20549-0408
February 9, 2005
Martin A. Thomson
President
First Federal of Northern Michigan Bancorp, Inc.
100 South Second Avenue
Alpena, Michigan 49707
Re: First Federal of Northern Michigan Bancorp, Inc.
Currently filing as Alpena Bancshares, Inc.
Form SB-2, amendment number 2, filed February 7, 2005
File Number 333-121178
Dear Mr. Thomson:
We have reviewed your amendment number 2 to the Form SB-2
and
have the following comments. Where indicated, we think you should
revise your documents in response to these comments. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with supplemental information so we may better
understand your disclosure. After reviewing this information we
may
have additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
How We Determined the Offering Range...page 6
1. We note your response to our prior comments one and two. While
we
note the disclosure in the last paragraph on page 6, we continue
to
believe that price-to-earnings and price-to-book ratios for your
publicly traded shares are key to an investors` understanding of
this
transaction. Please expand the table at the top of page 7 to
include
this information. In addition, please expand the textual
disclosure
to explain how this information is derived and how it relates to
the
other comparable values already provided.
After-Market Performance... page 7
2. We note your second sentence statement that this information
was
not included in the appraisal report. We assume that it was also
not
considered. Where appropriate, explain in the filing your
understanding as to why this is the case.
Our Failure to Utilize Effectively the Net Proceeds... - page 20
3. If management has not set a time target for the effective
deployment of the proceeds this needs to be disclosed in the
filing,
as is typical for a risk factor, that is, either quantify the risk
factor or state that you don`t know.
Insurance Activities - page 85
4. Please refer to prior comment 9 and revise to identify the
third
party with whom you have an exclusive contract and to disclose the
materials terms of the contract (e.g., length, source of revenues
and
fees). Similarly, revise the footnotes to the financial
statements.
5. Please revise to provide a more detailed discussion of these
activities, which are very material to operations. Discuss
managements` plans for this segment, including a discussion of why
these operations were acquired. Revise the Results of Operations
section of MD&A to provide a significantly expanded discussion of
effects of this material segment on operations.
Classification of Assets - page 80
6. Please refer to our previous comment 12. We note your response
to
the first and third bullet points; however, we could not locate
disclosure in your filing of how your accounting for the
impairment
for this investment complies with SFAS 144. Please revise to
include
the following disclosures:
* Disclose where you have recorded the impairment charge in the
statement of income, and disclose where you have recorded the
valuation allowance in the statement of financial condition.
* Reconcile the amount of your disclosed investment in these
properties of $562,000 with the disclosures on page 93 that your
investment in FSMC was $400,000 at September 30, 2004 and disclose
the form of your investment in FSMC. Also, reconcile these
disclosures with the discussion of your real estate activities on
page 85.
* Your discussion on page 81 states that FSMC`s investment in real
estate is classified as substandard. Revise your disclosure to
state
why you believe that characterizing this asset as "substandard"
complies with SFAS 144. In addition, the use of the word
"substandard" could be potentially confusing to investors, since
the
discussion in the preceding two paragraphs that defines the
meaning
of substandard assets relates to your classification of loans and
other assets, such as debt and equity securities.
* Revise your disclosure to state how you evaluate this investment
for impairment and how this complies with the guidance in SFAS
144.
* Disclose your methodology for testing the investment for
recoverability, clarifying why no further impairments have been
recognized or are necessary.
* Disclose the segment in which the real estate investment is
reported.
* * * * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
Direct any questions on accounting matters to Rebekah Moore
at
202-842-5482, or to Paul Cline, Senior Accountant, at 202-942-
1782.
Please direct any other questions to David Lyon at 202-942-1796,
or
to me at 202-942-1779.
Sincerely,
Barry McCarty
Senior Counsel
By fax : Steve Lanter
Fax number 202-362-2902
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First Federal of Northern Michigan Bancorp, Inc.
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