FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



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

                  For the quarterly period ended: June 30, 1998

                         Commission file number: 0-20167

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

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

                  130 South Cedar Street, Manistique, MI 49854
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (906) 341-8401

                                   -----------


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  period 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 ____

As of July 31, 1998, there were outstanding 2,374,949 shares of the registrant's
common stock, no par value.



                                        1
<PAGE>
                                      INDEX




                                                                            Page
                                                                       Number(s)

Part I.     Financial Information (unaudited):

            Item 1.
            Consolidated Financial Statements                                3-6
            Notes to Consolidated Financial Statements                       7-8

            Item 2.
            Management's Discussion and Analysis of
            Financial Condition and Results of Operations                   9-12

            Item 3.

            Quantitative and Qualitative Disclosure About Market Risk         13

Part II.    Other Information

            Item 4.
            Submission of Matters to a Vote of Security Holders               14

            Item 6.
            Exhibits and Reports on Form 8-K                                  15


Signatures                                                                    16

         
                                        2
<PAGE>
                   PART I - FINANCIAL INFORMATION (Unaudited)

ITEM 1.  FINANCIAL STATEMENTS

Consolidated Condensed Balance Sheets
(In thousands of dollars)
<TABLE>

                                                                         June 30,        December 31,
ASSETS                                                                    1998               1997
                                                                         ------             -----
                                                                       (Unaudited)
<S>                                                                   <C>                <C>
     Cash and due from banks                                          $  18,733          $   9,338
     Federal funds sold                                                   4,011              1,805
                                                                      ---------          ---------
         Total cash and cash equivalents                                 22,744             11,143

          Securities available for sale - stated at fair value           12,367             10,103

     Loans, net of unearned income                                      383,586            372,519
     Allowance for loan losses                                           (5,884)            (5,600)
                                                                      ---------          ---------
         Net loans                                                      377,702            366,919

     Premises and equipment                                              18,443             17,477
     Other assets                                                        13,305             15,792
                                                                      ---------          ---------
     TOTAL ASSETS                                                     $ 444,561          $ 421,434
                                                                      =========          =========

LIABILITIES AND SHAREHOLDERS' EQUITY
     Deposits
         Noninterest bearing deposits                                 $  37,543          $  33,354
         Interest bearing deposits                                      336,573            327,195
                                                                      ---------          ---------
               Total deposits                                           374,116            360,549

     Federal funds purchased and securities sold under
          agreement to repurchase                                         1,966              1,195
     Other borrowings                                                    27,076             19,628
     Other liabilities                                                    3,643              3,470
                                                                      ---------          ---------

     TOTAL LIABILITIES                                                  406,801            384,842
                                                                      ---------          ---------

     Shareholders' Equity
         Common stock - No par value
              Authorized - 6,000,000 shares
              Issued and outstanding - 2,369,811 and 2,379,490
                  shares at June 30, 1998 and December 31, 1997
                   respectively                                          19,245             19,916
         Retained earnings                                               18,526             16,679
         Other Comprehensive Income - Unrealized loss on securities
                  available for sale - net of tax                           (11)                (3)
                                                                      ---------          ---------
                 Total shareholders's equity                             37,760             36,592
                                                                      ---------          ---------
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                            $ 444,561          $ 421,434
                                                                      =========          =========
</TABLE>

                                        3
<PAGE>
Consolidated Condensed Statements of Income (unaudited)
(In thousands of dollars)
<TABLE>
                                                        Three months ended          Six Months ended
                                                             June 30                     June 30
                                                         1998        1997         1998          1997
                                                        ------      ------       ------        -----
Interest Income
<S>                                                   <C>          <C>          <C>          <C>
     Loans, including fees                            $    9,489   $    8,716   $   18,350   $   16,583
     Securities
         Taxable                                             178          299          397          574
         Exempt from federal taxation                          3           10            4           16
     Other                                                   145           59          247          129
                                                      ----------   ----------   ----------   ----------
Total interest income                                      9,815        9,084       18,998       17,302

Interest expense
     Deposits                                              4,096        3,600        8,073        6,929
     Borrowed funds                                          317          302          593          634
                                                      ----------   ----------   ----------   ----------
Total interest expense                                     4,413        3,902        8,666        7,563
                                                      ----------   ----------   ----------   ----------
Net interest income                                        5,402        5,182       10,332        9,739

Provision for loan losses                                    425          242          675          348
                                                      ----------   ----------   ----------   ----------
Net interest income after provision for loan losses        4,977        4,940        9,657        9,391

Noninterest income
     Service charges on deposit accounts                     401          284          710          522
     Gains on sale of loans                                   32           11           55           21
     Securities gains                                          0            0           44            0
     Other                                                   283           69          449          172
                                                      ----------   ----------   ----------   ----------
Total noninterest income                                     716          364        1,258          715

Noninterest expense
     Salaries and employee benefits                        1,568        1,531        3,208        3,032
     Furniture and equipment expense                         333          329          658          663
     Occupancy expense                                       265          204          508          464
     Other                                                 1,830        1,721        3,280        3,129
                                                      ----------   ----------   ----------   ----------
Total noninterest expense                                  3,996        3,785        7,654        7,288
                                                      ----------   ----------   ----------   ----------
Income before income tax                                   1,697        1,519        3,261        2,818

Provision for income tax                                     380          413          794          727
                                                      ----------   ----------   ----------   ----------
Net income                                            $    1,317   $    1,106   $    2,467   $    2,091
                                                      ==========   ==========   ==========   ----------
Weighted average common shares outstanding             2,375,670    2,376,704    2,378,112    2,373,522
                                                      ==========   ==========   ==========   ==========
</TABLE>
<TABLE>
                                          Three Months Ended                             Six Months Ended
                                June 30, 1998          June 30, 1997           June 30, 1998         June 30, 1997
                               Basic      Diluted     Basic      Diluted      Basic     Diluted      Basic    Diluted
<S>                            <C>        <C>         <C>        <C>          <C>       <C>          <C>      <C>
Earnings per common share      $ 0.55     $ 0.54      $ 0.47     $ 0.46       $ 1.04    $ 1.01       $ 0.88   $ 0.87
                               ======     ======      ======     ======       ======    ======       ======   ======
</TABLE>

                                        4
<PAGE>
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
(In thousands of dollars)
<TABLE>

                                                    Three Months Ended                Six Months Ended
                                                 June 30,         June 30,         June 30,        June 30,
                                                  1998             1997             1998            1997
                                                 ------           ------           ------          -----
<S>                                            <C>              <C>            <C>            <C>
Balance - beginning of period                  $ 37,471         $ 34,219       $ 36,589       $ 32,386

Comprehensive income:
     Net income for period                        1,317            1,106          2,467          2,091
     Net change in unrealized gain (loss) on
          securities available for sale              (5)             218             (5)            70
                                               --------         --------       --------       --------
     Total comprehensive income                   1,312            1,324          2,462          2,161

Cash dividends                                     (312)            (288)          (619)          (574)

Issuance of common stock                            129              115            281          1,397

Common stock retired                               (840)            (207)          (953)          (207)
                                               --------         --------       --------       --------

                                               $ 37,760         $ 35,163       $ 37,760       $ 35,163
                                               ========         ========       ========       ========
</TABLE>


                                        5
<PAGE>
Consolidated Statements of Cash Flows (unaudited)
(In thousands of dollars)
<TABLE>
                                                                        Six Months Ended
                                                                    June 30,          June 30,
                                                                     1998               1997
                                                                    ------             -----
<S>                                                               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES ..........................   $  6,799          $ 10,168
                                                                  --------          --------
CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in interest bearing deposits with banks .......          0               438
     Purchase of securities available for sale ................     (4,000)             (830)
     Proceeds from sales of securities available for sale .....          0             5,847
     Proceeds from maturities, calls, or paydowns of securities
          available for sale ..................................      1,000               353
     Net increase in loans ....................................    (11,067)          (18,471)
     Purchase of premises and equipment .......................     (1,626)           (3,240)
     Net cash provided in acquisitions ........................          0                32
                                                                  --------          --------
          Net cash used in investing activities ...............    (15,693)          (15,871)
                                                                  --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits .................................     13,567            20,955
     Net increase (decrease) in federal funds purchased and
securities sold under agreement to repurchase .................        771            (4,900)
     Proceeds from borrowings .................................     10,500             6,000
     Payment on notes payable .................................     (3,052)          (10,508)
     Proceeds from issuance of common stock ...................        281             1,190
     Retirement of common stock ...............................       (953)                0
     Payment of dividends .....................................       (619)             (574)
                                                                  --------          --------
         Net cash from financing activities ...................     20,495            12,163
                                                                  --------          --------
Net increase (decrease) in cash and cash equivalents ..........     11,601             6,460

Cash and cash equivalents at beginning of period ..............     11,143            12,164
                                                                  --------          --------
Cash and cash equivalents at end of period ....................   $ 22,744          $ 18,624
                                                                  ========          ========
</TABLE>

                                        6
<PAGE>
                       NORTH COUNTRY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


Note 1 - Basis of Presentation

The  unaudited  condensed  consolidated  financial  statements  of North Country
Financial  Corporation (the  "Registrant") 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  ending  June 30,  1998,  and the six month
period ending June 30, 1998 are not  necessarily  indicative of the results that
may be expected for the year ended December 31, 1998.  For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the  Registrant's  Annual  Report on Form 10-K for the year ended  December  31,
1997.

Note 2 - Accounting Changes

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related  Information." This statement  establishes  standards for
the way that public  business  enterprises  report  information  about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selected  information  about  operating  segments  in interim  financial
reports  issued  to  shareholders.   This  statement  supersedes  SFAS  No.  14,
"Financial  Reporting  for Segments of a Business  Enterprise,"  but retains the
requirement to report information about major customers. It also amends SFAS No.
94,  "Consolidation of All  Majority-Owned  Subsidiaries," to remove the special
disclosure  requirements  for  previously   unconsolidated   subsidiaries.   The
statement is effective  for financial  statements  for periods  beginning  after
December 15, 1997. In the initial year of application,  comparative  information
for  earlier  years is to be  restated.  This  Statement  need not be applied to
interim  financial  statements  in the  initial  year  of its  application,  but
comparative  information  for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. The statement is not expected to have an effect on the financial
position or operating  results of the  Registrant  , but may require  additional
disclosure in the financial  statements.  The  Registrant  will  implement  this
statement with the December 31, 1998 annual report.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("FAS") No. 133,  "Accounting for Derivative
Instruments and Hedging Activities." This statement requires that all derivative
financial  instruments  be  recognized as either  assets or  liabilities  in the
statement of financial position. Derivative financial instruments not designated
as hedges  will be  measured  at fair  value with  changes  in fair value  being
recognized in earnings in the period of change. If a derivative is designated as
a hedge,  the  accounting  for changes in fair value will depend on the specific
exposure  being hedged.  The  statement is effective for fiscal years  beginning
after June 15,  1999.  Management,  at this time,  cannot  determine  the effect
adoption  of  this  statement  may  have  on  the  financial  statements  of the
Registrant  as the effect is dependent  of the amount and nature of  derivatives
and hedges held at the time of adoption of the statement.

                                        7
<PAGE>
Note 3 - Allowance for Loan Losses

Activity in the allowance for loan losses for the six months ended June 30, 1998
and 1997, are summarized as follows:
<TABLE>
(In thousands of dollars)
                                              June 30,           June 30,
                                               1998                1997
<S>                                           <C>               <C>
Balance at beginning of period                $ 5,600           $ 4,591
Charge-offs                                      (441)             (257)
Recoveries                                         50                81
Transferred from purchase of U.P. Financial         0               298
Provision for loan loss                           675               348
    Total                                     $ 5,884           $ 5,061
                                              =======           =======
</TABLE>
Information regarding impaired loans follows:
(In thousands of dollars)
<TABLE>
                                              June 30,            December 31,
                                                1998                  1997
<S>                                          <C>                 <C>
Average investment in impaired loans         $  7,052            $  6,710
Balance of impaired loans                    $  7,014            $  6,933
</TABLE>

Note 4 - Other Borrowings

Other  borrowings  consists of the  following  at June 30, 1998 and December 31,
1997 (In thousands of dollars)
<TABLE>

                                                                          June 30,                    December 31,
                                                                            1998                           1997
<S>                                                                      <C>                         <C>
Other Borrowings
     Federal Home Loan bank advances (6) at various 
          rates with various maturities (see annual
          financial statements)                                          $   13,851                  $   16,115
     Federal Home Loan Bank, fixed-rate advance
         at 5.49%, putable June 23, 2002                                     10,000                           0
     Farmers Home Administration, $2,000,000 fixed
         rate line agreement maturing August 24, 2024,
         interest payable at 1%                                               1,938                       1,938
     Note payable to NBD Bank, $500,000 fixed rate
         line agreement maturing November 20, 1998,
         interest payable at 7.39%                                              500                           0
     Notes payable to South Range State Bank's
          former stockholders, maturing in three equal
         annual installments beginning February 1,
         1997.  Interest payable at 5.2%                                        787                       1,575
                                                                         ----------                  ----------
Total Other Borrowings                                                   $   27,076                  $   19,628
                                                                         ==========                  ==========
</TABLE>

The Federal Home Loan Bank borrowings are collateralized by a blanket collateral
agreement on the  Registrant's  residential  mortgage  loans.  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 December  31, 1997 and
June 30, 1998.  Borrowings  other than Federal Home Loan Bank are not subject to
prepayment penalties.

                                        8
<PAGE>
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 consolidated condensed
financial statements of the Registrant and its wholly-owned subsidiaries through
the second quarter of 1998. The  discussion  should be read in conjunction  with
those statements and their accompanying notes.

The Registrant is not aware of any market or institutional  trends,  events,  or
circumstances  that will have or are reasonably likely to have a material effect
on liquidity,  capital  resources,  or results of operations except as discussed
herein.  Also,  the  Registrant is not aware of any current  recommendations  by
regulatory authorities which will have such effect if implemented.

Highlights

Year to date  consolidated  net  income was  $2,467,000  through  June 30,  1998
compared to $2,091,000 for the same period in 1997. Earnings per share increased
from $0.88 for the six months ended June 30, 1997,  to $1.04 for the same period
in 1998.

Financial Condition

Loans

Through the second  quarter of 1998,  loan balances  increased by $11.1 million.
The loan to deposit  ratio has  decreased  from 101.8% at December 31, 1997,  to
101.0% at June 30, 1998.  Management  believes loans provide the most attractive
earning asset yield  available to the Registrant and that trained  personnel and
controls are in place to successfully  manage a growing portfolio.  Accordingly,
management  intends to continue to maintain  loans at the highest level which is
consistent with maintaining adequate liquidity. As shown in the table below, the
loan mix  remains  relatively  constant  for the  quarter  ended  June 30,  1998
compared to December 31, 1997.

Management is aware of the risk associated with an increase in average  balances
of loans but believes that the current level in the allowance for loan losses is
adequate.  At June 30, 1998 the  allowance for loan losses was equal to 1.53% of
total loans outstanding compared to 1.50% at December 31, 1997.

Commercial  real estate loans have increased by $2.6 million  through the second
quarter of 1998 to $88,639,000  at June 30, 1998.  Through the second quarter of
1998,  loans  to  general  commercial  businesses  decreased  by  $1,524,000  to
$94,107,000.  Commercial  leases  increased $11.0 million to $22,049,000 at June
30,  1998  and  governmental  leases  decreased  $3.9  million  to  $50,322,000.
Residential,  1-4 family  mortgages  increased by $0.3  million to  $95,842,000.
Consumer loans have decreased $2.0 million through the second quarter of 1998 to
$24,784,000.  Construction  loans have  decreased  $3.1 million to $7,843,000 at
June 30, 1998.
<TABLE>
                                                            June 30,                             December 31,
                                                             1998               % of Total           1997           % of Total
                                                            ------              ----------          ------          ----------
<S>                                                       <C>                    <C>          <C>                     <C>
Loans (in thousands)
Commercial real estate                                    $    88,639             23.1%       $    86,052             23.1%
Commercial, financial, and agricultural                        94,107             24.6%            95,631             25.7%
Leases:
     Commercial                                                22,049              5.7%            11,094              3.0%
     Governmental                                              50,322             13.1%            46,464             12.5%
1-4 family residential real estate                             95,842             25.0%            95,543             25.6%
Consumer                                                       24,784              6.5%            26,795              7.2%
Construction                                                    7,843              2.0%            10,940              2.9%
                                                        -------------          --------      ------------          --------
Total                                                      $  383,586            100.0%        $  372,519            100.0%
                                                        =============          ========      ============          ========
</TABLE>

                                        9
<PAGE>
Credit Quality

Management  analyzes the  allowance for loan losses in detail on a monthly basis
to ensure that the losses inherent in the portfolio are properly recognized. The
Registrant's success in maintaining  excellent credit quality is demonstrated in
its historical charge-off percentage. Charge-offs for the six month period ended
June 30, 1998 have  increased  $183,000  from the same  period in 1997.  This is
mainly the result of an increase in commercial and industrial  loan  charge-offs
to  $314,000  for the period.  Accordingly,  the  provision  for loan losses was
increased  from  $348,000 in the period  ended June 30, 1997 to $675,000 for the
same period in 1998.

The table  presented below shows the balances of nonaccrual  loans,  loans 90 or
more days past due, and renegotiated loans as of June 30, 1998, and December 31,
1997.

(In thousands of dollars)
<TABLE>
                                         June 30,                  December 31,
                                           1998                        1997
<S>                                     <C>                         <C>
Nonaccrual loans                        $  1,480                    $  1,956
Loans 90 days or more past due               665                    $    698
Renegotiated loans                             0                           0
</TABLE>

Investments

Available for sale securities increased $2.26 million through the second quarter
of 1998 due to the purchase of $4 million,  the call of $1 million, and the sale
of $0.75 million of  securities.  The mix of the portfolio  remained  relatively
unchanged from December 31, 1997. The primary use of the portfolio is to provide
a source of  liquidity  and  pledging  for  certain  repurchase  agreements  and
regulatory requirements.  Most of the portfolio is invested in U.S. Treasury and
agency securities which have little credit risk and are highly liquid. There are
no securities classified as held to maturity.

Deposits

Total deposits through the second quarter have increased $13.6 million. Interest
bearing deposit  balances  increased  through June 30, 1998,  continuing a trend
from 1997.

Borrowings

The  Registrant's  branching  network  is a  relatively  high  cost  network  in
comparison  to peers.  Accordingly,  the  Registrant  uses  alternative  funding
sources to provide funds for lending activities.  Other borrowings  increased by
$7.4 million  through the second quarter (refer to the table presented in Note 4
to the second  quarter  financial  statements  above for the  composition of the
increase). At June 30, 1998, $23.8 million of the total borrowings were from the
Federal Home Loan Bank of  Indianapolis.  Alternative  sources of funding can be
obtained at interest  rates which are  competitive  with, or lower than,  retail
deposit rates and with inconsequential administrative costs.

Liquidity

The Registrant's  sources of liquidity include  principal  payments on loans and
investments,  sales of securities  available for sale,  deposits from customers,
borrowings  from the  Federal  Home Loan Bank,  other bank  borrowings,  and the
issuance of common stock. The Registrant has ready access to significant sources
of liquidity on an almost immediate basis.  Management anticipates no difficulty
in  maintaining  liquidity at the levels  necessary to conduct the  Registrant's
day-to-day business activities.


                                       10
<PAGE>
Results of Operations

Net Interest Income

Net interest  income  through June 30, 1998  increased by 6.1%,  compared to the
same period one year ago. The net  interest  margin,  on a fully tax  equivalent
basis at June 30,  1998 was 5.65%,  compared  to 5.64% for all of 1997.  The net
yield  on  interest  earning  assets  reflects  the  competitive  nature  of the
Registrant's  market.  Interest  income  from loans  represented  96.6% of total
interest  income  through the second  quarter of 1998  compared to 95.7% for the
same period of 1997. In all cases,  the total amount of interest  income and the
yield on total earning assets is strongly influenced by lending activities.

Provision for Loan Losses

The  Registrant  maintains the allowance for loan losses at a level  believed by
management  to be  adequate  to cover  losses  inherent  in the  portfolio.  The
Registrant  records a  provision  for loan  losses  necessary  to  maintain  the
allowance at that level after  considering  factors such as loan charge-offs and
recoveries, changes in the mix of loans in the portfolio, loan growth, and other
economic factors.  The provision for loan losses was increased  $327,000 for the
six months ended June 30, 1998 over the amount of the provision  during the same
period in 1997 as a result of the  Registrant's  desire to  maintain an adequate
percentage of allowance to loans.

Noninterest Income

Service  charges on  deposit  accounts  increased  $188,000  through  the second
quarter of 1998 vs. the second quarter of 1997 due mainly to an increased  focus
on  non-interest  sources of income.  Gains on sales of loans has  increased  to
$34,000 through the second quarter of 1998 vs. $9,000 through the second quarter
of 1997 due to an increase in loan sale activity.  Securities gains were $44,000
through the second  quarter of 1998.  There were no security  gains or losses in
the same period in 1997.  The proceeds from the security sales were used to fund
loans in the  Registrant's  growing loan  portfolio.  Other  noninterest  income
increased  $277,000 through the second quarter of 1998 vs. the second quarter of
1997 due mainly to an increase in insurance  commissions  and the sale of excess
land at one of the Registrant's offices.

Noninterest Expenses

Noninterest expense showed an increase of 5.0% through June 30, 1998 compared to
the same period of 1997. The increase is consistent with the Registrant's  asset
growth.  Salary expense  increased by $176,000  during the six months ended June
30, 1998 over the same period in 1997.  Much of the increase in salaries was due
to the  Registrant's  staffing of branches that opened in the second  quarter of
1998.  Occupancy  expense  decreased by $39,000 from the June 30, 1997 six month
period  compared  with  the  same  period  in 1998.  Other  noninterest  expense
increased by $151,000 for this same  period.  While the changes in  non-interest
expense were expected,  a primary objective of management is to hold the rate of
increase in this category  below future asset growth.  Management  believes that
significant  efficiencies  can  be  obtained  and is  increasing  the  level  of
management emphasis in this area.

Federal Income Tax

The  provision  for income taxes was 24.3% of income  before  income tax through
June 30, 1998 compared to 25.8% through June 30, 1997.  The  difference  between
these rates and the federal corporate income tax rate of 34% is primarily due to
tax-exempt interest earned on loans, leases, and investments.  The effective tax
rate has  decreased as  tax-exempt  income has become a larger  portion of total
interest income.

Interest Rate Risk

Management  actively manages the Registrant's  interest rate risk. In relatively
low  interest  rate  environments  which  have been in place the last few years,
borrowers have generally tried to extend the maturities and repricing periods on
their loans and place deposits in demand or very short term accounts. Management
has taken various actions to offset the imbalance which those  tendencies  would
otherwise create. Management writes commercial and real estate loans at variable
rates or, if necessary,  fixed rate loans for relatively short terms. Management
has also offered products that

                                       11
<PAGE>
give customers an incentive to accept longer term deposits.  Management can also
manage  interest rate risk with the maturity  periods of  securities  purchased,
selling  securities  available  for sale,  and  borrowing  funds  with  targeted
maturity  periods.  The Registrant is slightly asset sensitive in the cumulative
net asset (liability) funding gap for 1 - 365 days since December 31, 1997.

Capital Resources

It is the policy of the  Registrant  to maintain  capital at a level  consistent
with  both  safe and  sound  operations  and  proper  leverage  to  generate  an
appropriate return on shareholders' equity. The capital ratios of the Registrant
exceed the regulatory  guidelines for well capitalized  institutions.  The table
below shows the  Registrant's  capital,  in  thousands  of dollars,  and capital
ratios at June 30, 1998 and 1997.

<TABLE>

                                                                             June 30, 1998
                                                  Required           Required            Actual             Actual
                                                      $                 %                  $                  %
<S>                                               <C>                 <C>              <C>                 <C>
Tier 1 risk adjusted capital ratio                13,064              4.00%             29,907              9.12%
Total risk adjusted capital ratio                 26,128              8.00%             31,365             10.29%
Tier 1 leverage ratio                             17,031              4.00%             29,907              7.28%

Tier 1 capital                                                                          31,420
Tier 2 capital                                                                           4,162
Total risk based capital                                                                35,453
Total risk weighted assets                                                             344,493
Average total assets                                                                   431,810
</TABLE>

<TABLE>
                                                                                 June 30, 1997
                                                  Required           Required           Actual             Actual
                                                     $                  %                 $                  %
<S>                                               <C>                 <C>              <C>                <C>
Tier 1 risk adjusted capital ratio                12,538              4.00%             28,431              9.07%
Total risk adjusted capital ratio                 25,077              8.00%             32,363             10.32%
Tier 1 leverage ratio                             16,137              4.00%             28,431              7.05%

Tier 1 capital                                                                          28,431
Tier 2 capital                                                                           3,932
Total risk based capital                                                                32,363
Total risk weighted assets                                                             313,457
Average total assets                                                                   403,429
</TABLE>

Year 2000 Issue

The  Registrant  has  identified  the  resolution  of the Year  2000  issue as a
priority item.  During 1997 and the first six months of 1998, the Registrant has
committed  resources,  mainly manpower,  to the task of identifying the scope of
the Year 2000 issue and formulating a plan and taking actions with the goal that
all impacted systems will be compliant by the end of 1998.

Because the  Registrant  has  outsourced  virtually all of its data  processing,
management has begun the process of contacting all related  vendors,  requesting
written  confirmation  that their  respective  products are Year 2000 compliant.
Vendor  assertions will be tested during 1998 so that the Registrant should have
time to react to any problems.

The  Registrant  has also  begun  contacting  significant  commercial  customers
regarding their status on the Year 2000 issue in an effort to avoid any negative
impact on the quality of the loan portfolio.

                                       12
<PAGE>
Because of the  outsourcing  utilized by the  Registrant,  the addressing of the
Year 2000 Issue is not expected to materially impact the Registrant's results of
operations and capital resources.  Nevertheless, the inability of the Registrant
to  successfully  address Year 2000 issues could result in  interruption  in the
Registrant's  business and have a material  adverse  impact on the  Registrant's
results of operation.

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  Registrant  intends  such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward-looking statements,  which are based on certain assumptions
and describe future plans,  strategies and  expectations of the Registrant,  are
generally  identifiable  by use  of the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project" or similar  expressions.  The Registrant's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse affect on the
operations and future prospects of the Registrant and the subsidiaries  include,
but are not limited to, changes in: interest rates, general economic conditions,
legislative/regulatory  changes,  monetary  and  fiscal  policies  of  the  U.S.
Government,  including  policies of the U.S.  Treasury  and the Federal  Reserve
Board, the quality or composition of the loan or investment  portfolios,  demand
for loan products, deposit flows, competition,  demand for financial services in
the Registrant's market area and accounting principles, policies and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such  statements.  Further
information  concerning the Registrant  and its business,  including  additional
factors that could materially  affect the  Registrant's  financial  results,  is
included  in  the   Registrant's   filings  with  the  Securities  and  Exchange
Commission.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The  Registrant  has not  experienced  any  material  changes to its market risk
position from that disclosed in the Registrant's 1997 Form 10-K Annual Report.



                                       13
<PAGE>
                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

At the date hereof, there were no material pending legal proceedings, other than
routine  litigation  incidental  to  the  business  of  banking,  to  which  the
Registrant  or  any  of its  subsidiaries  is a  party  of or  which  any of its
properties is the subject.


Item 2.  Changes in Securities.

None.


Item 3.  Defaults Upon Senior Securities.

None.


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

  (a)   The annual meeting of  shareholders of the Registrant was held on
        April 14, 1998 ("Annual Meeting")

  (c)   At the Annual  Meeting,  three  directors  were elected for terms
        expiring  in 2001 and  shareholders  approved  the  change of the
        Registrant's name to North Country Financial Corporation.

               The vote was as follows:
<TABLE>
                                                                                     ABSTAIN
                                      FOR                 AGAINST          (Including Broker Nonvotes)
       <S>                          <C>                    <C>             <C>
       Director Nominees:
         Stanley J. Gerou II        1,516,303               2,344
         Thomas G. King             1,517,047               1,600
         John Lindroth              1,517,409               1,238

      Change in Name                1,421,027              70,600
</TABLE>

Item 5.  Other Information.

None.



                                       14
<PAGE>
Item 6.  Exhibits and Reports on Form 8-K.

(a) The following exhibits are filed as part of this report:

Number                              Exhibit

27                Financial Data Schedule.  Filed herewith.


The following documents are filed as part of Part I, Item 1 of this report:

  Consolidated Balance Sheets - June 30, 1998 (Unaudited) and December 31, 1997
         (Audited)

  Consolidated  Statements  of Income - Three  months ended June 30, 1998
  and 1997 and Six months ended June 30, 1998 and 1998
         (Unaudited)

  Consolidated  Statement of  Changes  in  Shareholders'  Equity - Three  months
  ended June 30, 1998 and 1997 and Six Months ended June 30, 1998 and 1997
         (Unaudited)

  Consolidated Statement of Cash Flows - Six months ended June 30, 1998 and 1997
         (Unaudited)

  Notes to consolidated financial statements - June 30, 1998



                                       15
<PAGE>
                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused this  Quarterly  Report on Form 10-Q for the quarter
ended June 30, 1998 to be signed on its behalf by the undersigned  hereunto duly
authorized.

                                        NORTH COUNTRY FINANCIAL CORPORATION


                                        /s/ Ronald G. Ford
                                        Ronald G. Ford
                                        (Chief Executive Officer)


                                        /s/ Michael L. Roarty
                                        Michael L. Roarty
                                        (Executive Vice President and Chief
                                        Financial Officer)


Dated:  August ___, 1998





                                       16