First Federal of Northern Michigan Bancorp, Inc.

Compensation Committee Charter

Statement of Policy

The compensation Committee shall provide assistance to the Board of Directors (the "Board") of First Federal of Northern Michigan Bancorp, Inc. in fulfilling the board of director’s responsibilities relating to management organization, performance, and establishing compensation for senior officers, other employees and members of the Board.

Organization

The members of the Compensation Committee shall be appointed by the Board and may be removed by the Board. The Compensation Committee shall meet on the call of its chairman. The Compensation Committee has the authority to retain and terminate advisors, including compensation consultants, accountants and legal counsel, to assist in discharging its duties including the authority to approve such advisor’s fees and retention terms. There will be at least three members of the Compensation Committee. A majority of the members of the Compensation Committee shall be a quorum to transact business.

Qualifications

The Compensation Committee shall be composed of independent directors, determined by the Board under the First Federal of Northern Michigan Bancorp, Inc. Governance Guidelines. The members of the Compensation Committee shall be outside directors within the meaning of Section 162(m) of the Internal Revenue Code. Each member of the Compensation Committee shall also be a "Non-Employee Director" as the term is defined by Rule 16b-3 of the Securities and Exchange Commission.

Powers, Duties and Responsibilities

In discharging its responsibilities for management organization, performance, compensation and succession, the Compensation Committee shall:

  • Consider and authorize the compensation philosophy for First Federal of Northern Michigan Bancorp Inc. and its subsidiaries;
  • Review and evaluate chief executive officer performance, in light of goals and objectives set by the Compensation Committee that include First Federal of Northern Michigan Bancorp, Inc.’s performance and return to shareholders;
  • Set the chief executive officer’s compensation. The chief executive officer will not be present during the Compensation Committee’s deliberations about or voting on the chief executive officer’s compensation;
  • Approve the compensation ranges of the senior executive officers, including the senior executive officers of the affiliated savings bank;
  • Review the compensation ranges of the other employees;
  • Annually review and approve perquisites for the chief executive officer and other senior officers;
  • Evaluate and establish director compensation;
  • Consider and approve the report of the Compensation Committee for inclusion in First Federal of Northern Michigan Bancorp, Inc.’s Annual Proxy Statement;
  • Provide advice and recommendations to the board of directors as necessary or appropriate with respect to incentive compensation plans, deferred compensation plans, executive retirement plans, and equity-based plans;
  • Serve as the administrative committee for incentive, deferred compensation and equity-based plans;
  • Review and evaluate, on an annual basis, its own performance and function;
  • Report the matters considered and actions taken by the Compensation Committee to the Board;
  • Have the power to engage independent advisors to assist in the above powers, duties and responsibilities; and
  • Periodically review this charter and prepare updates as necessary for consideration and adoption by the Board.
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