
<CAPTION>
                                                                                        Three Months
                                                                                       Ended March 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Basic (loss) per common share:
   Net (loss)                                                                  $     (1,667)    $     (1,505)
                                                                               ============     ============
   Weighted average common shares outstanding                                         7,019            7,019
                                                                               ============     ============

     Basic (loss) per common share                                             $       (.24)    $       (.21)
                                                                               ============     ============

Diluted (loss) per common share:
   Net (loss)                                                                  $     (1,667)    $     (1,505)
                                                                               ============     ============

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

        Diluted (loss) per common share                                        $       (.24)    $       (.21)
                                                                               ============     ============
</TABLE>

4.    INVESTMENT SECURITIES

      The amortized cost and estimated fair value of investment securities
      available for sale as of March 31, 2004 and December 31, 2003, are as
      follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                        March 31, 2004                 December 31, 2003
                                                 ----------------------------    ----------------------------
                                                  Amortized       Estimated        Amortized      Estimated
                                                     Cost         Fair Value         Cost         Fair Value
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
U S Agencies                                     $     21,021    $     21,241    $     36,017    $     36,225
Obligations of states and political
  subdivisions                                          3,772           4,212           3,772           4,105
Corporate securities                                      666             708             666             708
Mortgage-related securities                            38,481          39,144          43,292          43,736
                                                 ------------    ------------    ------------    ------------

   Total securities available for sale           $     63,940    $     65,305    $     83,747    $     84,774
                                                 ============    ============    ============    ============
</TABLE>

      The amortized cost and estimated fair value of investment securities
      pledged to treasury deposits and borrowings were $50,315,000 and
      $50,502,000, respectively, at March 31, 2004.

                                                                              7.

<PAGE>

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

5.    LOANS

      The composition of loans at March 31, 2004 and December 31, 2003 is as
      follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Commercial real estate                                                         $     35,117     $     39,571
Commercial, financial, and agricultural                                             170,180          203,393
One- to four-family residential real estate                                          46,221           51,120
Consumer                                                                              2,867            3,195
Construction                                                                            636              567
                                                                               ------------     ------------

   Total loans                                                                 $    255,021     $    297,846
                                                                               ============     ============
</TABLE>

      An analysis of the allowance for loan losses for the three months ended
      March 31, 2004, and 2003 (dollars in thousands) is as follows:

<TABLE>
<CAPTION>
                                                                                 March 31,        March 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Balance at beginning of period                                                 $     22,005     $     24,908
Provision for loan losses                                                               -0-              -0-
Recoveries on loans                                                                     113              137
Loans charged off                                                                    (9,388)          (1,713)
                                                                               ------------     ------------

   Balance at end of period                                                    $     12,730     $     23,332
                                                                               ============     ============
</TABLE>

      The allowance for loan losses was significantly impacted by loan charge
      offs in the first quarter of 2004. The Corporation completed the sale of
      $25.2 million of loans, primarily nonperforming, during the first quarter
      of 2004 which resulted in a previously allocated specific reserve on these
      loans being recognized as a charge off. This specific reserve charge off
      amounted to $7.4 million.

      The aggregate amount of nonperforming residential and consumer loans was
      approximately $523,000 and $2,047,000 at March 31, 2004 and December 31,
      2003, 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 three months ended March 31, 2004 and 2003. The nonperforming
      commercial loans are reflected in the information regarding impaired
      loans.

      Information regarding impaired loans as of March 31, 2004 and December 31,
      2003 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Total impaired loans                                                           $     22,246     $     43,827
Impaired loans with a valuation allowance                                            14,478           39,993
Impaired loans on nonaccrual                                                         17,774           36,646
Valuation allowance related to impaired loans                                         3,069            7,648
</TABLE>

      The average investment in impaired loans was approximately $33.0 million
      and $46.7 million for the three-months ended March 31, 2004 and the year
      ended December 31, 2003, respectively.

                                                                              8.

<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 is
      summarized below is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Loans outstanding beginning of period                                          $      6,514     $     10,987
New loans                                                                               -0-              -0-
Net activity on revolving lines of credit                                               -0-           (4,480)
Repayment                                                                              (166)              98
Decrease related to retired executive officers and directors                            -0-              (91)
                                                                               ------------     ------------

   Loans outstanding end of period                                             $      6,348     $      6,514
                                                                               ============     ============
</TABLE>

      There were no loans to related-parties classified substandard at March 31,
      2004 and December 31, 2003, respectively.

6.    BORROWINGS

      Borrowings consist of the following at March 31, 2004 and December 31,
      2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<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 seven years              $     85,475     $     85,475

        Farmers Home Administration, fixed rate note payable, maturing August
           24, 2024, interest payable at 1%                                           1,551            1,551
                                                                               ------------     ------------

                                                                               $     87,026     $     87,026
                                                                               ============     ============
</TABLE>

      The Federal Home Loan Bank borrowings are collateralized at March 31,
      2004, by the following: a collateral agreement on the Corporation's one-
      to four-family residential real estate loans with a book value of
      approximately $37,156,000; commercial real estate leases with a book value
      of approximately $21,163,000; U.S. government agency and mortgage-backed
      securities with an amortized cost and estimated fair value of $48,480,543
      and $49,281,240, respectively; an interest-bearing deposit in the amount
      of $12,695,491; and Federal Home Loan Bank stock owned by the Bank
      totaling $4,600,800. 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 March 31, 2004.

      The U.S.D.A. Rural Development borrowing is collateralized by loans
      totaling $711,000 originated and held by the Corporation's wholly owned
      subsidiary, First Rural Relending, an assignment of a demand deposit
      account in the amount of $987,000, and guaranteed by the Corporation.

                                                                              9.

<PAGE>

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

7.    STOCK OPTION PLANS

      A summary of stock option transactions for the three months ended March
      31, 2004 and the year ended December 31, 2003, is as follows:

<TABLE>
<CAPTION>
                                                                                      Number of Shares
                                                                               -----------------------------
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Outstanding shares at beginning of year                                             549,732          772,397
Granted during the period                                                               -0-           50,000
Expired during the period                                                            (5,400)        (272,665)
                                                                               ------------     ------------

Outstanding shares at end of period                                                 544,332          549,732
                                                                               ============     ============

Weighted average exercise price per share
  at end of period                                                             $      14.03     $      13.94
                                                                               ============     ============

Shares available for grant at end of period                                         363,638          358,238
                                                                               ============     ============
</TABLE>

      Options granted in 2003 were granted at a price of $2.95 per share. These
      same options expired in 2003 as a result of the grantee's resignation.
      Under these plans, options expire ten years after the date of grant.

      Following is a summary of the options outstanding and exercisable at March
      31, 2004:

<TABLE>
<CAPTION>
                                  Weighted
                                  Average        Weighted
                                 Remaining        Average
   Exercise                     Contractual      Exercise
  Price Range       Number      Life-Years         Price
---------------  -----------   -------------   ------------
<S>              <C>           <C>             <C>
 $7.80 - $12.00      254,800            4.81   $       9.23
$15.00 - $20.33      289,532            3.76          18.25
                 -----------   -------------   ------------

                     544,332            4.25   $      14.03
                 ===========   =============   ============
</TABLE>

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.

                                                                             10.

<PAGE>

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

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

      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>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Commitments to extend credit:
   Fixed rate                                                                  $        887     $      3,870
   Variable rate                                                                      6,014           73,651
Standby letters of credit - Variable rate                                            14,557           14,498
Credit card commitments - Fixed rate                                                  3,355            3,381
                                                                               ------------     ------------

                                                                               $     24,813     $     95,400
                                                                               ============     ============
</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.

      Contingencies

      In the normal course of business, the Corporation is involved in various
      legal proceedings. For expanded discussion on the Corporation's legal
      proceedings, see Part II, Item 1, "Legal Proceedings" in this report.

      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 $54.4 million, or
      26.4%, of the commercial loan portfolio at March 31, 2004. 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
      locality.

                                                                             11.

<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 first
quarter of 2004. 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 Litigation 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:

      -     Impact of restrictions related to the trust preferred securities
            issued by the Corporation's subsidiary;

      -     Liquidity of the parent company of the Corporation;

      -     Difficulties in raising capital on acceptable terms;

      -     Impact of continued operating losses;

      -     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;

      -     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;

      -     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.

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.

                                                                             12.

<PAGE>

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

The following discussion will cover results of operations, asset quality,
financial position, liquidity, interest rate sensitivity, and capital resources
for the periods indicated. The information included in this discussion is
intended to assist readers in their analysis of, and should be read in
conjunction with, the consolidated financial statements and related notes and
other supplemental information presented elsewhere in this report. This
discussion should be read in conjunction with the consolidated financial
statements and footnotes contained in the Corporation's Annual Report and Form
10-K for the year-ended December 31, 2003. Throughout this discussion, the term
"Bank" refers to North Country Bank and Trust, the principal banking subsidiary
of the Corporation.

FINANCIAL OVERVIEW

In March 2003, the Bank entered into a formal Cease and Desist Order (the
"Order") under Federal and State banking laws. As a result of this Order, the
Bank initiated significant management and operational changes along with balance
sheet strategies to comply with the Order. The Bank experienced substantial
adverse publicity as a result of the public notice of this Order and from the
reported financial condition of the Bank. This negative publicity resulted in
substantial deposit runoff. The Bank also incurred an inordinate amount of legal
and accounting fees, along with consulting costs during 2003 in its attempt to
address the financial and operational deficiencies which led to the issuance of
the Order. The Order is discussed in more detail in the Consolidated Notes to
the Financial Statements and later in Management's Discussion.

Year-to-date consolidated net loss was $1.7 million through March 31, 2004,
compared to net loss of $1.5 million for the same period in 2003. Basic loss per
share was $.24 for the three months ended March 31, 2004, compared to a loss of
$.21 for the same period in 2003. There was no provision for loan losses for the
three months ended March 31, 2004 and March 31, 2003. Total assets declined
$22.1 million from December 31, 2003 to March 31, 2004. The loan portfolio
declined $42.8 million in the first quarter of 2004, from December 31, 2003
balances of $297.8 million. Deposits have declined $18.7 million since December
31, 2003.

FINANCIAL CONDITION

CASH AND CASH EQUIVALENTS

Cash and cash equivalents increased $23.1 million through the first quarter of
2004. This was due to an increased need to maintain liquidity, the need to fund
pending branch sales and deposit maturities. See further discussion of the
change in cash and cash equivalents in the Liquidity section.

INVESTMENT SECURITIES

Available-for-sale securities decreased $19.5 million, or 23.0%, from December
31, 2003 to March 31, 2004, with the balance on March 31, 2004, totaling $65.3
million. The decrease during the first quarter was due to a combination of
maturities, calls and paydowns of agencies and mortgage related securities.
Investment securities are utilized in an effort to manage interest rate risk and
liquidity. As of March 31, 2004, investment securities with an estimated fair
value of $50.3 million were pledged.

LOANS

Through the first quarter of 2004, loan balances decreased by $42.8 million, or
14.4% from December 31, 2003 balances of $297.8 million. As planned, the Bank
continues to decrease certain segments of its loan portfolio through tightened
underwriting and credit practices and controls. The Bank completed the sale of
$25.2 million of loans on March 31, 2004. This sale was composed of primarily
non-performing loans and resulted in a reduction in non-accrual loans of $17.5
million and a total reduction in non-performing loans of $18.5 million. This
loan sale also reduced concentration exposure in the hotel and tourism industry.
Enhancements to the loan approval process and exception reporting further
provide for a 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 effectively manage the risk in the loan
portfolio. As shown in the table below, most segments of the loan portfolio

                                                                             13.

<PAGE>

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

declined in the first quarter of 2004. Management intends to increase lending
activities in its market and for mortgage, consumer and commercial loan products
while concentrating on loan quality, industry concentration issues and
competitive pricing.

Following is a summary of the loan portfolio at March 31, 2004 and December 31,
2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                                   March 31,      Percent of      December 31,     Percent of
                                                     2004            Total            2003            Total
                                                 ------------    ------------     ------------    ------------
<S>                                              <C>             <C>              <C>             <C>
Commercial real estate                           $     35,117            13.8%    $     39,571            13.3%
Commercial, financial, and agricultural               170,180            66.7          203,393            68.3
1-4 family residential real estate                     46,221            18.1           51,120            17.1
Consumer                                                2,867             1.1            3,195             1.1
Construction                                              636             0.3              567             0.2
                                                 ------------    ------------     ------------    ------------

Total loans                                      $    255,021           100.0%    $    297,846           100.0%
                                                 ============    ============     ============    ============
</TABLE>

Following is a table showing the significant industry types in the commercial
loan portfolio as of March 31, 2004 and December 31, 2003 (dollars in
thousands):

<TABLE>
<CAPTION>
                                      March 31, 2004                         December 31, 2003
                          --------------------------------------  --------------------------------------
                                       Percent of   Percent of                 Percent of   Percent of
                          Outstandint  Commercial  Shareholders'  Outstanding  Commercial  Shareholders'
                            Balance       Loans        Equity       Balance       Loans       Equity
                          -----------  ----------  -------------  -----------  ----------  -------------
<S>                       <C>          <C>         <C>            <C>          <C>         <C>
Hospitality and tourism   $    54,418       26.4%         580.7%  $    76,131       31.3%         711.5%
Gaming                         20,746       10.1          221.4%       22,317        9.2          208.6%
Petroleum                       5,331        2.6           56.9%        8,770        3.6           82.0%
Forestry                        1,300        0.6           13.9%        1,911        0.8           17.9%
Other                         123,502       60.3         1317.9%      133,835       55.1         1250.8%
                          -----------  ---------   ------------   -----------  ---------   ------------
  Total Commercial Loans  $   205,297      100.0%                 $   242,964        100%
                          ===========  =========                  ===========  =========
</TABLE>

Management has made considerable progress in reducing concentrations of
hospitality and tourism loans, which reduced exposure to this economic segment
and lowered overall loan portfolio risk. Management expects further reductions
in concentrations of hospitality and tourism loans through a combination of new
loans in other industries and paydowns and maturities of current portfolio loans
in this sector.

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 March
31, 2004, the allowance for loan losses decreased to 4.99% of total loans
outstanding from 7.39% at December 31, 2003.

Management analyzes the allowance for loan losses in detail on a monthly basis
to determine whether the losses inherent in the portfolio are properly reserved
for. Net charge-offs to average loans outstanding increased to 3.21% from 1.50%
for the three months ended March 31, 2004 and 2003, respectively. Net
charge-offs for the three-month period ended March 31, 2004 were $9,275,000
compared to $2,903,000 for the same period in 2003. Charge offs during the first
quarter of 2004 include $7.4 million of charge offs incurred as a result of the
sale of $25.2 million of primarily non-performing loans. The sale of these
non-performing loans did not result in any gain or loss since the total reduced
carrying value was previously recognized as a specific reserve allocation. The
Corporation did not

                                                                             14.

<PAGE>

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

recognize a provision for loan losses for the three months ended March 31, 2004,
and March 31, 2003. There were no new significant problem loans or loan
downgrades identified during the first quarter of 2004.

The table below shows period end balances of non-performing assets (dollars in
thousands):

<TABLE>
<CAPTION>
                                                  March 31,     December 31,
                                                    2004            2003
                                                ------------    ------------
<S>                                             <C>             <C>
NONPERFORMING ASSETS:
Nonaccrual Loans                                $     18,297    $     38,660
Loans past due 90 days or more                           736             241
Restructured Loans                                        48           7,181
                                                ------------    ------------
  Total nonperforming loans                           19,081          46,082
Other real estate owned                                3,861           4,356
                                                ------------    ------------
  Total nonperforming assets                    $     22,942    $     50,438
                                                ============    ============
Nonperforming loans as a % of loans                     7.48%          15.47%
                                                ------------    ------------
Nonperforming assets as a % of assets                   5.73%          11.94%
                                                ------------    ------------
RESERVE FOR LOAN LOSSES:
At period end                                   $     12,730    $     22,005
                                                ------------    ------------
As a % of loans                                         4.99%           7.39%
                                                ------------    ------------
As a % of nonperforming loans                          66.72%          47.75%
                                                ------------    ------------
As a % of nonaccrual loans                             69.57%          56.92%
                                                ============    ============
</TABLE>

Following is the allocation of the allowance for loan losses as of March 31,
2004 and December 31, 2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Commercial financial and agricultural loans                                    $      6,120     $     11,222
One-to-four family residential real estate loans                                        143              280
Reserve allocation based upon historical loss rate                                    3,210              N/A
Specific reserve on loans sold in first quarter of 2004                                 -0-            7,425
Unallocated                                                                           6,467            3,078
                                                                               ------------     ------------
Totals                                                                         $     15,940     $     22,005
                                                                               ============     ============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                 March 31,      December 31,
                                                                                   2004             2003
                                                                               ------------     ------------
<S>                                                                            <C>              <C>
Allowance to total loans                                                               4.99%            7.39%
Average loans, outstanding, for the quarter and year, respectively             $    288,548     $    361,144
Net charge-offs to average outstanding loans                                           3.21%            0.80%
Nonperforming loans to gross loans                                                     7.48%           15.47%
</TABLE>

Total nonperforming loans decreased $27.0 million since December 31, 2003, after
the net charge-offs of $9.3 million which have been recognized through March 31,
2004. Contributing to the significant reduction in non-performing loans was the
sale of $25.2 million in loans of which $18.5 million were non-performing.

                                                                             15.

<PAGE>

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

Management continues to address market issues impacting its loan customer base.
In conjunction with the Corporation's senior lending staff and the bank
regulatory examinations, management intensified the review of the Corporation's
loans, related collateral evaluations, and the overall lending process during
2003. The Corporation also utilized a loan review consultant, in 2003, to
perform a review of the loan portfolio. The opinion of this consultant upon
completion of the independent review provided findings similar to management on
the overall adequacy of the reserve. The Corporation has engaged this same
consultant for loan review during 2004.

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 for the first
quarter of 2004 (dollars in thousands):

<TABLE>
<S>                                                                  <C>
Balance at December 31, 2003                                         $ 4,356
Other real estate transferred from loans                                 314
Other real estate sold/written down                                     (809)
                                                                     -------

Balance at March 31, 2004                                            $ 3,861
                                                                     =======
</TABLE>

During the first three months of 2004, the Corporation received real estate in
lieu of loan payments of $.314 million. 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 reduction in the fair value results in a write-down of other real
estate. Write-downs on other real estate may be recorded based on subsequent
evaluations of current realizable fair values.

DEPOSITS

The Corporation had a reduction in deposits in the first quarter of 2004. Total
deposits decreased by $18.7 million, or 6.1%, in the first quarter of 2004. Due
to the reduction in the loan portfolio, management was able over the last twelve
months to reduce its reliance on brokered and noncore certificates of deposits
over $100,000. Brokered deposits decreased by $20 million during the first
quarter of 2004 to $10 million at March 31, 2004, while certificates of deposit
over $100,000 showed a slight increase of $.3 million during the first quarter
of 2004 to $18.9 million at March 31, 2004. The Corporation's other deposit
categories increased by $1.0 million in the first quarter of 2004.

BORROWINGS

The Corporation has used alternative funding sources to provide long-term,
stable sources of funds. Total borrowings have remained the same from December
31, 2003 to March 31, 2004, at $87.0 million of which $85.5 million of the total
borrowings 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.

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. The Board of Directors adopted a resolution to apply for the
deferment of interest payments on the Trust Preferred securities. The trust
document allows for a deferral of interest payments for up to 20 quarters.
Management has deferred the quarterly payments beginning with the November 14,
2002, payment and it is expected that interest will continue to be deferred
until the Board of Directors believes it is prudent to resume payments.

                                                                             16.

<PAGE>

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

SHAREHOLDERS' EQUITY

Total shareholders' equity decreased $1.3 million from December 31, 2003 to
March 31, 2004. The decrease is comprised of a net loss of $1.7 million and an
increase in the net unrealized gain on securities of $338,000. 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 to include
satisfaction of requirements in the Order.

RESULTS OF OPERATIONS

NET INTEREST INCOME

Net interest income before provision for loan losses for the quarter ended March
31, 2004, decreased by $1.1 million, or 35.3% compared to the same period one
year ago. The decrease in loan volume offset by the decrease in deposit volume
during the past twelve months, combined with the impact of nonaccrual loans, and
a continued low interest rate environment have resulted in the decline in net
interest income.

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. There was no provision
for loan losses for the quarter ended March 31, 2004 and March 31, 2003.
Management continues to monitor the loan portfolio for changes which may impact
the required allowance for loan losses.

OTHER INCOME

Other income decreased by $133,000 for the quarter ended March 31, 2004,
compared to the quarter ended March 31, 2003. Service fees decreased $137,000,
while loan and lease income declined $22,000. The decline in service fees is
primarily due to the significant decline in deposits from March 31, 2003 to
March 31, 2004. Other non-interest income was positively impacted in the first
quarter of 2004 from a gain of $258,000 on the sale of a limited partnership
interest.

The following table details noninterest income for the three months ended March
31, 2004 and March 31, 2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                                            For the three months ended
                                                                     March 31,             % Increase (Decrease)
                                                               2004            2003             2004-2003
                                                           ------------    ------------    ---------------------
<S>                                                        <C>             <C>             <C>
Service fees                                               $        293    $        430              (31.86)
Loan and lease fee income                                             5              27              (81.48)
Gain on sale of loans                                                12              55              (78.18)
Gain (loss) on sale of property and equipment                        48             (58)             182.76
Other non interest income                                           353             413              (14.53)
                                                           ------------    ------------        ------------
        Subtotal                                                    711             867              (17.99)
                                                           ------------    ------------        ------------
Net Securities gains (losses)                                         0             (23)             100.00
                                                           ------------    ------------        ------------
        Total noninterest income                           $        711    $        844              (15.76)
                                                           ============    ============        ============
</TABLE>

OTHER EXPENSES

Other expenses decreased $747,000 for the quarter ended March 31, 2004, compared
to the same period in 2003. Salaries, commissions, and related benefits
decreased by $178,000 during the first quarter of 2004 compared to the first
quarter of 2003. During the first quarter of 2004, the Corporation recognized
the cost of the planned closing of five branch offices. The total cost
associated with these branch office closings is approximately $500,000 of which
$266,000 was recognized in the first quarter of 2004 and is included in other
operating expenses. The remaining cost will be expensed prior to the branch
closings. The Corporation has taken action, since the fall of 2003, to

                                                                             17.
<PAGE>

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

reduce reliance on external accounting and consulting services. The Corporation
has also reduced costs in most other areas of expense. These expense reductions
are expected to continue as a result of lower costs associated with
non-performing assets and less overhead due to the previously discussed branch
closings.

The following table details noninterest expense for the three months ended March
31, 2004 and March 31, 2003 (dollars in thousands):

<TABLE>
<CAPTION>
                                         For the three months ended
                                                 March 31,               % Increase (Decrease)
                                          2004                 2003              2003-2002
                                         -------             -------     ---------------------
<S>                                      <C>                 <C>         <C>
Salaries and Employee Benefits           $ 1,499             $ 1,677                    (10.61)
Furniture and Equipment Expense              258                 366                    (29.51)
Occupancy Expense                            347                 399                    (13.03)
Data Processing Expense                      355                 407                    (12.78)
Accounting, legal and consulting fees        406                 830                    (51.08)
Loan and Deposit Expense                     493                 574                    (14.11)
Telephone expense                            213                 333                    (36.04)
Advertising Expense                           17                  49                    (65.31)
Other Operating Expenses                     801                 501                     59.88
                                         -------             -------     ---------------------
   Total noninterest expense             $ 4,389             $ 5,136                    (14.54)
                                         =======             =======     =====================
</TABLE>

FEDERAL INCOME TAXES

The income tax provision of $320,000 for the quarter ended March 31, 2003 was
the result of an addition to the valuation allowance provided against the
deferred tax asset. This provision increases the valuation allowance to $7.3
million at March 31, 2003, from $7 million at December 31, 2002. The
Corporation's current year net losses are currently anticipated to more likely
than not expire prior to their 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 2003 annual and first quarter 2004 results, and
the constraints of the Order, sources of liquidity, such as lines of credit from
correspondent banks, borrowings from the Federal Home Loan Bank, brokered
deposits, 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 2004 are
discussed below.

The Corporation's parent company is dependent upon its primary operating
subsidiary, the Bank, for sources of cash to fund its operating needs. As a
result of the Order, and the restrictions placed upon the Bank as it relates to
payment of dividends, the parent company of the Corporation faces a short-term
liquidity crisis. Early in the second quarter, the parent company addressed the
immediate cash needs of day-to-day operations and payment of legal and
professional costs by borrowing $150,000 in total, from members of its board of
directors. The terms of these borrowings, considering the financial condition of
the Corporation, were favorable as compared to prevailing borrowing
opportunities offered elsewhere. The Corporation is exploring additional areas
for cash infusion into the parent company, including the sale of stock or the
investment in the Corporation by a third party.

During the first quarter of 2004, the Corporation increased cash and cash
equivalents by $23.1 million. As shown on the Corporation's condensed
consolidated statement of cash flows, liquidity was primarily impacted from cash
provided by investing activities. In the first quarter of 2004, the Corporation
funded the reduction of deposits of $18.7 million primarily through the balance
sheet reductions of loans, $33.2 million, and investments, $19.5 million. These
asset reductions allowed the Corporation to increase liquidity $23.1 million
which will provide the necessary funding for branch sales later in the year,
along with near-term maturities of brokered and other time deposits.

                                                                             18.

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



It is anticipated that during the remainder of 2004, cash generated from
decreases in certain segments of the loan portfolio will be reinvested in
securities and local market loans, and deposits generated locally will replace a
portion of the Internet and brokered deposits.

As of March 31, 2004, the Corporation has suspended seven 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.

The Corporation's liquidity plan for 2004 includes strategies to increase core
deposits in the Corporation's local markets. New products and advertising
commenced in 2004, with a goal of increasing core deposits to reduce the
dependency on noncore deposits. The Corporation's liquidity plan for 2004 calls
for augmenting local deposit growth efforts with Internet CD funding to the
extent necessary. There is no assurance that Internet CDs will be available in
adequate amounts or at economically feasible pricing.

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.

CAPITAL AND REGULATORY

During the first quarter of 2004, capital decreased by $1.3 million, as a result
of the net loss of $1.7 million and the increase in the unrealized gain on
securities available for sale of $338,000. This compares to a decrease in
capital during the same period in the previous year of $1.6 million, resulting
primarily from a net loss, and changes in the unrealized gain on securities
available for sale.

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 March 31,
2004, the Corporation, and as of December 31, 2003, 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.

                                                                             19.

<PAGE>

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

The following table details sources of capital for the periods indicated.

<TABLE>
<CAPTION>
                                                 March 31,         December 31,
                                                   2004                2003
                                             ----------------   ----------------
<S>                                          <C>                <C>
CAPITAL STRUCTURE
Long-term debt (1)                           $         12,450   $         12,450
Shareholders' equity                                    9,371             10,700
                                             ----------------   ----------------
Total capitalization                         $         21,821   $         23,150
                                             ----------------   ----------------
Tangible capital                             $         20,324   $         21,557
                                             ----------------   ----------------
INTANGIBLE ASSETS
   Core deposit premium                      $            978   $          1,067
   Other identifiable intangibles                         519                526
                                             ----------------   ----------------
Total intangibles                            $          1,497   $          1,593
                                             ----------------   ----------------
RISK-BASED CAPITAL
Tier I capital:
   Shareholders' equity                      $          9,371   $         10,700
Net unrealized (gains) on
  available for sale securities                        (1,366)            (1,027)
   Minority interest                                    2,264              2,785
   Less: intangibles                                   (1,497)            (1,593)
                                             ----------------   ----------------
     Total Tier I capital                    $          8,772   $         10,865
                                             ----------------   ----------------
Tier II Capital:
   Allowable reserve for loan losses         $          3,495   $          4,016
   Qualifying long-term debt                            5,277              6,849
                                             ----------------   ----------------
     Total Tier II capital                              8,772             10,865
                                             ----------------   ----------------
     Total capital                           $         17,544   $         21,730
                                             ================   ================
Risk-adjusted assets                         $        270,403   $        303,284
                                             ================   ================
Capital ratios:
   Tier I Capital to risk weighted assets                3.24%              3.58%
   Total Capital to risk weighted assets                 6.49%              7.16%
   Tier I Capital to average assets                      2.13%              2.48%
</TABLE>

(1) Long term debt in the Corporation's subordinated debentures.

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, such as acquisition intangibles.

                                                                             20.

<PAGE>

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

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:
    March 31, 2004                                                  2.1%              3.2%               6.5%
    December 31, 2003                                               2.5%              3.6%               7.2%

The Bank:
    March 31, 2004                                                  4.8%              7.3%               8.6%
    December 31, 2003                                               4.8%              6.9%               8.3%
</TABLE>

The capital levels show inclusion of capital debentures, issued in May 1999,
subject to certain limitations. Federal Reserve guidelines limit the amount of
capital debentures which can be included in Tier I capital to 25% of total Tier
I capital. As of March 31, 2004 and December 31, 2003, $2,193,000 and
$2,785,000, respectively, of the $12,450,000 of capital debentures were
available as Tier I capital of the Corporation.

In October, 2001, the Bank was notified by the FDIC that it is a "troubled
institution" within the meaning of FDIC regulations. As a troubled institution,
the Bank is required to notify the FDIC 30 days prior to the addition or
replacement of a Board member and the employment or changes in responsibilities
of a senior executive officer.

In September, 2002, a regularly-scheduled 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.

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 payments 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. Those restrictions may
adversely impact the ability of the Corporation and the Bank to take certain
restructuring steps unless waivers can be obtained from the holders of the trust
preferred securities. There can be no assurance that such waivers will be given.

Following the completion of the 2002 regularly-scheduled 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 was reported on
the Corporation's Form 8-K filed on April 9, 2003 and is available on the FDIC
website www.FDIC.Gov. 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 identified deficiencies in the Bank's policies and procedures,
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.

                                                                             21.

<PAGE>

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

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 loan concentrations, (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.

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 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.

Addressing the requirements of the Order, carrying out the objectives of the
strategic plan, and attempting to return the Corporation to profitability
required the strengthening of the executive management team. During 2003, the
Corporation added 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.

                                                                             22.

<PAGE>

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

The Corporation has attempted to address each of the matters identified in the
Order. Progress in correcting administrative and management deficiencies has
been made. The Bank has adopted new policies for liquidity, investment and asset
liability management. In regards to its lending functions, practices related to
credit underwriting, credit administration and problem loan management were
revamped and current practices and procedures are believed to be operating
within the requirements of the Order. Most of the above changes were initiated
by a new management team, which was put in place, as a requirement of the Order,
during the second half of 2003. Although improvements have been made and
continue to be made from the actions initiated by this new management team in a
relatively short time frame, completion of certain matters noted in the Order
will require further actions by the Corporation and the Bank.

Since the entry of the Order, and as of March 31, 2004, the Bank has not been in
compliance with the minimum capital ratios specified in the Order. 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 and has
not done so as of the date of this report. Noncompliance with the minimum
capital requirements and/or other requirements of the Order may impact the
ability of the Corporation and the Bank to remain as ongoing operating entities.

SUBSEQUENT EVENTS

Subsequent to the end of the quarter, the Corporation announced the sale of
three additional branch locations with total deposits of approximately $13
million. The Corporation expects to consummate the sale of these three branch
offices in the third quarter of 2004. The Corporation also closed five branch
offices early in May. The Corporation recognized the costs associated with these
branch closings as a charge to other operating expense prior to the closing. The
costs included write-offs of leasehold improvements and the costs of lease
abandonment and totaled approximately $500,000. The Corporation anticipates
future operating expense reductions as a result of the closing of these five
non-profitable locations. The closing of these offices was previously announced.

                                                                             23.

<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 also has $65.3 million of securities, of which $38.5 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 repricable assets over liabilities is
referred to as a positive gap. An excess of repricable 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 repricable are reported in the 1- to 90-day time frame.
The estimates of principal amortization and prepayments are assigned to the
following time frames.

                                                                             24.

<PAGE>

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

The following is the Corporation's repricing opportunities at March 31, 2004
(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                                          $     131,470   $      11,988   $      51,610   $     59,953   $     255,021
  Securities (1)                                         5,866              67          22,679         41,294          69,906
  Other                                                 53,393             -0-             -0-            -0-          53,393
                                                 -------------   -------------   -------------   ------------   -------------

  Total interest-earning assets                        190,729          12,055          74,289        101,247         378,320
                                                 -------------   -------------   -------------   ------------   -------------
  Interest-bearing obligations:
  Savings deposits                                      87,018             -0-             -0-            -0-          87,018
  Time deposits                                         49,534          57,623          67,770            738         175,665
  Borrowings                                               176           2,551          14,299         70,000          87,026
  Subordinated debentures                               12,450             -0-             -0-            -0-          12,450
                                                 -------------   -------------   -------------   ------------   -------------

  Total interest-bearing obligations                   149,178          60,174          82,069         70,738         362,159
                                                 -------------   -------------   -------------   ------------   -------------

Gap                                              $      41,551   $     (48,119)  $      (7,780)  $     30,509   $      16,161
                                                 =============   =============   =============   ============   =============

Cumulative gap                                   $      41,551   $      (6,568)  $     (14,348)  $     16,161
                                                 =============   =============   =============   ============
</TABLE>

(1) Includes Federal Home Loan Bank Stock

The above analysis indicates that at March 31, 2004, the Corporation had a
cumulative liability sensitivity gap position of $6.6 million within the
one-year time frame. The Corporation's cumulative liability sensitive gap
suggests that if market interest rates increase in the next twelve months, the
Corporation's net interest income could be reduced. 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 increase.

At December 31, 2003, the Corporation had a cumulative asset sensitivity gap
position of $37.5 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, 2003, gap position suggested the
Corporation's net interest income would decrease.

The change in the gap position from December 31, 2003 to March 31, 2004 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, while experience suggests
that these categories of deposits are actually comparatively resistant to rate
sensitivity.

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.

                                                                             25.

<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, Michigan. 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 March 31, 2004, the Corporation had
excess Canadian assets of $1.7 million (or $1.3 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.

                                                                             26.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION
                         ITEM 4. CONTROLS AND PROCEDURES

As of March 31, 2004, an evaluation was performed under the supervision of and
with the participation of the Corporation's management, including the President
and Chief Executive Officer, and the 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 President and Chief Executive Officer, concluded that the
Corporation's disclosure controls and procedures were effective as of March 31,
2004.

                                                                             27.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION
                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Corporation and its subsidiaries are subject to routine litigation
incidental to the business of banking. In addition, the Corporation or the Bank
are subject to the Order referred to below, and the litigation and arbitration
described below. Information regarding the Order is contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the caption "Capital and Regulatory" in this report, and is incorporated here by
reference. The litigation and arbitration that is not routine and incidental to
the business of banking is described below. The same litigation and arbitration
was previously described in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2003.

Securities Litigation

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 brought a class action against the Corporation, its former
chairman and chief executive officer and current director, Ronald G. Ford, and
its former chief executive officer and director, Sherry L. Littlejohn, for
alleged violations of Federal securities laws.

In another 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, its former chairman and chief executive officer and
current director, Ronald G. Ford, and its former chief executive officer and
director, Sherry L. Littlejohn, for alleged violations of Federal securities
laws.

On September 2, 2003, pursuant to 15 U.S.C. Section 78-u-4(a)(3)(B), plaintiff
Charles Lanctot filed a motion requesting the Court to consolidate the two
securities class action cases (Lanctot and Rosen) under the caption In re North
Country Financial Corporation Securities Litigation, to appoint him as "Lead
Plaintiff" in the consolidated cases, and to approve the selection of his
counsel as "Lead Plaintiff's Counsel." In an Order dated September 29, 2003, the
Court among other things consolidated the Lanctot and Rosen actions, designated
Charles D. Lanctot and John F. Stevens as "Lead Plaintiffs," and designated
"Co-Lead Counsel" and "Liaison Counsel" for the class.

On December 1, 2003, the plaintiffs filed their Corrected Consolidated Amended
Class Action Complaint ("Amended Complaint"), which adds John F. Stevens as a
plaintiff. The Amended 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 Securities and Exchange Commission (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 Amended
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 Amended 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 Amended Complaint further alleges that the
Corporation's acquisition of American Financial Mortgage, which had an
"unusually large number of defaulted loans . . . which triggered the attention
of banking regulators;" that a Cease and Desist Order, dated March 26, 2002,
which is attached as Exhibit 1 to the Amended Complaint, demonstrates how
defendants made "false statements" in public filings and other communications,
and were required to take "corrective actions;" that various public filings were
"false because the Company's operations resulted in an excessive level of
adversely classified assets, delinquent loans, and nonaccrual loans as well as
an inadequate level of capital protection for the kind and qualify of assets
held;" that, "according to former employees, loans for Company insiders and
their related entities were often approved regardless of the quality of the
loan;" and, that the Corporation incorrectly attributed its performance to the
World Trade Center disaster and other factors impacting tourism and hospitality
businesses, instead of disclosing "insider loans," a "disproportionately high
loan concentration" in the hospitality industry, and

                                                                             28.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION

information about the Corporation's banking practices and loan loss reserves.
The Amended 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 on a joint and several basis against all
defendants, including the Corporation, plus interest and costs, including
attorney's fees and expert's fees.

On January 23, 2004, the Corporation and the other defendants filed their Joint
Motion to Dismiss the Corrected Consolidated Amended Class Action Complaint,
principally based on the ground that plaintiffs have not adequately plead that
the Corporation, through its officers and directors, acted with the intent to
defraud the investing public under the standard articulated in Helwig v. Vencor,
Inc., 251 F.3d 540 (6th Cir. 2001), cert. dismissed, 536 U.S. 935, 122 S.Ct.
2616 (2002). During the pendency of the motion to dismiss, a stay of "all
discovery and other proceedings" automatically is imposed under 15 U.S.C.
Section 78u-4(b)(3)(B). Plaintiffs filed their Brief in Opposition to
Defendants' Motion to Dismiss on March 8, 2004. Defendants filed a reply brief
in support of their Motion to Dismiss on March 23, 2004. The Court has scheduled
an oral argument on the Motion to Dismiss for May 17, 2004.

Shareholder's Derivative Litigation

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) adequately to
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 under the Plan, (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.

On September 18, 2003, the Corporation filed a motion to dismiss the Damon
action because plaintiff did not satisfy the mandatory precondition, under
Section 493a of the Michigan Business Corporation Act ("MBCA"), M.C.L. Section
450.1493a, for filing a shareholder derivative action that the shareholder must
first have submitted a written demand that the Corporation pursue in its own
right the claims asserted by the shareholder (the plaintiff here). Certain of
the individual defendants in the Damon action filed their own motion to dismiss
on November 25, 2003, in which motion the other individual defendants later
joined. The plaintiff filed an Opposition to both motions to dismiss on January
9, 2004, and on January 30, 2004, the defendants filed reply briefs in support
of their motions to dismiss.

By letter dated September 17, 2003, and expressly without prejudice to the
argument that any such written demand is not required, plaintiff's counsel
purported to make a written demand that the Corporation pursue a number of

                                                                             29.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION

indicated putative claims against: (1) present and former officers and directors
of the Corporation who also are the individual defendants in the Damon action,
and (2) the certified public accounting firm of Wipfli, Ullrich, Bertelson, LLP.
The MBCA grants the Corporation ninety (90) days in which to respond to a proper
written demand. On November 11, 2003, the Corporation filed a motion, as
permitted by section 495 of the MBCA, M.C.L. Section 450.1495, requesting the
Court to appoint a disinterested person to conduct a reasonable investigation of
the claims made by the plaintiff and to make a good faith determination whether
the maintenance of the derivative action is in the best interests of the
Corporation. On January 9, 2004, the plaintiff filed a Supplemental Response to
the Corporation's motion to dismiss, requesting that the Court appoint two
persons other than the one nominated by the Corporation, to act as a
disinterested person for such purpose. Following an in camera conference and
telephone conference held by the Court, plaintiff is understood to have
withdrawn its objection to the individual nominated by the Corporation in its
motion to the Court for appointment as a disinterested person. The parties,
through their respective counsel, are currently negotiating a stipulated form of
order to be entered by the Court making the appointment of the disinterested
person. It is anticipated that the disinterested person, once appointed, will
complete his investigation of the claims made by the plaintiff and will make his
good faith determination whether the maintenance of the derivative action is in
the best interests of the Corporation within 120 days of his appointment.

On March 22, the Court issued an Opinion and Order granting in part and denying
in part the motions to dismiss in the Damon case. The Court dismissed the
Section 14(a) claim against all of the defendants as barred by the statute of
limitations and, as further grounds, dismissed that claim as to those who were
not directors at the time of the mailing of the proxy statement. The Court has
permitted the plaintiff to proceed with its breach of fiduciary duty claims
against the Directors on the grounds that the plaintiff cured its procedural
failings by subsequently transmitting a demand letter as required by Section 493
of the MBCA. In addition, on April 19, 2004, the Court entered an Order Granting
Stipulation to Grant Plaintiff Leave to File Amended Complaint and to Grant
Related Relief to All Parties; under that Order, plaintiff is required to file,
but has not yet filed, an amended complaint alleging the Court's diversity
jurisdiction over this action.

Employment Agreement Arbitration

On September 16, 2003, Ronald G. Ford, the former chairman and chief executive
officer and a current director of the Corporation, initiated an arbitration
proceeding with the American Arbitration Association against the Corporation
seeking monetary damages for alleged breach by the Corporation of his Amended
and Restated Employment Agreement, Chairman Agreement, and Amended and Restated
Consulting Agreement, each with the Corporation. The Corporation has denied the
alleged breach and asserted a counterclaim to recover all amounts paid to Mr.
Ford under the Chairman Agreement, as required by the Cease and Desist Order
entered by the FDIC and the OFIS, in addition to other amounts. On March 19,
2004, at the request of Mr. Ford, the American Arbitration Association
reactivated the arbitration proceeding, and the parties are in the process of
selecting an arbitrator. The Corporation intends to defend the arbitration.

Litigation of the types involved in the actions described above can be complex,
time-consuming, and often protracted. The Corporation has incurred and
anticipates that it will continue to incur substantial additional expense for
legal and other professional fees as a result of the filing and defense of these
actions. At this 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.

                                                                             30.

<PAGE>

                       NORTH COUNTRY FINANCIAL CORPORATION

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 18, 2003 between North Country
                  Bank and Trust and Joseph E. Petterson, incorporated herein by
                  reference to Exhibit 10.1 of the Corporation's Annual Report
                  on Form 10-K for the year-ended December 31, 2003.

    Exhibit 10.2  Agreement dated September 1, 2003 between North Country
                  Bank and Trust and Jani Blake, incorporated herein by
                  reference to Exhibit 10.2 of the Corporation's Annual Report
                  on Form 10-K for the year-ended December 31, 2003.

    Exhibit 10.3  Agreement dated September 3, 2003 between North Country
                  Bank and Trust and Kelly W. George, incorporated herein by
                  reference to Exhibit 10.3 of the Corporation's Annual Report
                  on Form 10-K for the year-ended December 31, 2003.

    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 February 17, 2004, issuance of a press release announcing
        earnings for the year-ended December 31, 2003.

    -   Form 8-K dated February 17, 2004, issuance of a press release announcing
        the signing of a definitive agreement to sell two branch offices.

    -   Form 8-K dated February 17, 2004, amendment to Form 8-K dated February
        17, 2004 announcing earnings for the year-ended December 31, 2003.

                                                                             31.

<PAGE>

                                    SIGNATURE

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)

5/14/04                                By: /s/ C. James Bess
Date                                      --------------------------------------
                                           C. JAMES BESS,
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                           (principal executive and financial
                                             officer)

                                       By: /s/ Ernie R. Krueger
                                          --------------------------------------
                                           ERNIE R. KRUEGER,
                                           VICE PRESIDENT / CONTROLLER
                                           (principal accounting officer)

                                                                             32.

<PAGE>

                                  Exhibit Index

    No.                        Description

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.