<PAGE>
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                                FORM 10-KSB


 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the fiscal year ended December 31, 1998

 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     For the transition period from _______________________ to
     _____________________

                  Commission File Number: 333-00724
                     VALLEY RIDGE FINANCIAL CORP.
            (Name of Small Business Issuer in Its Charter)

              MICHIGAN                                  38-2888214
    (State or Other Jurisdiction of        (I.R.S. Employer Identification No.)
     Incorporation or Organization)

        450 WEST MUSKEGON AVENUE
          KENT CITY, MICHIGAN                            49330
(Address of Principal Executive Offices)               (Zip Code)

                            (616) 678-5911
           (Issuer's Telephone Number, Including Area Code)

     Securities registered under Section 12(b) of the Exchange Act: NONE.

     Securities registered under Section 12(g) of the Exchange Act: NONE.

Check whether the registrant:  (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 __________

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [X]

The issuer's revenues for the year ended December 31, 1998, were $12,144,450.




<PAGE>
As of March 29, 1999, the aggregate market value of the common stock
held by non-affiliates of the registrant was approximately
$13,683,530.  This amount is based on the sale price of $35.00 per
share for the registrant's stock as of such date.

As of March 29, 1999, the registrant had outstanding 622,573 shares of
Common Stock.

Transitional Small Business Disclosure Format (check one):  Yes ____  No __X__.









































<PAGE>
                                PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

     Valley Ridge Financial Corp. (the "Corporation") is a Michigan
bank holding corporation with its headquarters in Kent City, Michigan.
The Corporation was formed on May 20, 1988.  The Corporation is the
parent company of Valley Ridge Bank, a Michigan banking corporation.
Valley Ridge Bank is the Corporation's only subsidiary.  Valley Ridge
Bank owns a 20% interest in a non-banking corporation, West Shore
Computer Services, Inc., a data processing firm and owns 100% of the
outstanding shares of Valley Ridge Investments, Inc., a  company that
holds a 6% interest in a title company, Valley Ridge Realty, Inc., a
real estate brokerage company, and Valley Ridge Financial Services,
Inc., an insurance agency.

     On July 1, 1996, Community Bank Corporation ("Community") merged
with and into the Corporation (the "Merger").  The then-shareholders
of Community received 152,159 shares of the Common Stock of the
Corporation ("Valley Ridge Common Stock") for the shares of common
stock of Community that they held, in addition to cash in lieu of
fractional shares.  The Merger was treated as a pooling of interests
for accounting purposes and the assets and liabilities of Community
were carried forward in the Corporation's accounts.

     Effective at the close of business on December 6, 1996, the
Corporation's two subsidiary banks, The Grant State Bank ("Grant") and
Kent City State Bank ("Kent City"), were consolidated into a single
banking corporation (the "Consolidation").  The purpose of the
Consolidation was to allow the Corporation to further realize
operational efficiencies and provide more consistent and improved
service to the market areas that the Corporation had been servicing.
The Consolidation resulted in a single bank named "Valley Ridge Bank"
(the "Bank").  On December 31, 1998, the Bank had assets totaling $148
million, deposits of $119.6 million and shareholders' equity of $14.2
million.

     The Corporation and the Bank operate in a single industry
segment--the business of commercial banking, mortgage banking and
other related activities.  The Bank is a full service bank offering
customary commercial banking services, which include commercial and
retail loans, business and personal checking accounts, savings and
individual retirement accounts, time deposit instruments, automated
transaction machine services, money transfer services and safe deposit
facilities, and insurance and real estate brokerage services.  No
material part of the business of the Corporation or the Bank is
dependent upon a single customer or very few customers, the loss of
which would have a materially adverse effect on the Corporation.

                                      -2-
<PAGE>
     The principal markets for the Corporation's financial services
are presently the Michigan communities in which the Bank's offices are
located and the areas immediately surrounding those communities.  The
Corporation and the Bank serve these markets through eight offices
located in Kent City, Coopersville, Egelston, Grant, Newaygo, Ravenna,
Sparta and White Cloud, Michigan.  This diversification allows the
Bank to spread some of its market risk over a wider area and not be
subject to downturns in any specific community.  Within this market
area, the Bank competes with various banks, savings and loan
associations and credit unions.  The Bank is the only bank with
offices in Kent City and Grant, Michigan.  Other banks and financial
institutions have offices in some of the towns where the Bank's
branches are located.  The Corporation and the Bank have no material
foreign assets or income.

     The business of banking is highly competitive.  In addition to
competition from other commercial banks, banks face significant
competition from savings and loan associations, credit unions, finance
companies, insurance companies and investment and brokerage firms.
The principal methods of competition for financial services are price
(interest rates paid on deposits, interest rates charged on borrowings
and fees charged for services) and service (convenience and quality of
services rendered to customers).

     Banks and bank holding companies are extensively regulated.  The
Bank is chartered under state law and is supervised, examined and
regulated by both the Financial Institutions Bureau of the Michigan
Department of Consumer and Industry Services (the "FIB") and the Board
of Governors of the Federal Reserve System (the "Federal Reserve
Board").  The Corporation is regulated by the Federal Reserve Board.
Deposits of the Bank are insured by the Federal Deposit Insurance
Corporation (the "FDIC") to the extent provided by law.

     Federal and state laws that govern banks significantly limit
their business activities in a number of respects.  Prior approval of
the Federal Reserve Board, and in some cases various other government
agencies, is required for the Corporation to acquire control of any
additional banks or other operating subsidiaries. The business
activities of the Corporation and the Bank are limited to banking and
other activities that are determined by the Federal Reserve Board to
be closely related to banking.

     The Corporation is a legal entity separate and distinct from the
Bank.  There are legal limitations on the extent to which the Bank can
lend or otherwise supply funds to the Corporation.  In addition,
payment of dividends to the Corporation by the Bank is subject to
various state and federal regulatory limitations.


                                      -3-
<PAGE>
     Under Federal Reserve Board policy, the Corporation is expected
to act as a source of financial strength to the Bank and to commit
resources to support it.  Under federal law, the FDIC also has
authority to impose special assessments on insured depository
institutions to repay FDIC borrowings from the United States Treasury
or other sources and to establish semi-annual assessment rates on Bank
Insurance Fund ("BIF") member banks to maintain the BIF at the
designated reserve ratio required by law.

     Banks are subject to a number of federal and state laws and
regulations that have a material impact on their business.  These
include, among others, state usury laws, state laws relating to
fiduciaries, the Truth in Lending Act, the Truth in Savings Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Expedited Funds Availability Act, the Community Reinvestment Act,
electronic funds transfer laws, redlining laws, antitrust laws,
environmental laws and privacy laws.  The instruments of monetary
policy of authorities such as the Federal Reserve Board may influence
the growth and distribution of bank loans, investments and deposits,
and may also affect interest rates on loans and deposits.  These
policies may have a significant effect on the operating results of
banks.

     The Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act") substantially changed the geographic
constraints applicable to the banking industry.  The Riegle-Neal Act
allows bank holding companies to acquire banks located in any state in
the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law.  Effective June 1,
1997, the Riegle-Neal Act also allowed banks to establish interstate
branch networks through acquisitions of other banks.  The
establishment of DE NOVO interstate branches or the acquisition of
individual branches of a bank in another state (rather than the
acquisition of an out-of-state bank in its entirety) is allowed by the
Riegle-Neal Act only if specifically authorized by state law.  The
legislation allowed individual states to "opt-out" of certain
provisions of the Riegle-Neal Act by enacting appropriate legislation
prior to June 1, 1997.

     Michigan permits both U.S. and non-U.S. banks to establish branch
offices in Michigan.  The Michigan Banking Code permits, in
appropriate circumstances and with the approval of the Commissioner of
the FIB, (i) acquisition of Michigan banks by FDIC-insured banks,
savings banks or savings and loan associations located in other
states, (ii) sale by a Michigan bank of branches to an FDIC-insured
bank, savings bank or savings and loan association located in a state
in which a Michigan bank could purchase branches of the purchasing
entity, (iii) consolidation of Michigan banks and FDIC-insured banks,

                                      -4-
<PAGE>
savings banks or savings and loan associations located in other states
having laws permitting such consolidation, (iv) establishment of
branches in Michigan by FDIC-insured banks located in other states,
the District of Columbia or U.S. territories or protectorates having
laws permitting a Michigan bank to establish a branch in such
jurisdiction, and (v) establishment by foreign banks of branches
located in Michigan.

     The nature of the business of the Bank is such that it holds
title, on a temporary or permanent basis, to a number of parcels of
real property.  These include properties owned for branch offices and
other business purposes as well as properties taken in or in lieu of
foreclosure to satisfy loans in default.  Under current state and
federal laws, present and past owners of real property may be exposed
to liability for the cost of cleanup of environmental contamination on
or originating from those properties, even if they are wholly innocent
of the actions that caused the contamination.  These liabilities can
be material and can exceed the value of the contaminated property.

     The Corporation and the Bank employed approximately 100 persons
(85 persons on a full-time equivalent basis) at December 31, 1998.

     Certain statistical information describing the business of the
Corporation follows.  Additional statistical information describing
the business of the Corporation and the Bank appears in Management's
Discussion and Analysis or Plan of Operation included in Item 6 of
this report and in the Consolidated Financial Statements and notes
thereto included in Item 7 of this report.


ITEM 2.  DESCRIPTION OF PROPERTY.

     The Corporation maintains its offices and conducts its business
operations from the principal banking office of the Bank in Kent City,
Michigan. The Bank's principal office is located at 450 West Muskegon
Avenue, Kent City, Michigan. These premises encompass approximately
24,000 square feet, all of which are occupied by the Bank and the
Corporation. The Corporation also owns property located at 6 North
Main Street, Kent City, Michigan, the former location of the Bank's
principal office.  The Corporation also owns a vacant lot located in
an industrial park in Coopersville, Michigan.

     The Bank owns the premises occupied by its branch offices at the
following addresses, all of which are in Michigan: 10 West Main
Street, Grant (4,051 square feet), the corner of M-37 and M-82,
Newaygo (1,450 square feet), 661 West Randall Road, Coopersville
(1,950 square feet); 3069 Slocum Road, Ravenna (3,300 square feet);
5475 Apple Avenue, Egelston (3,300 square feet); and 11 South State

                                      -5-
<PAGE>
Street, Sparta (1,040 square feet).  The Bank leases its office at 47
South Charles Street, White Cloud, Michigan (approximately 500 square
feet).  The Corporation believes all of its and the Bank's properties
are in good condition and repair and are adequately covered by
insurance.

     As part of its business, the Bank generates all types of
mortgages.  The Bank occasionally purchases mortgages as part of its
business, but typically relies on its ability to generate mortgages
for most purposes.


ITEM 3.  LEGAL PROCEEDINGS.

     From time to time, the Corporation or the Bank is party, as
plaintiff or defendant, to legal proceedings in the normal course of
operations.  No pending litigation is considered material at this
time.


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

     Not applicable.


























                                      -6-
<PAGE>
                               PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     There is no established public trading market for Valley Ridge
Common Stock.  Transactions in Valley Ridge Common Stock are
occasionally effected by individuals on an informal basis.  Some
transactions are effected through the involvement of local brokerage
firms.  The prices at which such transactions are effected are only
occasionally reported to the Corporation.  As of December 31, 1998,
there were approximately 490 record holders of shares of Valley Ridge
Common Stock.

     The Corporation has paid regular cash dividends since June 30,
1989.  The following table summarizes the quarterly cash dividends
paid to common shareholders during the last two full years,
retroactively adjusted for a 5-for-4 stock split during October 1997,
which was effected in the form of a stock dividend:
<TABLE>
<CAPTION>
          QUARTER                     1997         1998
          -------                     ----         ----
<S>      <C>                      <C>           <C>
          1st                      $   .16       $  .25
          2nd                          .16          .25
          3rd                          .16          .25
          4th                          .22          .25
                                   -------       ------
          Total                    $   .70       $ 1.00
                                   =======       ======
</TABLE>

     Holders of Valley Ridge Common Stock are entitled to receive
dividends when, as and if declared by the Corporation's board of
directors out of funds legally available for that purpose.  The
earnings of the Corporation, through dividends paid by the Bank, are
the principal source of funds to pay cash dividends.  Consequently,
cash dividends are dependent upon the earnings, capital needs,
regulatory constraints and other factors affecting the Corporation.
Federal and state banking laws and regulations place certain
restrictions on the amount of dividends and loans that a bank can pay
to its parent company.  These restrictions are not expected to
prohibit the Corporation from continuing its normal dividend policy.






                                      -7-
<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion is provided by Valley Ridge Financial Corp.
management as its analysis of the consolidated financial condition and
results of operations of the Corporation.  This analysis should be
read in conjunction with the consolidated financial statements and
related notes.

TWELVE MONTHS ENDED DECEMBER 31, 1998 AND 1997

RESULTS OF OPERATIONS:  The Corporation reported net income of
$1,627,173 or $2.62 per share for 1998. This was 9.8% higher than the
$1,481,712, or $2.39 per share, earned in 1997.  The increase in net
income was primarily a result of increased net interest income from
$5,920,713 in 1997 to $6,384,613 in 1998, along with an increase in
non-interest income from $1,085,728 in 1997 to $1,382,786 in 1998.

The following table presents, for the periods indicated, the total
dollar amount of interest income from average interest-earning assets
and the related yields, as well as the interest expense on average
interest-bearing liabilities.




























                                      -8-
<PAGE>
<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                    --------------- 1 9 9 8 ---------------   --------------- 1 9 9 7 ----------------
                                        AVERAGE                     AVERAGE      AVERAGE                       AVERAGE
                                        BALANCE        INTEREST       RATE       BALANCE         INTEREST       RATE
                                        -------        --------       ----       -------         --------       ----
<S>                                <C>              <C>              <C>     <C>             <C>               <C>
Taxable investment
   securities                       $  11,395,604    $   686,176      6.02%   $  6,707,055    $     414,079     6.17%
Tax-exempt securities <F1>             14,793,501      1,302,427      8.80      13,217,462        1,202,770     9.10
                                    -------------    -----------              ------------    -------------
     Total securities                  26,189,105      1,988,603      7.59      19,924,517        1,616,849     8.11
Loans <F1><F2><F3>                     95,943,606      9,091,258      9.48      89,814,550        8,648,756     9.63
Federal funds sold                      3,108,766        165,341      5.32       2,209,315          113,259     5.13
                                    -------------    -----------              ------------    -------------
     Total earning assets             125,241,477     11,245,202      8.98     111,948,382       10,378,864     9.27

Nonaccrual loans                          315,833                                  162,015

Less allowance for
   loan losses                         (1,225,931)                              (1,175,479)
Cash and due from banks                 5,377,324                                5,741,211
Other nonearning assets                 8,382,550                                5,379,438
                                    -------------                             ------------
     Total assets                   $ 138,091,253                             $122,055,567
                                    =============                             ============
</TABLE>

<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                    --------------- 1 9 9 8 ---------------   --------------- 1 9 9 7 ----------------
                                        AVERAGE                     AVERAGE      AVERAGE                       AVERAGE
                                        BALANCE        INTEREST       RATE       BALANCE         INTEREST       RATE
                                        -------        --------       ----       -------         --------       ----
<S>                                <C>              <C>              <C>     <C>             <C>               <C>
Interest-bearing demand
  deposits                          $  13,930,957    $   206,008      1.48%   $ 13,008,853    $     210,677      1.62%
Savings deposits                       30,736,597        742,036      2.41      28,178,318          740,033      2.63
Time deposits                          49,237,546      2,772,433      5.63      43,747,811        2,550,362      5.83
                                    -------------    -----------              ------------    -------------
     Total interest-bearing
       deposits                        93,905,100      3,720,477      3.96      84,934,982        3,501,072      4.12
Other borrowings                       11,399,995        656,574      5.76       9,015,974          514,853      5.71
                                    -------------    -----------              ------------    -------------
     Total interest-bearing
       liabilities                    105,305,095      4,377,051      4.16      93,950,956        4,015,925      4.27
                                                     -----------                              -------------
                                      -9-
<PAGE>
Demand deposits                        17,351,318                               14,381,087
Other liabilities                       1,382,331                                1,141,626
                                    -------------                             ------------
     Total liabilities                124,038,744                              109,473,669
Average equity                         14,052,509                               12,581,898
                                    -------------                             ------------
     Total liabilities and
       equity                       $ 138,091,253                             $122,055,567
                                    =============                             ============
Net interest income                                  $ 6,868,151                               $  6,362,939
                                                     ===========                               ============
Rate spread                                                           4.82                                       5.00
Net interest margin                                                   5.48                                       5.68
<FN>
<F1>  Yields reflected have been computed on a tax equivalent basis
      using a marginal tax rate of 34%.
<F2>  Average outstanding balances exclude non-accruing loans.
<F3>  Includes loans held for sale.
</FN>
</TABLE>


The following table presents the dollar amount of change in interest
income and interest expense for major components of interest-earning
assets and interest-bearing liabilities.  For purposes of this table,
changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to
volume and change due to rate.





















                                      -10-
<PAGE>
<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                             --------------- 1998 over 1997 -----------
                                               TOTAL            VOLUME           RATE
                                               -----            ------           ----
<S>                                         <C>            <C>            <C>
Increase (decrease) in interest income
     Loans (including loans held for sale)   $   442,502    $   582,557    $   (140,055)
     Taxable securities                          272,097        282,560         (10,463)
     Nontaxable securities                        99,657        139,754         (40,097)
     Federal funds sold                           52,082         47,692           4,390
                                             -----------    -----------    ------------
       Net change in tax-equivalent income       866,338      1,052,563        (186,225)

Increase (decrease) in interest expense
     Interest-bearing demand deposits             (4,669)        14,350         (19,019)
     Savings deposits                              2,003         64,315         (62,312)
     Time deposits                               222,071        311,448         (89,377)
     Other borrowings                            141,721        137,281           4,440
                                             -----------    -----------    ------------
       Net change in interest expense            361,126        527,394        (166,268)
                                             -----------    -----------    ------------
          Net change in tax-equivalent
            net interest income              $   505,212    $   525,169    $    (19,957)
                                             ===========    ===========    ============
</TABLE>

Net interest margin remained strong at 5.48% for 1998, a decline of 20
basis points from 1997.  The decrease is largely due to increased
competition for loan and deposit accounts.  Average loans, including
loans held for sale, increased by 6.8% to $95,943,606 with a year-to-
year increase in mortgage loans, including loans held for sale, of
17.8% in 1998.  The increase in mortgage loans is primarily due to the
favorable rate environment.  Average securities increased 31.4% to
$26,189,105.  Average interest-bearing deposits increased $8,970,118
or 10.6%.  The increase is primarily the result of various CD
promotions throughout 1998.  Average other borrowings increased by
26.4% to $11,399,995, and average equity increased $1,470,611, an
11.7% increase.

The provision for loan losses was $300,000 and $190,000 for 1998 and
1997.  The provision for loan losses represents the adjustment to the
allowance for loan losses needed to maintain the allowance at a level
determined by management to cover inherent losses within the
Corporation's loan portfolio.  The allowance for loan losses is based
on the application of projected loss ratios to the risk-ratings of
loans, both individually and by category.  Projected loss ratios

                                      -11-
<PAGE>
incorporate such factors as recent loss experience, current economic
conditions and trends, trends in past due and impaired loans, and risk
characteristics of various categories and concentrations of loans.
Most of the loans charged-off were consumer loans for both years.
<TABLE>
<CAPTION>
                                                                    As of and for the years
                                                                        ended December 31,
                                                                  1998                  1997
                                                                  ----                  ----
<S>                                                          <C>                 <C>
Balance at beginning of year                                  $  1,186,772        $   1,182,154
Provision charged to operating expense                             300,000              190,000

Recoveries on loans previously charged to the allowance             43,612               42,725
Loans charged off                                                 (141,684)            (228,107)
                                                              ------------        -------------
     Net charge offs                                               (98,072)            (185,382)
                                                              ------------        -------------
Balance at end of year                                        $  1,388,700        $   1,186,772
                                                              ============        =============
Allowance for loan losses as a percentage of
  total loans as of year end                                          1.40%                1.28%
Ratio of net charge-offs to average total loans outstanding
  during the year                                                    .0010                .0021
</TABLE>

The allowance for loan losses at December 31, 1998 was 1.4 times the
average of impaired loans for the year.  Loan recoveries were 19% of
the prior year's charge-offs.  Net charge-offs for 1998 decreased from
$185,382 in 1997 to $98,072.  The provision for loan losses was
increased to $300,000 to allow for an increase in loan growth and
downward trends in the agricultural economy.  The net effect was a
$201,928 increase in the allowance balance at December 31, 1998.
These factors result in an increase in the ratio of allowance to total
loans from 1.28% to 1.40%.  Management believes that this level of
allowance is adequate to cover problem credits in the loan portfolio.

The balance of impaired loans at December 31, 1998 of $166,317 is
$1,893,443 lower than at December 31, 1997.  This decrease is due
primarily to two commercial credits which were considered impaired at
December 31, 1997, but subsequently paid off during 1998.  As
indicated in Note 4 of the consolidated financial statements,
management does not anticipate significant loss exposure relating to
the loans classified as impaired and has established no specific
reserves against those loans due to favorable collateral positions.



                                      -12-
<PAGE>
The allowance for loan losses was allocated in an amount deemed
necessary to provide for probable losses within the following loan
categories as of December 31:
<TABLE>
<CAPTION>
                                                                        (Dollars in thousands)
                                  -------------------1998-------------------             ------------------1997------------------
       BALANCE AT END OF            PRINCIPAL       ALLOCATED    % OF TOTAL                PRINCIPAL     ALLOCATED   % OF TOTAL
      PERIOD APPLICABLE TO           BALANCE        ALLOWANCE       LOANS                   BALANCE      ALLOWANCE      LOANS
      --------------------           -------        ---------       -----                   -------      ---------      -----
<S> <C>                             <C>            <C>             <C>                    <C>           <C>             <C>
     Commercial and agricultural     $  44,968      $      379       44%                   $  43,108     $      268       47%
     Real estate - mortgages            41,734             113       40                       35,438             67       38
     Consumer                           16,403             296       16                       13,871            202       15
     Unallocated                                           601                                                  650
                                     ---------      ----------      ---                    ---------     ----------      ---
                                     $ 103,105      $    1,389      100%                   $  92,417     $    1,187      100%
                                     =========      ==========      ===                    =========     ==========      ===
</TABLE>
Noninterest income was $1,382,786 and $1,085,728 for 1998 and 1997,
respectively.  The increase was primarily a result of increased other
income and net realized gain on the sale of securities for 1998
compared to 1997.  Other income increased from 1997 to 1998 as a
result of increased income from West Shore Computer Services, Inc.
West Shore Computer Services, Inc. is owned jointly by Valley Ridge
with several other community banks and provides data processing
services to Valley Ridge and other banks.  Noninterest expense
increased to $5,436,531 compared to $4,921,337 in 1997.  Noninterest
expense was higher in 1998 when compared to 1997 largely because of
salaries and benefits, which increased $323,294 or 13.2%.  Increases
from 1997 to 1998 in occupancy expense of $88,113 or 27.1% and
furniture and fixtures expense of $62,968 or 23.5% also contributed to
the increase in noninterest expense.  The increase in occupancy and
furniture and fixtures expenses can be attributed to the completion of
a new corporate office during 1998.

Following are overall return percentages and the dividend pay-out
ratio for the past two years:
<TABLE>
<CAPTION>
                                                          1998      1997
                                                          ----      ----
<S> <C>                                                  <C>       <C>
     Return on average assets                              1.18%     1.21%
     Return on average equity                             11.58     11.78
     Dividend pay-out ratio                               38.19     29.29
     Average equity to average assets ratio               10.18     10.31
</TABLE>

                                      -13-
<PAGE>
Management is not aware of any existing trends, events, uncertainties
or current recommendations by regulatory authorities that are expected
to have a material impact on Valley Ridge's future operating results
or financial condition.

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES:  Total assets
increased by $17,320,601 or 13.2% to $148,195,110 at December 31, 1998
compared to $130,874,509 at December 31, 1997.  This growth is
attributable primarily to growth in the loan portfolio which was
funded by deposit growth.  This growth was partially due to Valley
Ridge benefiting from consolidation of major regional banks in some of
its markets.  Total liabilities increased by $16,133,526 or 13.7% to
$133,710,659 at December 31, 1998 compared to $117,577,133 at
December 31, 1997.  The increase in shareholders' equity is due
primarily to retention of earnings and an increase of $151,566 in the
unrealized gain on securities available for sale.

Total loans increased by $7,016,611 or 7.6% from the balance at
December 31, 1997 to $99,433,953 at December 31, 1998.  In addition,
loans held for sale were $3,670,761 at December 31, 1998 compared to
zero at December 31, 1997.  Deposits increased by $14,407,816 or 13.7%
to $119,582,751 at December 31, 1998.  The overall impact of these two
changes was a decrease in the net loan to deposit ratio to 82% at
December 31, 1998 compared to 87% at December 31, 1997.  The allowance
for loan losses increased by $201,928 causing the ratio of reserves to
outstanding loans to increase from 1.28% at December 31, 1997 to 1.40%
at December 31, 1998.

The following table shows the maturity of commercial, consumer, real
estate construction and agricultural loans outstanding at December 31,
1998.  Also provided below is the amount due after one year classified
according to the terms of the loans.  Demand loans, loans with no
stated maturity and overdrafts are reported as due in one year or
less.















                                      -14-
<PAGE>
<TABLE>
<CAPTION>
                                                DUE IN      DUE AFTER ONE         DUE
                                               ONE YEAR     YEAR THROUGH         AFTER
                                                OR LESS      FIVE YEARS        FIVE YEARS
                                                -------      ----------        ----------
                                                        (Dollars in thousands)
<S> <C>                                      <C>              <C>             <C>
     Commercial                               $    26,292      $  8,414        $   2,823
     Consumer                                       7,541         7,847            1,015
     Real estate                                   10,844        25,314            1,905
     Agricultural                                   4,140         2,864              435
                                              -----------      --------        ---------
                                              $    48,817      $ 44,439        $   6,178
                                              ===========      ========        =========
     Loans due after one year
       With fixed rates                                        $ 34,389        $   5,231
       With floating rates                                       10,050              947
                                                               --------        ---------
                                                               $ 44,439        $   6,178
                                                               ========        =========
</TABLE>

The time remaining until maturity of time certificates of deposit of
$100,000 or more at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
<S> <C>                                                <C>
     Three months or less                               $    4,198,000
     Over three months through six months                    2,163,000
     Over six months through twelve months                   1,442,000
     Over twelve months                                      1,576,000
                                                        --------------
                                                        $    9,379,000
                                                        ==============
</TABLE>

Valley Ridge paid dividends totaling $621,394 in 1998, compared to
$434,049 paid during 1997.

The Corporation's capital ratios exceeded the minimum levels
prescribed by the Federal Reserve Board, as shown in Note 16 of the
consolidated financial statements.

Total cash, cash equivalents and investment securities totaled
$36,700,174 at December 31, 1998 or 25% of total assets.  The
principal source of funding for the Corporation continues to come from
its deposit customers, which have historically been a stable source of

                                      -15-
<PAGE>
funds.  Other sources of funding include normal loan repayments, sales
and maturities of securities, federal funds available from
correspondent banks, and additional advances available from the
Federal Home Loan Bank.  Management believes that the current level of
liquidity is sufficient to meet the normal operating needs of the Bank.

<TABLE>
The following table shows, by class of maturities at December 31,
1998, the amounts and weighted average yields of investment securities
<F1>:
<CAPTION>
                                                         CARRYING       AVERAGE
                                                          VALUE         YIELD <F2>
                                                          -----        ----------
                                                         (Dollars in thousands)
<S> <C>                                                <C>              <C>
     U.S. Treasury securities and obligations of U.S.
       Government corporations and agencies
        One year or less                                $  2,020          6.60%
        Over one through five years                        4,137          5.91
        Over five through ten years                        2,031          7.00
        Over ten years
                                                        --------          ----
                                                           8,188          6.37
     Obligations of states and political subdivisions
        One year or less                                   1,410          7.65
        Over one through five year                         2,291          9.15
        Over five through ten years                        4,758          8.68
        Over ten years                                     8,409          8.44
                                                        --------          ----
                                                          16,868          8.53

     Mortgage-backed securities and other                  4,239          6.06
                                                        --------          ----
                                                        $ 29,295          7.57%
                                                        ========          ====
Because of their variable payments, mortgage-backed securities are not
reported by a specific maturity grouping.
<FN>
<F1>  Calculated on the basis of the cost and effective yields weighted
     for the scheduled maturity of each security.
<F2>  Weighted average yield has been computed on a fully taxable
     equivalent basis.  The rates shown on state and municipal
     securities have been adjusted to a fully taxable equivalent using a
     federal income tax rate of 34%.
</FN>
</TABLE>


                                      -16-
<PAGE>
As of December 31, 1998, the securities of no issuer except the U.S.
Government had an aggregate carrying value that exceeded 10% of
shareholders' equity.

Accrued expenses and other liabilities increased by $805,441 or 72.0%,
from 1997.  Included in this increase are an increase in commercial
loan participation payments in process, an increase in accrued
deferred director expenses, and an increase in the deferred tax
portion of the unrealized gains on securities available for sale.

Securities sold under agreements to repurchase generally mature within
one to three days from the transaction date.  Valley Ridge Bank has
pledged certain investment securities, which are held in safekeeping,
as collateral against these borrowings.  Valley Ridge Bank had
$1,204,014 and $283,745 in repurchase agreements at year end 1998 and 1997.

The Corporation had $11,000,000 in advances from the Federal Home Loan Bank
at year end 1998 and 1997.  Each advance requires monthly interest payments
at either fixed or adjustable rates.  These borrowings are collateralized by
nonspecific loans within the mortgage portfolio up to the principal
outstanding and nonspecific qualifying securities within the securities
portfolio.

The following table shows the interest sensitivity gaps for four
different time intervals as of December 31, 1998.
























                                      -17-
<PAGE>
<TABLE>
<CAPTION>
                                                     MATURITY OR REPRICING FREQUENCY
                                                     -------------------------------
                                     0-3 MONTHS        3-12 MONTHS          1-5 YEARS          5 YEARS+
                                     ----------        -----------          ---------          --------
<S><C>                             <C>              <C>                <C>                 <C>
    INTEREST-EARNING ASSETS
     Loans                         $  33,880,000     $   14,937,000     $    44,439,000     $    6,178,000
     Loans held for sale               3,671,000
     Investment securities                                3,430,000           6,428,000         15,198,000
     Federal funds sold                  500,000
                                   -------------     --------------     ---------------     --------------
      Total                        $  38,051,000     $   18,367,000     $    50,867,000     $   21,376,000
                                   =============     ==============     ===============     ==============
     INTEREST-BEARING LIABILITIES
     Certificates of deposit       $  17,165,000     $   20,601,000     $    15,236,000     $       35,000
     Savings accounts                 19,268,000
     Money market accounts            15,850,000
     NOW accounts                     10,954,000
     FHLB Loan                         3,000,000          5,000,000           3,000,000
                                   -------------     --------------     ---------------     --------------
      Total                        $  66,237,000     $   25,601,000     $    18,236,000     $       35,000
                                   =============     ==============     ===============     ==============
     Interest sensitivity gap      $ (28,186,000)    $   (7,234,000)    $    37,697,000     $   24,004,000
                                   =============     ==============     ===============     ==============
     Cumulative gap                                  $  (35,420,000)    $     2,277,000     $   26,281,000
                                                     ==============     ===============     ==============
</TABLE>

The above table is based on contractual terms.  Mortgage-backed
securities do not have a single maturity date and, therefore, were
excluded from investment securities.  Savings accounts, money market
accounts, and NOW accounts are subject to immediate withdrawal and are
presented as repricing in the earliest period presented.  Although
demand and savings accounts, for which rates paid are not readjusted
on a pre-established contract cycle and are subject to immediate
withdrawal, are presented as repricing in the 0-3 months period,
management believes that these types of accounts are not as sensitive
to changes in interest rates in the short-term as this presentation
would indicate.  The Corporation is liability sensitive in periods out
to 12 months in the amount of $35,420,000; however, this is offset in
the 1-5 years period with a positive interest sensitivity gap of
$37,697,000.  The cumulative gap increases to $26,281,000 for all time
periods.  Management strives to maintain a positive cumulative gap for
periods out to five years.  The practice of underwriting loans with
maturity dates of five years or less and with variable rates allows
for a repricing of those assets over a relatively short period.

                                      -18-
<PAGE>
Additionally, management does not aggressively price deposits,
preferring to maintain a level of lending supported primarily by its
base of core deposits.  The Corporation's asset/liability management
committee meets semi-annually, or more often as needed, to review gap
positions and determine management strategies for loan and deposit
pricing, purchase and sale of securities, and other borrowing
decisions.

IMPACT OF INFLATION AND CHANGING PRICES.  Most assets and liabilities
of a financial institution are monetary in nature.  This differs from
most commercial and industrial companies that have significant
investments in fixed assets or inventories.  The effect of inflation
on financial institutions is to a large extent indirect and the
measure of such impact is largely subjective.

Noninterest expenses tend to rise during periods of general inflation.
Inflation levels are to some degree reflected in interest rates.
Changes in interest rates, which are to some extent attributable to
changes in inflation rates or uncertainty concerning changes in
inflation rates, do affect the earnings of the Corporation.  The
Corporation seeks to protect net interest income from the adverse
effects of interest rate fluctuations through its asset/liability
management program.

The Corporation's management believes that increases in financial
institution assets and deposits result in part from monetary
inflation.  As assets increase, the financial institution must
increase equity capital proportionately to maintain appropriate
relationships between assets and equity.

IMPACT OF ACCOUNTING STANDARDS EFFECTIVE IN FUTURE PERIODS:  In 1998,
the Financial Accounting Standards Board issued Statement No. 133, ACCOUNTING
FOR DERIVATIVES AND HEDGING ACTIVITIES, which will require, in 2000, the
recording of derivatives at fair value in the balance sheet, with changes
in fair value running through the income statement.  Also issued in 1998
was Statement No. 134, MORTGAGE-BACKED SECURITIES AFTER SECURITIZATION, which
will allow, in 1999, mortgage loans that are securitized to be classified
as trading, available for sale, or, in certain circumstances, held to
maturity.  Currently, these must be classified as trading.  Management does
not anticipate that the adoption of these standards will have a significant
impact on the Corporation's consolidated financial statements.


YEAR 2000 READINESS DISCLOSURE

The Corporation is currently in the process of addressing an issue
that is facing all users of automated information systems.  The issue
is that many computer systems that process transactions based on two

                                      -19-
<PAGE>
digits representing the year of the transaction may recognize a date
using "00" as the year 1900 rather than the year 2000.  The inability
to correctly recognize "00" as the year 2000 could affect a wide
variety of automated information systems, such as mainframe
applications, personal computers and communication systems, in the
form of software failure, errors or miscalculations.

The Corporation has developed a plan to prepare for the year 2000. This
plan includes the performance of an inventory of hardware and software
applications, communicating with third party vendors, suppliers and
customers, and obtaining certifications of compliance from third party
providers. The Corporation's core computer services provider, West Shore
Computer Services, Inc. ("West Shore") (20% of the stock of which is owned by
the Corporation) has implemented its own plan to perform an inventory of
its systems and ensure that its systems are year 2000 compliant. As of
December 31, 1998, West Shore had completed approximately 85% of its plan.

The Corporation had completed approximately 85% of its plan as of
December 31, 1998 at a cost of $62,000.  This includes costs related
to personnel, programming, and hardware and software upgrades and
replacements.  Management anticipates that an additional $40,000 in
personnel, programming, and hardware and software upgrades and
replacements will be required to complete the plan during 1999.  While
additional unforeseen costs may occur, these costs are not expected to
be significant.

The impact of the year 2000 issue on the Corporation will depend not only
on corrective actions that the Corporation takes, but also on the way in
which year 2000 issues are addressed by governmental agencies, businesses
and other third parties that provide services or data to, or receive services
or data from, the Corporation, or whose financial condition or operational
capability is important to the Corporation.  To reduce this exposure, the
Corporation has initiated formal communications with its significant
suppliers and large customers to determine the extent to which the
Corporation's interface systems are vulnerable to those third parties'
failures to resolve their own year 2000 issues.  The Corporation is
continuing to seek assurances from its third party vendors and suppliers
confirming that the third parties' software systems are year 2000 compliant
or an expected compliance date by mid 1999.  The Corporation is continuing
to seek assurances that the systems of other companies on which the
Corporation's systems rely will be timely converted or modified.  If such
modifications and conversions are not completed timely, their inability
to correctly recognize the year 2000 could have an adverse impact on the
operations of the Corporation.

The Corporation's credit risk associated with borrowers may increase to the
extent borrowers fail to adequately address year 2000 issues.  As a result,
the Bank identified its material borrowers and has assessed these borrowers'

                                      -20-
<PAGE>
year 2000 readiness.  The material borrowers' year 2000 readiness will be
monitored periodically, based on the level of risk that the year 2000 has
been estimated to potentially impact the business of each borrower.

The Corporation is preparing general contingency plans to address unforeseen
year 2000 issues, including plans in the event that mission critical systems
experience difficulties or other significant third parties fail to
adequately address year 2000 issues.  Such plans principally involve the
operation of systems in an off-line environment.  This would be accomplished
by the manual and desktop computer update of financial records until problems
or difficulties are remedied.  Internal remediation plans are being developed
in the remaining information and non-information technology areas.  The
Corporation is also enhancing its existing business resumption plans to
reflect year 2000 issues.  It is developing plans, designed to coordinate
the efforts of its personnel and resources, in addressing any year 2000
difficulties that become evident after December 31, 1999.  There can be no
assurance that any plans will fully mitigate any such difficulties.
Furthermore, there may be certain mission critical third parties, such as
utilities or telecommunication companies, where alternative arrangements
or other sources are limited or unavailable.

The Corporation believes that with modifications to existing hardware and
software and conversions to new hardware and software, the year 2000 issue
should not pose significant operational problems for its computer systems
and that costs to be incurred are not expected to be material to the
Corporation's results of operations, liquidity or capital resources.

There can be no guarantee that these estimates will be achieved and
actual results could differ from those anticipated.  Specific factors
that might cause differences include, but are not limited to, the
ability of other companies on which the Corporation's systems rely to
modify or convert their systems to be year 2000 complaint, the ability
to locate and correct all relevant computer codes, and similar
uncertainties.  This year 2000 readiness disclosure is in part based upon
and repeats information provided to the Corporation by outside sources,
including its customers, suppliers, and other business partners and the
vendors and licensors of the Corporation's software, hardware and other
systems and equipment.  Although the Corporation believes this outside
information is accurate, the Corporation is not the original source of
this outside information and has not independently verified the information.









                                      -21-
<PAGE>
FORWARD-LOOKING STATEMENTS

This discussion and analysis of financial condition and results of
operations, and other sections of this report, contain forward-looking
statements that are based on management's beliefs, assumptions,
current expectations, estimates and projections about the financial
services industry, the economy, and about the Corporation itself.
Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "intends," "is likely," "plans," "predicts," "projects,"
variations of such words and similar expressions are intended to
identify such forward-looking statements.  Year 2000 related
remediation, cost and risk assessments are necessarily statements of
belief as to the outcome of future events, based in part on
information provided by vendors and others that the Corporation has
not independently verified.  These statements are not guarantees of
future performance and involve certain risks, uncertainties and
assumptions ("Future Factors") that are difficult to predict with
regard to timing, extent, likelihood and degree of occurrence.
Therefore, actual results and outcomes may materially differ from what
may be expressed, implied or forecasted in such forward-looking
statements.  Furthermore, the Corporation undertakes no obligation to
update, amend or clarify forward-looking statements, whether as a
result of new information, future events or otherwise.

Future Factors include changes in interest rates and interest rate
relationships; demand for products and services; the degree of
competition by traditional and non-traditional competitors; changes in
banking regulations; changes in tax laws; changes in prices, levies
and assessments; the impact of technological advances; governmental
and regulatory policy changes; the outcomes of pending and future
litigation and contingencies; trends in customer behavior as well as
their ability to repay loans; the ability of companies on which the
Corporation relies to make their computer systems year 2000 compliant;
and changes in the national economy.  These are representative of the
Future Factors that could cause a difference between an ultimate
actual outcome and a preceding forward-looking statement.













                                      -22-
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS.

                     VALLEY RIDGE FINANCIAL CORP.
                     CONSOLIDATED BALANCE SHEETS
                      December 31, 1998 and 1997
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                             1998                  1997
                                                             ----                  ----
<S>                                                      <C>                  <C>
ASSETS
     Cash and due from banks                              $  5,553,484         $  5,502,762
     Federal funds sold                                        500,000            3,000,000
                                                          ------------         ------------
       Total cash and cash equivalents                       6,053,484            8,502,762

     Securities available for sale                          29,294,862           23,300,280
     Other securities                                        1,351,828            1,345,596
     Loans held for sale                                     3,670,761

     Loans                                                  99,433,953           92,417,342
     Allowance for loan losses                              (1,388,700)          (1,186,772)
                                                          ------------         ------------
                                                            98,045,253           91,230,570

     Accrued interest receivable                             1,079,289            1,084,995
     Premises and equipment - net                            5,721,881            3,428,200
     Other assets                                            2,977,752            1,982,106
                                                          ------------         ------------
       Total assets                                       $148,195,110         $130,874,509
                                                          ============         ============
LIABILITIES AND SHAREHOLDERS' EQUITY
     Deposits
       Noninterest-bearing                                $ 20,473,900         $ 16,465,625
       Interest-bearing                                     99,108,851           88,709,310
                                                          ------------         ------------
          Total                                            119,582,751          105,174,935
     Securities sold under agreement to repurchase           1,204,014              283,745
     Other borrowings                                       11,000,000           11,000,000
     Accrued expenses and other liabilities                  1,923,894            1,118,453
                                                          ------------         ------------
       Total liabilities                                   133,710,659          117,577,133

Shareholders' equity
     Common stock, no par value:  2,000,000 shares



                                      -23-
<PAGE>
       authorized and 622,573 shares outstanding in
       1998; 1,000,000 shares authorized and 619,979
       shares outstanding in 1997                            7,666,697            7,596,526
     Retained earnings                                       6,007,862            5,002,083
     Unearned restricted stock                                 (40,441)
     Net unrealized gain on securities available for sale      850,333              698,767
                                                          ------------         ------------
       Total shareholders' equity                           14,484,451           13,297,376
                                                          ------------         ------------
          Total liabilities and shareholders' equity      $148,195,110         $130,874,509
                                                          ============         ============
</TABLE>

-------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.


































                                      -24-
<PAGE>
                     VALLEY RIDGE FINANCIAL CORP.
                  CONSOLIDATED STATEMENTS OF INCOME
                Years ended December 31, 1998 and 1997
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                             1998                  1997
                                                             ----                  ----
<S>                                                      <C>                  <C>
Interest income
     Loans, including fees                                $   9,050,545        $  8,615,472
     Federal funds sold                                         165,341             113,259
     Securities
       Taxable                                                  686,176             414,079
       Nontaxable                                               859,602             793,828
                                                          -------------        ------------
          Total interest income                              10,761,664           9,936,638

Interest expense
     Deposits                                                 3,720,477           3,501,072
     Other                                                      656,574             514,853
                                                          -------------        ------------
       Total interest expense                                 4,377,051           4,015,925
                                                          -------------        ------------
NET INTEREST INCOME                                           6,384,613           5,920,713

Provision for loan losses                                       300,000             190,000
                                                          -------------        ------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES           6,084,613           5,730,713

Noninterest income
     Service charges                                            837,958             796,071
     Net realized gain on sale of securities                    182,268              32,391
     Net realized gain on sale of loans                          21,693              28,912
     Other income                                               340,867             228,354
                                                          -------------        ------------
       Total noninterest income                               1,382,786           1,085,728

Noninterest expense
     Salaries and benefits                                    2,767,230           2,443,936
     Occupancy                                                  412,368             324,255
     Furniture and fixtures                                     331,414             268,446
     Legal and professional fees                                180,052             178,753
     Data processing                                            267,332             250,005




                                      -25-
<PAGE>
     Supplies                                                   188,046             230,298
     Other expense                                            1,290,089           1,225,644
                                                          -------------        ------------
       Total noninterest expenses                             5,436,531           4,921,337
                                                          -------------        ------------
INCOME BEFORE FEDERAL INCOME TAX                              2,030,868           1,895,104

Federal income tax expense                                      403,695             413,392
                                                          -------------        ------------
NET INCOME                                                $   1,627,173        $  1,481,712
                                                          =============        ============
Basic and diluted earnings per share                      $        2.62        $       2.39
                                                          =============        ============
</TABLE>

-------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.
































                                      -26-
<PAGE>
                     VALLEY RIDGE FINANCIAL CORP.
           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                Years ended December 31, 1998 and 1997
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                        1998                1997
                                                        ----                ----
<S>                                                <C>               <C>
Net income                                          $   1,627,173     $   1,481,712
Other comprehensive income, net of tax:
     Unrealized holding gains and losses on
        available-for-sale securities                     411,914           381,982

     Less reclassification adjustments for gains
        later recognized in income                        182,268            32,391
                                                    -------------     -------------
     Net unrealized gains and losses                      229,646           349,591
       Tax effect                                        (78,080)          (118,861)
                                                    -------------     -------------
     Other comprehensive income                           151,566           230,730
                                                    -------------     -------------
Comprehensive income                                $   1,778,739     $   1,712,442
                                                    =============     =============
</TABLE>






-------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.
















                                      -27-
<PAGE>
                         VALLEY RIDGE FINANCIAL CORP.
        CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                    Years ended December 31, 1998 and 1997
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                       NET UNREALIZED
                                                                                                        GAIN (LOSS)
                                                                                             UNEARNED  ON SECURITIES     TOTAL
                                                                     COMMON      RETAINED   RESTRICTED   AVAILABLE   SHAREHOLDERS'
                                                                     STOCK       EARNINGS      STOCK      FOR SALE      EQUITY
                                                                    -------      --------      -----      --------      ------
<S>                                                              <C>           <C>            <C>      <C>          <C>
BALANCE, JANUARY 1, 1997                                          $ 6,357,626   $ 5,196,705             $ 468,037    $12,022,368

Net income for 1997                                                               1,481,712                            1,481,712

Stock split (5 for 4)                                               1,238,900    (1,242,285)                              (3,385)

Cash dividend ($0.70 per share)                                                    (434,049)                            (434,049)

Net change in unrealized gain (loss) on securities
  available for sale, net of tax of ($118,861)                                                            230,730        230,730
                                                                  -----------   -----------             ---------    -----------

BALANCE, DECEMBER 31, 1997                                          7,596,526     5,002,083               698,767     13,297,376

Net income for 1998                                                               1,627,173                            1,627,173

Cash dividend ($1.00 per share)                                                    (621,394)                            (621,394)

Issuance of restricted stock awards (unearned)                         80,881                 $(80,881)

Restricted stock awards earned                                                                  40,440                    40,440

Stock repurchased                                                     (10,710)                                           (10,710)

Net change in unrealized gain (loss) on securities
  available for sale, net of tax of ($78,080)                                                             151,566        151,566
                                                                  -----------   -----------   --------  ---------    -----------

BALANCE, DECEMBER 31, 1998                                        $ 7,666,697   $ 7,666,697   $(40,441) $ 850,333     14,484,451
                                                                  ===========   ===========   ========  =========    ===========
</TABLE>

-------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.


                                      -28-
<PAGE>
                     VALLEY RIDGE FINANCIAL CORP.
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                Years ended December 31, 1998 and 1997
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                          1998              1997
                                                          ----              ----
<S>                                                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                        $  1,627,173      $ 1,481,712
     Adjustments to reconcile net income
       to net cash from operating activities
       Depreciation and amortization                        317,530          229,078
       Amortization of the premiums and
         discounts on securities, net                        50,435           37,827
       Provision for loan losses                            300,000          190,000
       Gain on sale of securities                          (182,268)         (32,391)
       Gain on sale of loans                                (21,693)         (28,912)
       Loans originated for sale                         (8,810,321)       (3,998,400)
       Proceeds from loans sold                           8,764,014         4,027,312
       Net change in
          Accrued interest receivable and other assets     (255,421)         (430,726)
          Accrued expenses and other liabilities            767,801           311,473
                                                       ------------      ------------
            Net cash from operating activities            2,557,250         1,786,973

CASH FLOWS FROM INVESTING ACTIVITIES
     Net change in loans                                (11,462,642)       (8,115,723)
     Proceeds from
       Sale of securities available for sale              8,362,564         4,529,869
       Repayments and maturities of securities
         available for sale                               3,036,554         3,489,823
     Purchases of
       Securities available for sale                    (17,032,221)      (12,191,250)
       Federal Reserve stock                                                  (11,250)
       FHLB stock                                                            (206,000)
       Farmer Mac stock                                      (6,232)
       Premises and equipment                            (2,600,532)       (1,380,844)
                                                       ------------      ------------
          Net cash from investing activities            (19,702,509)      (13,885,375)

CASH FLOWS FROM FINANCING ACTIVITIES
     Payments for fractional shares                                            (3,385)
     Net increase (decrease) in short-term borrowings       920,269          (117,157)
     Net increase in deposits                            14,407,816        10,639,388
     Advances from Federal Home Loan Bank                 3,000,000         8,000,000
     Payments on Federal Home Loan Bank advances         (3,000,000)       (5,000,000)

                                      -29-
<PAGE>
     Shares repurchased                                     (10,710)
     Dividends paid                                        (621,394)         (434,049)
                                                       ------------      ------------
       Net cash from financing activities                14,695,981        13,084,797
                                                       ------------      ------------
Net change in cash and cash equivalents                  (2,449,278)          986,395

Cash and cash equivalents at beginning of year            8,502,762         7,516,367
                                                       ------------      ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR               $  6,053,484      $  8,502,762
                                                       ============      ============
Supplemental disclosures of cash flow information
     Cash paid during the year for
       Interest                                        $  4,457,914      $  3,924,056
       Income taxes                                         517,149           418,556
</TABLE>

Supplemental disclosure of non-cash investing activities - See Note 1

-------------------------------------------------------------------------------
          See accompanying notes to consolidated financial statements.




























                                      -30-
<PAGE>
                       VALLEY RIDGE FINANCIAL CORP.
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 1998 and 1997
-------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION:  The consolidated financial statements
include Valley Ridge Financial Corp. and its wholly-owned subsidiary,
Valley Ridge Bank, and its wholly-owned subsidiaries, Valley Ridge
Realty, Inc., Valley Ridge Investments, Inc., and Valley Ridge
Financial Services, Inc. after elimination of significant intercompany
transactions and accounts.

NATURE OF OPERATIONS:  Valley Ridge Financial Corp. ("Corporation") is
a regional, community-based financial institution, that owns all of
the outstanding stock of Valley Ridge Bank ("Bank").  The Bank's loan
and deposit accounts are primarily with customers located in Western
Michigan, within the counties of Kent, Ottawa, Muskegon and Newaygo.
A real estate agency was purchased during 1998.  The Corporation and
its subsidiaries are primarily organized to operate in the banking
industry.  Substantially all revenues are derived from banking
products and services.

USE OF ESTIMATES:  To prepare financial statements in conformity with
generally accepted accounting principles, management makes estimates
and assumptions based on available information.  These estimates and
assumptions affect the amounts reported in the financial statements
and the disclosures provided, and future results could differ.  The
allowance for loan losses and fair values of financial instruments are
particularly subject to change.

CASH FLOW REPORTING:  Cash and cash equivalents include cash on hand,
demand deposits with other financial institutions and federal funds
sold.  Cash flows are reported net for customer loan and deposit
transactions, interest-bearing time deposits with other financial
institutions and short-term borrowings with maturities of 90 days or
less.

SECURITIES:  Securities are classified as held to maturity and carried
at amortized cost when management has the positive intent and ability
to hold them to maturity.  Securities are classified as available for
sale when they might be sold before maturity.  Securities available
for sale are carried at fair value, with unrealized holding gains and
losses reported separately in shareholders' equity, net of tax.  Gains
and losses on the sales of securities available for sale are
determined using the specific allocation method.  Securities are
written down to fair value when a decline in fair value is not

                                      -31-
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

temporary.  Interest and dividend income, adjusted by amortization of
purchase premium or discount, is included in earnings.

LOANS:  Loans are reported at the principal balance outstanding, net
of unearned interest, deferred loan fees and costs, and an allowance
for loan losses.  Loans held for sale are reported at the lower of
cost or market, on an aggregate basis.  Interest income is reported on
the interest method and includes amortization of net deferred loan
fees and costs over the loan term.

Interest income is not reported when full loan repayment is in doubt,
typically when payments are past due over 90 days.  Payments received
on such loans are reported as principal reductions.

ALLOWANCE FOR LOAN LOSSES:  The allowance for loan losses is a
valuation allowance, increased by the provision for loan losses and
recoveries, and decreased by charge-offs.  Management estimates the
allowance balance required based on past loan loss experience, known
and inherent risks in the portfolio, information about specific
borrower situations and estimated collateral values, economic
conditions, and other factors.  Allocations of the allowance may be
made for specific loans, but the entire allowance is available for any
loan that, in management's judgment, should be charged-off.

Loan impairment is reported when full payment under the loan terms is
not expected.  Impairment is evaluated in the aggregate for smaller-
balance loans of similar nature such as residential mortgage, consumer
and credit card loans, and on an individual loan basis for other
loans.  If a loan is impaired, a portion of the allowance is allocated
so that the loan is reported, net, at the present value of estimated
future cash flows using the loan's existing rate.  Loans are evaluated
for impairment when payments are delayed, typically 90 days or more,
or when it is probable that all principal and interest amounts will
not be collected according to the original terms of the loan.

PREMISES AND EQUIPMENT:  Premises and equipment are stated at cost
less accumulated depreciation.  Depreciation is computed using both
straight-line and accelerated methods over the estimated useful lives
of the respective assets.

OTHER REAL ESTATE OWNED:  Real estate properties acquired in
collection of a loan are recorded at fair value at acquisition.  Any
reduction to fair value from the carrying value of the related loan is
accounted for as a loan loss.  After acquisition, a valuation
allowance reduces the reported amount to the lower of the initial
amount or fair value less costs to sell.  Expenses, gains and losses

                                      -32-
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

on disposition, and changes in the valuation allowance are reported in
other expenses.  The Corporation held approximately $662,000 of other
real estate at December 31, 1998.  The Corporation did not hold other
real estate at December 31, 1997.

SERVICING RIGHTS:  Servicing rights represent the allocated value of
servicing rights retained on loans sold.  Servicing rights are
expensed in proportion to, and over the period of, estimated net
servicing revenues.  Impairment is evaluated based on the fair value
of the rights, using groupings of the underlying loans as to interest
rates and then, secondarily, as to geographic and prepayment
characteristics.  Any impairment of a grouping is reported as a
valuation allowance.

INTANGIBLES:  Purchased intangibles, primarily goodwill and core deposit
value, are recorded at cost and amortized over the estimated lives.
Goodwill amortization is straight-line over 25 years, and core deposit
amortization is accelerated over 12 years.

LONG-TERM ASSETS:  These assets are reviewed for impairment when
events indicate the carrying amount may not be recoverable from future
undiscounted cash flows.  If impaired, the assets are recorded at
discounted amounts.

EMPLOYEE BENEFITS:  The Bank maintains profit sharing and 401(k) plans
for substantially all employees.  Contributions to the profit sharing
plan are made at the discretion of the Board of Directors.  The 401(k)
plan allows employee contributions up to 12% of employee compensation.
Up to 6% of the contributions are matched at 50% by the Bank.

The Corporation also maintains an Employee Stock Ownership Plan (ESOP)
covering substantially all full-time employees after one year of
service, which invests primarily in stock of Valley Ridge Financial
Corp.  Accordingly, compensation expense is recorded based on the cash
or fair value of shares contributed or committed to be contributed to
the plan.

RESTRICTED STOCK AWARDS:  The measurement of total compensation cost
for restricted stock awards is based upon the fair value of the shares
at the grant date.  Compensation expense is recognized on a prorata
basis over the vesting period of the award.  The unearned compensation
value of the restricted stock awards is shown as a reduction of
shareholders' equity.

STOCK OPTIONS:  Expense for employee compensation is recognized only
if the options are granted below the market price at the date of

                                      -33-
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

grant.  As shown in a separate footnote, pro forma disclosures of net
income and earnings per share are provided as if the fair value method
were used for stock-based compensation.

INCOME TAXES:  Income tax expense is the sum of the current year
income tax return liability plus the change in deferred tax assets and
liabilities.  Deferred tax assets and liabilities are the expected
future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, computed using
enacted tax rates.  A valuation allowance, if needed, reduces deferred
tax assets to the amount expected to be realized.

FAIR VALUES OF FINANCIAL INSTRUMENTS:  Fair values of financial
instruments are estimated using relevant market information and other
assumptions, as more fully disclosed separately.  Fair value estimates
involve uncertainties and matters of significant judgment regarding
interest rates, credit risk, prepayments and other factors, especially
in the absence of broad markets for particular items.  Changes in
assumptions or in market conditions could significantly affect the
estimates.

DIVIDEND RESTRICTIONS:  Banking regulations require the maintenance of
certain capital levels and may limit the amount of dividends which may
be paid by the Bank to the Corporation or by the Corporation to
shareholders.

EARNINGS PER SHARE:  Basic earnings per share is based on weighted-
average common shares outstanding, including shares held by the ESOP.
Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options.
Earnings and dividends per share are restated for all stock splits and
dividends through the date of issue of the financial statements.

COMPREHENSIVE INCOME:  Comprehensive income consists of net income and
unrealized gains and losses on securities available for sale which are
also recognized as separate components of equity.  The accounting
standard that requires reporting comprehensive income first applies
for 1998, with prior information restated to be comparable.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:  During
1998, the Corporation transferred $3,670,761 from portfolio loans to
loans held for sale.

RECLASSIFICATIONS:  Some items in prior financial statements have been
reclassified to conform with the current presentation.


                                      -34-
<PAGE>
NOTE 2 - CASH AND DUE FROM BANKS

Minimum cash balances, which are based on the deposit levels of the
Bank, are required to be maintained by the Federal Reserve as legal
reserve requirements.  Cash balances restricted from usage due to
these requirements were approximately $690,000 and $448,000 at
December 31, 1998 and 1997, respectively.


NOTE 3 - SECURITIES

The amortized cost and fair values of securities at year-end were as
follows:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
                                                               GROSS             GROSS
                                              AMORTIZED      UNREALIZED        UNREALIZED         FAIR
                                                 COST          GAINS             LOSSES          VALUES
                                                 ----          -----             ------          ------
<S>                                        <C>              <C>              <C>              <C>
1998
     U.S. Treasury securities and
       obligations of U.S. Government
       corporations and agencies            $    8,115,226   $     75,340     $     (2,807)    $  8,187,759
     Obligations of states and
       political subdivisions                   15,613,694      1,255,911           (1,527)      16,868,078
                                            --------------   ------------     ------------     ------------
                                                23,728,920      1,331,251           (4,334)      25,055,837
     Mortgage-backed securities                  4,277,558         13,266          (51,799)       4,239,025
                                            --------------   ------------     ------------     ------------
                                            $   28,006,478   $  1,344,517     $    (56,133)    $ 29,294,862
                                            ==============   ============     ============     ============
</TABLE>















                                      -35-
<PAGE>
NOTE 3 - SECURITIES (Continued)
<TABLE>
<CAPTION>
                                                               GROSS             GROSS
                                              AMORTIZED      UNREALIZED        UNREALIZED         FAIR
                                                 COST          GAINS             LOSSES          VALUES
                                                 ----          -----             ------          ------
<S>                                        <C>              <C>              <C>              <C>
1997
     U.S. Treasury securities and
       obligations of U.S. Government
       corporations and agencies            $   6,007,814    $    60,431                       $   6,068,245
     Obligations of states and
       political subdivisions                  14,964,077        986,125      $   (17,868)        15,932,334
                                            -------------    -----------      -----------      -------------
                                               20,971,891      1,046,556          (17,868)        22,000,579
     Mortgage-backed securities                 1,269,652         30,407             (358)         1,299,701
                                            -------------    -----------      -----------      -------------
                                            $  22,241,543    $ 1,076,963      $   (18,226)     $  23,300,280
                                            =============    ===========      ===========      =============
</TABLE>

<TABLE>
<CAPTION>
OTHER SECURITIES
                                                     COST AND
                                                    FAIR VALUE
                                                    ----------
<S>                                              <C>
1998
     Federal Reserve stock                        $     180,000
     Federal Home Loan Bank stock                     1,160,600
     Farmer Mac stock                                    11,228
                                                  -------------
                                                  $   1,351,828
                                                  =============
1997

     Federal Reserve stock                        $     180,000
     Federal Home Loan Bank stock                     1,160,600
     Farmer Mac stock                                     4,996
                                                  -------------
                                                  $   1,345,596
                                                  =============
</TABLE>

The amortized cost and fair values of debt investment securities at
year-end 1998, by contractual maturity, are shown below.  Expected

                                      -36-
<PAGE>
NOTE 3 - SECURITIES (Continued)

maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.  Securities not due at a single maturity
date, mortgage-backed securities, are shown separately.
<TABLE>
<CAPTION>
                                                      AMORTIZED         FAIR
                                                         COST          VALUES
                                                         ----          ------
<S><C>                                           <C>               <C>
     Due in one year or less                      $   3,406,939     $  3,430,239
     Due after one year through five years            6,270,091        6,428,223
     Due after five years through ten years           6,384,489        6,788,949
     Due after ten years                              7,667,401        8,408,426
                                                  -------------     ------------
                                                     23,728,920       25,055,837
     Mortgage-backed securities                       4,277,558        4,239,025
                                                  -------------     ------------
                                                  $  28,006,478     $ 29,294,862
                                                  =============     ============
</TABLE>

Gross realized gains from sales of securities available for sale were
$182,493 and $41,048 for 1998 and 1997.  Gross losses on those sales
were $225 and $8,657 for 1998 and 1997.

Securities with a par value of approximately $400,000, were pledged to
secure public deposits and for various other purposes as required or
permitted by law at December 31, 1998 and 1997.  Securities with a par
value of $2,000,000 were pledged to secure short-term borrowings at
December 31, 1998.  Nonspecific securities were pledged to secure FHLB
advances at December 31, 1998.















                                      -37-
<PAGE>
NOTE 4 - LOANS

Year-end loans were as follows:
<TABLE>
<CAPTION>
                                                        1998                1997
                                                        ----                ----
<S> <C>                                          <C>                 <C>
     Commercial                                   $  37,528,868       $  36,115,052
     Residential real estate                         38,062,631          35,438,635
     Consumer                                        16,403,123          13,871,065
     Agricultural                                     7,439,331           6,992,590
                                                  -------------       -------------
                                                  $  99,433,953       $  92,417,342
                                                  =============       =============
</TABLE>

Loans serviced for others were $16,670,404 and $12,215,000 at year-end
1998 and 1997.

Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>
                                                        1998                1997
                                                        ----                ----
<S> <C>                                          <C>                 <C>
     Balance at beginning of year                 $   1,186,772       $    1,182,154
       Provision charged to operating expense           300,000              190,000
       Recoveries on loans previously
         charged to the allowance                        43,612               42,725
       Loans charged off                              (141,684)             (228,107)
                                                  -------------       --------------
     Balance at end of year                       $   1,388,700       $    1,186,772
                                                  =============       ==============
</TABLE>
Impaired loans were as follows:
<TABLE>
<CAPTION>
                                                                        1998                1997
                                                                        ----                ----
<S> <C>                                                             <C>                 <C>
     Year-end loans with no allowance for loan losses allocated      $   166,317         $  2,059,760
     Year-end loans with allowance for loan losses allocated                                   11,225
     Amount of the allowance allocated                                                          2,000

     Average of impaired loans during the year                           983,063            1,247,719
     Interest income recognized during impairment                         69,711              109,515
     Cash basis interest income recognized                                57,884              103,995
</TABLE>
                                      -38-
<PAGE>
NOTE 5 - PREMISES AND EQUIPMENT - NET

Year-end premises and equipment were as follows:
<TABLE>
<CAPTION>
                                                             ACCUMULATED         CARRYING
                                              COST           DEPRECIATION          VALUE
                                              ----           ------------          -----
<S>                                    <C>                <C>                 <C>
1998
     Land                               $     305,422                          $     305,422
     Building and improvements              5,678,703      $    (1,016,847)        4,661,856
     Furniture and equipment                3,005,369           (2,250,766)          754,603
                                        -------------      ---------------     -------------
                                        $   8,989,494      $    (3,267,613)    $   5,721,881
                                        =============      ===============     =============
1997
     Land                               $     305,422                          $     305,422
     Building and improvements              2,398,275      $      (928,748)        1,469,527
     Construction in progress                 965,194                                965,194
     Furniture and equipment                2,734,763           (2,046,706)          688,057
                                        -------------      ---------------     -------------
                                        $   6,403,654      $    (2,975,454)     $  3,428,200
                                        =============      ===============     =============
</TABLE>


NOTE 6 - DEPOSITS

Deposits at year-end are summarized as follows:
<TABLE>
<CAPTION>
                                                        1998                1997
                                                        ----                ----
<S> <C>                                            <C>                 <C>
     Noninterest-bearing demand deposit accounts    $   20,473,900      $  16,465,625
     Money market accounts                              15,850,182         14,768,774
     NOW and Super NOW accounts                         10,953,463         10,617,089
     Savings accounts                                   19,268,254         15,779,490
     Certificates of deposit                            53,036,952         47,543,957
                                                    --------------      -------------
                                                    $  119,582,751      $ 105,174,935
                                                    ==============      =============
</TABLE>





                                      -39-
<PAGE>
NOTE 6 - DEPOSITS (Continued)

At year-end 1998 and 1997, stated maturities of all time deposits were
as follows:
<TABLE>
<CAPTION>
                                               1998            1997
                                               ----            ----
<S>   <C>                                 <C>            <C>
       1998                                               $ 34,526,988
       1999                                $ 37,766,111      9,577,930
       2000                                   6,428,237      2,510,232
       2001                                   3,194,754        535,120
       2002                                   3,367,580        356,746
       2003                                   2,245,053         36,941
       Thereafter                                35,217
                                           ------------   ------------
                                           $ 53,036,952   $ 47,543,957
                                           ============   ============
</TABLE>

Time deposit accounts of $100,000 or more were $9,379,000 and
$7,632,000 at year-end 1998 and 1997.


NOTE 7 - BORROWINGS

At year-end 1998, the Corporation had the following advances from the
Federal Home Loan Bank ("FHLB"):
<TABLE>
<CAPTION>
      TYPE               INTEREST RATE    MATURITY DATE         AMOUNT
      ----               -------------    -------------         ------
<S> <C>                      <C>       <C>                  <C>
     Fixed                    5.230       February 1, 1999    $ 1,000,000
     Fixed                    5.260       February 1, 1999      2,000,000
     Fixed                    6.070           July 9, 1999      2,000,000
     Fixed                    6.080     September 22, 1999      3,000,000
     Fixed                    5.120       October 22, 2003      3,000,000
                                                              -----------
                                                              $11,000,000
                                                              ===========
</TABLE>
Each advance requires monthly interest payments at either fixed or
adjustable rates.  These borrowings are collateralized by nonspecific
loans within the mortgage portfolio and nonspecific qualifying
securities within the securities portfolio up to the principal
outstanding.

                                      -40-
<PAGE>
NOTE 8 - FEDERAL INCOME TAXES

The provision for income taxes consists of:
<TABLE>
<CAPTION>
                                                             1998            1997
                                                             ----            ----
<S> <C>                                                 <C>            <C>
     Current expense                                     $   559,129    $    428,296
     Deferred benefit                                       (155,434)        (14,904)
                                                         -----------    ------------
                                                         $   403,695    $    413,392
                                                         ===========    ============
</TABLE>

Year-end deferred tax assets and liabilities consist of:
<TABLE>
<CAPTION>
                                                                       1998         1997
                                                                       ----         ----
<S> <C>                                                              <C>         <C>
     Deferred tax assets
       Allowance for loan losses                                     $ 320,922    $ 218,266
       Deferred loan fees                                               60,649       40,258
       Deferred compensation                                           210,528      129,473
       Core deposit amortization                                        27,576       31,420
       Other                                                            17,778        8,034
                                                                     ---------    ---------
                                                                       637,453      427,451
     Deferred tax liabilities
       Fixed assets                                                   (201,952)    (153,369)
       Net unrealized appreciation on securities available for sale   (438,051)    (359,971)
       Accrual to cash                                                 (23,777)     (47,553)
       Other                                                           (45,346)     (15,585)
                                                                     ---------    ---------
                                                                      (709,126)    (576,478)
                                                                     ---------    ---------
     Net deferred tax liability                                      $ (71,673)   $(149,027)
                                                                     =========    =========
</TABLE>

No valuation allowance has been recorded against the deferred tax
assets.






                                      -41-
<PAGE>
NOTE 8 - FEDERAL INCOME TAXES (Continued)

The effective tax rate differs from the statutory federal income tax
rate as follows:
<TABLE>
<CAPTION>
                                                          1998          1997
                                                          ----          ----
<S> <C>                                             <C>              <C>
     Statutory rates                                 $    690,495     $   644,335
     Increase (decrease) from
       Tax-exempt interest                               (308,439)       (283,084)
       Nondeductible interest expense                      34,333          29,693
       Income related to officers' life insurance         (17,735)         (9,561)
       Other, net                                           5,041          32,009
                                                     ------------     -----------
          Income tax expense                         $    403,695     $   413,392
                                                     ============     ===========
</TABLE>
NOTE 9 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow:
<TABLE>
<CAPTION>
                                                                 1998           1997
                                                                 ----           ----
<S>      <C>                                               <C>              <C>
          Basic
               Net income                                   $  1,627,173     $  1,481,712
                                                            ------------     ------------
               Weighted average common shares outstanding        620,418          619,979
                                                            ------------     ------------
            Basic earnings per common share                 $       2.62     $       2.39
                                                            ============     ============
          Diluted
               Net income                                   $  1,627,173     $  1,481,712
                                                            ------------     ------------
               Weighted average common shares outstanding
                 for basic earnings per common share             620,418          619,979
               Add:  Dilutive effects of assumed
                 exercises of stock options                          123
                                                            ------------     ------------
               Average shares and dilutive potential
                 common shares                                   620,541          619,979
                                                            ------------     ------------
            Diluted earnings per common share               $       2.62     $       2.39
                                                            ============     ============
</TABLE>

                                      -42-
<PAGE>
NOTE 9 - EARNINGS PER SHARE (Continued)

1,450 shares of unearned restricted stock were not considered in
computing diluted earnings per common share for 1998 because they were
antidilutive.

NOTE 10 - EMPLOYEE BENEFIT PLANS

The Bank maintains profit sharing and 401(k) plans for substantially
all employees.  Under the plans, employees may make voluntary
contributions based on a percentage of covered compensation.  The
plans also allow the Bank, at the discretion of the Board of
Directors, to provide an annual contribution.  The Bank's cash
contributions to the profit sharing plan were $120,000 in 1998 and
1997.  Additionally, the Bank made matching contributions to the
401(k) plan of $39,200 and $38,600 in 1998 and 1997.

The Corporation also maintains an Employee Stock Ownership Plan
(ESOP), covering substantially all full-time employees after one year
of service, which invests primarily in stock of Valley Ridge Financial
Corp.  In accordance with the terms of the ESOP, the Corporation may
make discretionary contributions to the plan.  The amount of the
annual contribution to the ESOP is determined by the Board of
Directors.  The Corporation made ESOP contributions totaling $50,000
in 1998 and $35,000 in 1997.  At December 31, 1998, the plan had no
indebtedness and held 19,356 shares of stock, allocated to employees
and voted by trustees of the plan.  Upon distribution of shares to a
participant, the participant has the right to require the Corporation
to purchase shares at their fair value in accordance with the terms
and conditions of the plan.  The fair value of the shares allocated as
of December 31, 1998, was $677,460.


NOTE 11 - STOCK INCENTIVE PLAN

A stock incentive plan was established during 1998 for directors,
officers, and other key employees of the Corporation and its
subsidiaries.  The plan authorizes the issuance of up to 30,000 shares
in the form of stock options and restricted stock awards.

Stock options for nonemployee directors are granted at the market
price on the date of grant.  Stock options awarded to nonemployee
directors are fully vested on the date of grant and expire five years
from the date of grant.  Half of the restricted stock awards vest at
the date of grant with the remainder vesting in five equal annual
installments from the date of grant.



                                      -43-
<PAGE>
NOTE 11 - STOCK INCENTIVE PLAN (Continued)

A summary of the activity in the plan is as follows:
<TABLE>
<CAPTION>

                                               STOCK OPTIONS          RESTRICTED STOCK
                                               -------------          ----------------
                                                        WEIGHTED                WEIGHTED
                                                        AVERAGE                 AVERAGE
                                                        EXERCISE               GRANT DATE
                              AUTHORIZED     OPTIONS      PRICE      SHARES    FAIR VALUE
                              ----------     -------      -----      ------    ----------
<S>                            <C>            <C>      <C>          <C>       <C>
Balance outstanding
  January 1, 1998
     Authorized                 30,000
     Granted                    (6,288)        3,388    $   27.89     2,900    $    27.89
                               -------       -------    ---------   -------    ----------
Balance outstanding
  December 31, 1998             23,712         3,388    $   27.89     2,900    $    27.89
                               =======       =======    =========   =======    ==========
Options (shares) exercisable
  (vested) at year-end                         3,388    $   27.89     1,450    $    27.89
                                             =======    =========   =======    ==========
</TABLE>

Compensation expense related to restricted stock awards was $40,440
for 1998.

Had compensation cost for stock options been measured using FASB
Statement No. 123, net income and earnings per share would have been
the pro forma amounts indicated below.  The pro forma effect may
increase in the future if more options are granted.















                                      -44-
<PAGE>
NOTE 11 - STOCK INCENTIVE PLAN (Continued)
<TABLE>
<CAPTION>
                                                                1998
                                                                ----
<S> <C>                                                   <C>
     Net income as reported                                $   1,627,173
     Pro forma net income                                      1,619,076

     Basic earnings per share as reported                           2.62
     Pro forma basic earnings per share                             2.61

     Diluted earnings per share as reported                         2.62
     Pro forma diluted earnings per share                           2.61

     Weighted-average grant-date fair value per option              2.39
</TABLE>

The pro forma effects are computed using option pricing models, using
the following weighted-average assumptions as of grant date:
<TABLE>
<CAPTION>
                                                                  1998
                                                                  ----
<S> <C>                                                         <C>
     Risk-free interest rate                                       5.65%
     Expected option life                                        4 years
     Expected stock price volatility                               3.87%
     Dividend yield                                                3.18%

</TABLE>
NOTE 12 - DIRECTOR DEFERRED COMPENSATION PLAN

The Corporation instituted a Director Deferred Compensation Plan in 1994,
whereby directors may periodically defer a portion of current compensation.
The Corporation has committed to pay to the directors, or the directors'
designated beneficiaries or survivors, the total amount of deferred
compensation plus accumulated interest at or following retirement.  The
interest is added to the accumulated deferred compensation liability at a
periodic compound rate.  The agreement also addresses termination, disability
or death prior to retirement.  The Corporation purchased single premium
universal life insurance policies in connection with the establishment of the
plan.  The cash surrender value of these policies as of December 31, 1998
and 1997 was $1,854,412 and $1,596,551, which was included in other assets.
The compensation expense was $173,900 and $165,656 for 1998 and 1997,
respectively.  The portion of the compensation expense deferred for 1998 and
1997 was $160,800 and $153,381, respectively.  The accrued deferred compensation
liability was $569,145 and $408,345 as of December 31, 1998 and 1997.

                                      -45-
<PAGE>
NOTE 13 - RELATED PARTIES

Certain directors and executive officers of the Corporation, including
their immediate families and companies in which they are principal
owners, were loan customers of the Corporation.  At December 31, 1998
and 1997, the Corporation had approximately $2,115,000 and $1,844,000
in outstanding loans to directors and executive officers.  New loans
and repayments were $2,545,000 and $2,274,000, respectively, during
1998.

Related party deposits totaled approximately $2,514,000 and $3,519,000
at year-end 1998 and 1997.

NOTE 14 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES

There are various contingent liabilities that are not reflected in the
consolidated financial statements, including claims and legal actions
arising in the ordinary course of business.  In the opinion of
management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material effect
on financial condition or results of operations.

Some financial instruments are used to meet customer financing needs
and to reduce exposure to interest rate changes.  These financial
instruments include commitments to extend credit and standby letters
of credit.  These involve, to varying degrees, credit and
interest-rate risk in excess of the amount reported in the financial
statements.

Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
commitment, and generally have fixed expiration dates.  Standby
letters of credit are conditional commitments to guarantee a
customer's performance to a third party.  Exposure to credit loss if
the other party does not perform is represented by the contractual
amount for commitments to extend credit and standby letters of credit.
Collateral or other security is normally not obtained for these
financial instruments prior to their use, and many of the commitments
are expected to expire without being used.










                                      -46-
<PAGE>
NOTE 14 - COMMITMENTS, OFF-BALANCE-SHEET RISK AND CONTINGENCIES (Continued)

Commitments at year-end were as follows:
<TABLE>
<CAPTION>
                                                      1998            1997
                                                      ----            ----
<S> <C>                                         <C>              <C>

     Commitments to make loans                   $  5,585,000     $  2,212,000
     Commercial unused lines of credit              7,236,000       14,210,000
     Consumer unused lines of credit                2,520,000        1,959,000
     Standby letters of credit                         45,000          265,000
</TABLE>

Substantially all of the commitments to make loans at December 31,
1998 were made at fixed rates ranging from 6.25% to 9.50%.  These
commitments generally have termination dates of one year or less and
may require a fee.  Since many of the above commitments expire without
being used, the above amounts do not necessarily represent future cash
commitments.  No losses are anticipated as a result of these
transactions.

NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate fair
values for financial instruments.  The carrying amount is considered
to estimate fair value for cash and short-term instruments, demand
deposits, short-term borrowings, accrued interest, and variable rate
loans or deposits that reprice frequently and fully.  Securities fair
values are based on quoted market prices or, if no quotes are
available, on the rate and term of the security and on information
about the issuer.  For fixed rate loans or deposits and for variable
rate loans or deposits with infrequent repricing or repricing limits,
the fair value is estimated by discounted cash flow analysis using
current market rates for the estimated life and credit risk.  Fair
values for impaired loans are estimated using discounted cash flow
analyses or underlying collateral values, where applicable.  Fair
value of loans held for sale is based on market estimates.  The fair
value of debt is based on currently available rates for similar
financing.  The estimated fair value of other financial instruments
and off-balance-sheet loan commitments approximate cost and are not
considered significant to this presentation.






                                      -47-
<PAGE>
NOTE 15 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

Financial instruments at year-end were as follows, in thousands:
<TABLE>
<CAPTION>
                                                          1 9 9 8                            1 9 9 7
                                                          -------                            -------
                                               CARRYING              FAIR           CARRYING         FAIR
                                                AMOUNT               VALUE           AMOUNT          VALUE
                                                ------               -----           ------          -----
                                                      (000's omitted)                   (000's omitted)
<S> <C>                                       <C>               <C>               <C>              <C>
     Financial assets
       Cash and short-term investments         $    6,053        $    6,053        $     8,503      $   8,503
       Securities available for sale               29,295            29,295             23,300         23,300
       Other securities                             1,352             1,352              1,346          1,346
       Loans held for sale                          3,671             3,671
       Loans - net                                 98,045            98,558             91,231         90,546
       Accrued interest receivable                  1,079             1,079              1,085          1,085

     Financial liabilities
       Deposit liabilities                        119,583           120,145            105,175        104,992
       Accrued interest payable                       222               222                303            303
       Short-term borrowings                        1,204             1,204                284            284
       Other borrowings                            11,000            10,986             11,000         10,995
</TABLE>


NOTE 16 - REGULATORY MATTERS

The Corporation and Bank are subject to regulatory capital
requirements administered by federal banking agencies.  Capital
adequacy guidelines and prompt corrective action regulations involve
quantitative and qualitative measures of assets, liabilities, and
certain off-balance-sheet items calculated under regulatory accounting
practices.

The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized,
although these terms are not used to represent overall financial
condition.  If adequately capitalized, regulatory approval is required
to accept brokered deposits.  If undercapitalized, capital
distributions are limited, as is asset growth and expansion, and plans
for capital restoration are required.




                                      -48-
<PAGE>
NOTE 16 - REGULATORY MATTERS (Continued)

Actual capital levels (in millions) and minimum required levels for
the Bank were:
<TABLE>
<CAPTION>
                                                                                           MINIMUM REQUIRED
                                                                                              TO BE WELL
                                                                       MINIMUM REQUIRED    CAPITALIZED UNDER
                                                                          FOR CAPITAL      PROMPT CORRECTIVE
                                                       ACTUAL          ADEQUACY PURPOSES   ACTION REGULATIONS
                                                       ------          -----------------   ------------------
                                                  AMOUNT     RATIO      AMOUNT    RATIO     AMOUNT    RATIO
                                                  -----      -----      ------    -----     ------    -----
<S>                                             <C>          <C>      <C>         <C>      <C>        <C>
1998

     Total capital (to risk weighted assets)     $    14.6    14.1%    $    8.3    8.0%     $   10.3   10.0%
     Tier 1 capital (to risk weighted assets)         13.3    12.9          4.1    4.0           6.2    6.0
     Tier 1 capital (to average assets)               13.3     9.1          5.9    4.0           7.3    5.0

1997

     Total capital (to risk weighted assets)     $    13.5    14.8%    $    7.3    8.0%     $    9.1   10.0%
     Tier 1 capital (to risk weighted assets)         12.3    13.6          3.6    4.0           5.5    6.0
     Tier 1 capital (to average assets)               12.3     9.6          5.1    4.0           6.4    5.0
</TABLE>


The Bank was categorized as well capitalized at year end 1998 and 1997.



















                                      -49-
<PAGE>
NOTE 17 - VALLEY RIDGE FINANCIAL CORP. (PARENT COMPANY ONLY)
  CONDENSED FINANCIAL STATEMENTS

Following are condensed parent company only financial statements.
<TABLE>
                       CONDENSED BALANCE SHEETS
<CAPTION>
                                                              December 31,
                                                         1998            1997
                                                         ----            ----
<S>                                                 <C>              <C>
ASSETS
     Cash                                            $    43,075      $    74,416
     Investment in subsidiary                         14,224,449       13,072,724
     Other assets                                        216,953          150,263
                                                     -----------      -----------
       Total assets                                  $14,484,477      $13,297,403
                                                     ===========      ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
     Liabilities                                     $        26      $        27
     Shareholders' equity                             14,484,451       13,297,376
                                                     -----------      -----------
       Total liabilities and equity                  $14,484,477      $13,297,403
                                                     ===========      ===========
</TABLE>
<TABLE>
                    CONDENSED STATEMENTS OF INCOME
<CAPTION>
                                                      Years ended December 31,
                                                         1998            1997
                                                         ----            ----
<S>                                                 <C>              <C>
Income
     Dividends from subsidiary                       $   708,750      $   525,000
     Other                                                    38               39
                                                     -----------      -----------
       Total income                                      708,788          525,039

Expenses
     Other operating expenses                             81,774           71,572
                                                     -----------      -----------
INCOME BEFORE INCOME TAX AND EQUITY IN
  UNDISTRIBUTED NET INCOME OF SUBSIDIARIES               627,014          453,467

Equity in undistributed net income of subsidiary       1,000,159        1,028,245
                                                     -----------      -----------
NET INCOME                                           $ 1,627,173      $ 1,481,712
                                                     ===========      ===========
</TABLE>
                                      -50-
<PAGE>
NOTE 17 - VALLEY RIDGE FINANCIAL CORP. (PARENT COMPANY ONLY)
  CONDENSED FINANCIAL STATEMENTS (Continued)

<TABLE>
                  CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                             Years ended December 31,
                                                                1998            1997
                                                                ----            ----
<S>                                                       <C>              <C>
Operating activities
     Net income                                            $  1,627,173     $  1,481,712
     Adjustments to reconcile net income to
       net cash from operating activities
       Equity in undistributed net income of subsidiary      (1,000,159)      (1,028,245)
       Change in other assets and liabilities                   (26,251)
                                                           ------------     ------------
          Net cash from operating activities                    600,763          453,467

Financing activities
     Dividends paid                                            (621,394)        (434,049)
     Repurchase of common stock                                 (10,710)
     Purchase of fractional shares                                                (3,385)
                                                           ------------     ------------
       Net cash from financing activities                      (632,104)        (437,434)
                                                           ------------     ------------
Net change in cash                                              (31,341)          16,033

Cash at beginning of year                                        74,416           58,383
                                                           ------------     ------------
CASH AT END OF YEAR                                        $     43,075     $     74,416
                                                           ============     ============
</TABLE>


NOTE 18 - SHAREHOLDERS' EQUITY

On September 24, 1997, the Board of Directors approved a five-for-four
split of the Corporation's common stock for shareholders, effected in
the form of a stock dividend.  The stated par value of each share was
not changed.  All share and per share amounts have been adjusted to
reflect the stock split.







                                      -51-
<PAGE>
                          [CROWE CHIZEK LOGO]

                    REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Valley Ridge Financial Corp.
Kent City, Michigan


We have audited the accompanying consolidated balance sheets of Valley
Ridge Financial Corp. as of December 31, 1998 and 1997 and the related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for the years then ended.  These
financial statements are the responsibility of the Corporation's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in
the first paragraph present fairly, in all material respects, the
financial position of Valley Ridge Financial Corp. at December 31,
1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted
accounting principles.





                                   s/ Crowe,  Chizek and Company LLP
                                   Crowe, Chizek and Company LLP

Grand Rapids, Michigan
February 19, 1999






                                      -52-
<PAGE>
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

     Not applicable.


                               PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
          PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

     The Corporation's board of directors is divided into three
classes, which are as nearly equal in number as possible.  Each
director is a member of a class that has a term of office of three
years, with the term of office of one class expiring at the annual
meeting of shareholders in each successive year.

     All directors of the Corporation also have been directors of the
Bank since the Consolidation.  Directors who were directors of
Community before the Merger also concurrently served as directors of
Grant from the date of their election or appointment as a director of
Community until the Consolidation.  Directors who were not directors
of Community also concurrently served as directors of Kent City from
the date of their election or appointment as a director of the
Corporation until the Consolidation.

     Except as otherwise indicated, all of the named individuals have
had the same principal employment for over five years.  Executive
officers are appointed annually and serve at the pleasure of the board
of directors of the Corporation.

     DIRECTORS WITH TERMS EXPIRING IN 1999

     Michael E. McHugh (age 49) has been a director of the Corporation
and/or Kent City since 1989.  Mr. McHugh is Secretary and Treasurer of
the Corporation.  Mr. McHugh has also been Executive Vice President of
the Bank (and, before the Consolidation, Kent City) since 1987.

     Dennis C. Nelson (age 50) has been a director of the Corporation
since the Merger and was a director of Community and/or Grant from
1985 until the Merger.  Mr. Nelson is a dentist practicing in Grant,
Michigan.

     John J. Niederer (age 63) has been a director of the Corporation
and/or Kent City since 1994.  Mr. Niederer has been President and sole
shareholder of Greenridge Fruit, Inc., a distributor of fruit, since
1990.  Prior to that, Mr. Niederer was Vice President of Wm. Bolthouse
Farms, Inc., a producer and distributor of vegetables.

                                      -53-
<PAGE>
     Paul K. Spoelman (age 63) has been a director of the Corporation
and/or Kent City since 1994.  Mr. Spoelman is a shareholder and
founder of Spoelman, Hovingh & Feldt, Inc., an accounting firm.

     Donald Swanson (age 64) has been a director of the Corporation and/or
Kent City since 1981.  Mr. Swanson is Chairman and a majority shareholder
of Swanson Pickle Co., Inc., a producer and distributor of pickles.

     Donald VanSingel (age 55) has been Vice Chairman and a director
of the Corporation since the Merger and was Chairman of Community
and/or Grant from 1982 until the Merger and a director of Community
and/or Grant from 1973 until the Merger.  Mr. VanSingel has been a
consultant for Governmental Consultant Services, Inc. since 1993.
Prior to that, Mr. VanSingel served in the Michigan House of
Representatives.

     DIRECTORS WITH TERMS EXPIRING IN 2000

     Jerome B. Arends (age 54) has been a director of the Corporation
and/or Kent City since 1987.  Mr. Arends is Chief Executive Officer
and President of Ravenna Farm Equipment, Inc., a distributor of farm
implements and equipment.

     K. Timothy Bull (age 51) has been a director of the Corporation
and/or Kent City since 1993 and was also a director of the Corporation
from 1988 until 1991.  Mr. Bull is President and sole shareholder of
Moon Lake Orchards, Inc., a producer of fruit.

     Richard L. Edgar (age 54) has been a director of the Corporation
and/or Kent City since 1974.  Mr. Edgar has been President and Chief
Executive Officer of the Corporation since 1988, and President and
Chief Executive Officer of the Bank (and, before the Consolidation,
Kent City)  since 1987.  Prior to that, Mr. Edgar served Kent City in
various management and other capacities since 1963.  Mr. Edgar is also
a director of West Shore Computer Services, Inc., a data processing
company in which the Bank is a 20% shareholder.

     Fred J. Finkbeiner (age 69) has been a director of the
Corporation since the Merger and was a director of Community and/or
Grant from 1965 until the Merger.  In 1996, Mr. Finkbeiner retired as
a Sales Manager at V & P Produce, a distributor of vegetables located
in Grant, Michigan.

     DIRECTORS WITH TERMS EXPIRING IN 2001

     Gary Gust (age 54) has been a director of the Corporation and/or
Kent City since 1991.  Mr. Gust is President and sole shareholder of
Gust Construction Company, a general contractor.

                                      -54-
<PAGE>
     Ronald L. Hansen (age 54) has been a director of the Corporation
since the Merger and was a director of Community from 1990 until the
Merger.  Mr. Hansen has been Vice President of the Corporation since
the Merger and a Senior Vice President of the Bank since the
Consolidation.  Prior to that, Mr. Hansen was Secretary of Community
from 1994 until the Merger, President and Chief Executive Officer of
Grant from 1994 until the Consolidation, a director of Grant from 1982
until the Consolidation and Vice President and Cashier of Grant from
1982 until 1994.  Prior to that, Mr. Hansen served Grant in various
management and other capacities since 1973.

     Robert C. Humphreys (age 60) has been a director of the
Corporation and/or Kent City since 1988.  Mr. Humphreys has been
Chairman of the Board of the Corporation and the Bank (and, before the
Consolidation, Kent City) since 1993.  Mr. Humphreys owns and operates
Humphreys Orchards, a producer of fruit.

     Ben J. Landheer (age 63) has been a director of the Corporation
since the Merger and was a director of Community and/or Grant from
1991 until the Merger.  Mr. Landheer owns and operates Landheer
Insurance Agency, an agent for insurance companies offering a broad
range of insurance products.

     EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

     Robert L. Karpinski (age 58) is Senior Vice President of the Bank
and has served the Bank in various executive capacities since January
1985.

     As of the date of this Form 10-KSB, directors and officers of the
Corporation and persons who beneficially own more than 10% of the
outstanding shares of Valley Ridge Common Stock were not subject to
the reporting obligations of Section 16(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act").


ITEM 10.  EXECUTIVE COMPENSATION.

     The following table shows certain information concerning the
compensation for services rendered during each of the three years in
the period ended December 31, 1998, of the Chief Executive Officer of
the Corporation and each executive officer of the Corporation who
earned cash compensation in excess of $100,000 during 1998.
Messrs. Edgar, McHugh and Hansen were compensated by the Bank in the
capacities indicated in the table.




                                      -55-
<PAGE>
<TABLE>
                      SUMMARY COMPENSATION TABLE
<CAPTION>
                                                                      LONG-TERM
                                                                     COMPENSATION
                                                                    ---------------
    NAME AND                                  ANNUAL COMPENSATION       AWARDS
                                              -------------------   ---------------
    PRINCIPAL                                                         RESTRICTED      ALL OTHER
    POSITION                       YEAR      SALARY<F1>   BONUS<F2> STOCK AWARDS<F3> COMPENSATION<F4>
    --------                       ----      ---------    --------  ---------------  ---------------
<S>                                <C>    <C>            <C>          <C>          <C>
Richard L. Edgar                   1998    $   143,003    $  36,850    $   22,312   $     32,500
     Director, President           1997        123,510       32,900            --         31,801
     and Chief Executive           1996        119,950       30,000            --         27,403
     Officer of the Corporation
     and the Bank

Michael E. McHugh                  1998    $   92,022     $  21,850    $   15,340   $     19,049
     Director, Secretary and       1997    $   88,050     $  19,740            --   $     18,406
     Treasurer of the Corporation  1996        86,250        18,000            --         18,055
     and Director and Executive
     Vice President of the Bank

Ronald L. Hansen                   1998    $   93,334     $  14,500    $   12,551   $     13,078
     Director and Vice President   1997        87,525        14,250            --         12,634
     of the Corporation and        1996        77,725        13,100            --             37
     Director and Senior Vice
     President of the Bank
<FN>
_____________________

<F1> Includes compensation deferred under the Bank's Profit
     Sharing/401(k) Plan and director fees paid by the Bank and its
     predecessors.

<F2> Includes compensation deferred under the Bank's Profit Sharing/401(k)
     Plan.

<F3> The values of restricted stock awards reported in this column are
     calculated using the market price of Valley Ridge Common Stock on
     the date of grant.  At December 31, 1998, each of the named
     executive officers held shares of restricted stock.  Dividends
     will be paid on shares of restricted stock at the same rate
     dividends are paid on Valley Ridge Common Stock.  The number of
     shares of restricted stock held by each named individual and the
     aggregate value of those shares (based on the market price of
     Valley Ridge Common Stock on December 31, 1998) at the end of the
     Corporation's fiscal year are set forth below:
                                      -56-
<PAGE>
                                    NUMBER OF           AGGREGATE
                                      SHARES              VALUE
                                    ---------           ---------
                 Mr. Edgar             800              $ 28,000
                 Mr. McHugh            550                19,250
                 Mr. Hansen            450                15,750

     All such shares were awarded in 1998 and vest as follows: 50% of
     the shares vested on the date of grant; 10% of the shares vest on
     each anniversary of the date of grant thereafter.

<F4> All other compensation for 1998 includes:  (i) contributions by
     the Bank under the Profit Sharing/401(k) Plan; (ii) contributions
     by the Corporation under the Valley Ridge Employee Stock
     Ownership Plan; and (iii) amounts paid by the Bank for life
     insurance.  The amounts included for each such factor for 1998
     are:

                              (I)            (II)          (III)
                              ---            ----          -----
     Mr. Edgar           $   21,975     $    3,467     $    7,058
     Mr. McHugh              13,337          2,327          3,385
     Mr. Hansen              10,345          1,954            779
</FN>
</TABLE>
     During 1998, the Bank compensated its directors at the rate of
$3,800 per year and $400 per regular board meeting attended, except
that the Chairman of the Board was paid $500 per meeting attended.
Directors who were not executive officers of the Corporation or the
Bank also received $125 per committee meeting attended. The
Corporation has entered into deferred compensation agreements with
some of its directors under which payments will be made to the
directors after their retirement.

     Effective January 1, 1997, the Bank entered into Executive
Employee Salary Continuation Agreements (the "Agreements") with each
of the named executive officers.  Under the Agreements, an executive
officer is eligible to receive payment of a monthly retirement benefit
from the Bank for 180 months following normal retirement date (age
65).  An executive officer may retire early, after age 60, and receive
a reduced benefit, or retire after age 65 and receive an increased
benefit.  If an executive officer terminates employment prior to early
retirement, a vested benefit is payable.  Vesting is based on five
years of employment commencing January 1, 1997, with 100% vesting
given upon death, disability or other involuntary termination of
employment for reasons other than "cause."  If a named executive
officer dies before receiving the entire benefit, remaining payments
will be made to a beneficiary.  If the officer is terminated prior to
early retirement, without "cause" but following a "change in control"
                                      -57-
<PAGE>
of the Bank (as these terms are defined in the Agreements), the
officer named will receive the vested benefit plus payment of one
year's salary.  The monthly normal retirement benefit for each
executive officer is $3,275 for Mr. Edgar, $758 for Mr. McHugh, and
$1,825 for Mr. Hansen.

     Effective January 13, 1998, Mr. Edgar and Mr. McHugh have
employment agreements with the Corporation under which Mr. Edgar
serves as President and Chief Executive Officer, and Mr. McHugh serves
as Secretary, Treasurer and Chief Financial Officer, of the
Corporation and the Bank.  Mr. Edgar's agreement provides for a
minimum annual salary of $116,761, or any increased amount authorized
by the Board of Directors, and Mr. McHugh's agreement provides for a
minimum annual salary of $80,340, or any increased amount authorized
by the Board of Directors. Both agreements provide for annual salary
reviews and bonuses in the discretion of the Board of Directors.  Both
agreements provide that if the Corporation terminates the executive's
employment other than for "cause" or due to the executive's extended
"disability" (as those terms are defined in the agreements), or if the
executive terminates the employment for "good reason" (as defined in
the agreements), the executive will be entitled to severance pay
consisting of continuation of his salary and benefits for the
remaining term of the his agreement.  Severance pay would be reduced
by the amount of any disability benefits received by the executive
(other than benefits under a specifically identified disability
insurance policy) and would also be reduced as much as necessary to
avoid any part of the executive's compensation from the Corporation
being classified as "excess parachute payments" under Section 280G of
the Internal Revenue Code.  Severance pay is subject to discontinuance
if the executive materially competes with the Corporation.  The term
of Mr. Edgar's agreement is five years and extended one year on each
anniversary of the effective date unless the Board of Directors gives
written notice of its intention not to extend the term.  The term of
Mr. McHugh's agreement is five years.

     Ronald L. Hansen has an employment agreement with the
Corporation.  Under this agreement, Mr. Hansen is to serve the
Corporation and the Bank in his present capacity for an annual salary
of $70,000 and discretionary bonuses to be determined by the board of
directors of the Corporation.  Mr. Hansen's salary is reviewed at
least annually by the board of directors and may be increased, but not
decreased.  Upon termination of his employment agreement by the
Corporation without "cause" or by Mr. Hansen for "good reason" before
a "change in control" of the Corporation (as these terms are defined
in the agreements), Mr. Hansen is entitled to his salary and benefits,
as if termination of his employment had not occurred, through June 30,
2001.  If such termination occurs after a change in control, Mr.


                                      -58-
<PAGE>
Hansen is entitled to his salary and benefits, as if termination of
his employment had not occurred, until the later of (i) June 30, 2001,
or (ii) three years after the change in control; provided that the
amount of salary and benefits continuation attributable to the period
beyond June 30, 2001, will be subject to a reduction to the extent of
any portion of that amount that constitutes an "excess parachute
payment" (as that term is defined in Section 280G of the Internal
Revenue Code of 1986, as amended).


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     The following table sets forth information concerning the number
of shares of Valley Ridge Common Stock held as of December 31, 1998 by
each shareholder who is known to the Corporation's management to have
been the beneficial owner of more than 5% of the outstanding shares of
Valley Ridge Common Stock as of that date:
<TABLE>
<CAPTION>
                                 AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
                                          VALLEY RIDGE COMMON STOCK <F1>
                                 --------------------------------------------
                                      SOLE           SHARED
                                   VOTING AND       VOTING OR      TOTAL
NAME AND ADDRESS OF                DISPOSITIVE     DISPOSITIVE   BENEFICIAL       PERCENT
BENEFICIAL OWNER                      POWER          POWER<F2>    OWNERSHIP       OF CLASS
-------------------                   -----          --------    ----------       --------
<S>                                  <C>             <C>          <C>             <C>
Robert C. Humphreys<F3>
17660 Westbrook Drive
Casnovia, MI 49318                    21,965          20,482       42,447          6.81%

Valley Ridge Bank
  Bank Profit Sharing Plan Trust
c/o NBD Bank
200 Ottawa, N.W.
Grand Rapids, MI 49503                13,095          26,169       39,264          6.31

Richard L. Edgar<F4>
450 West Muskegon Avenue
Kent City, MI 49330                   32,009              --       32,009          5.14
__________________________
(Footnotes begin on page 38.)
</TABLE>




                                      -59-
<PAGE>
     The following table shows certain information concerning the
number of shares of Valley Ridge Common Stock held as of December 31,
1998, by each of the Corporation's directors, each of the named
executive officers and all of the Corporation's directors and
executive officers as a group:
<TABLE>
<CAPTION>
                                 AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
                                          VALLEY RIDGE COMMON STOCK <F1>
                                 --------------------------------------------
                                      SOLE           SHARED
                                    VOTING AND      VOTING OR      TOTAL
    NAME OF                         DISPOSITIVE    DISPOSITIVE   BENEFICIAL          PERCENT
BENEFICIAL OWNER                      POWER<F3>      POWER<F2>   OWNERSHIP<F3>       OF CLASS
-------------------                   -----          --------    ----------          --------
<S>                                  <C>               <C>          <C>               <C>
Jerome B. Arends                        7,781            5,465        13,246           2.13%
K. Timothy Bull                           308           29,865        30,173           4.84
Richard L. Edgar                       32,009<F4><F5>       --        32,009<F4><F5>   5.14
Fred J. Finkbeiner                        308            6,282         6,590           1.06
Gary Gust                              11,700           11,009        22,709           3.65
Ronald L. Hansen                        2,113            1,095         3,208              *
Robert C. Humphreys                    21,965           20,482        42,447           6.81
Ben J. Landheer                        15,388               --        15,388           2.47
Michael E. McHugh                      28,617<F4><F5>       --        28,617<F4><F5>   4.60
Dennis C. Nelson                          811               --           811              *
John J. Niederer                          308            1,905         2,213              *
Paul K. Spoelman                        2,208               --         2,208              *
Donald Swanson                          5,914            1,494         7,408           1.19
Donald VanSingel                          308            4,920         5,228              *

All directors and
  executive officers
  as a group                          128,077<F4><F5>   82,517       210,594<F4><F5>   33.64%
<FN>
_________________________
<F*>Less than 1%

<F1> The numbers of shares stated are based on information furnished
     by each person listed and include shares personally owned of
     record by that person and shares that, under applicable
     regulations, are considered to be otherwise beneficially owned by
     that person.  Under these regulations, a beneficial owner of a
     security includes any person who, directly or indirectly, through
     any contract, arrangement, understanding, relationship or
     otherwise has or shares voting power or dispositive power with
     respect to the security.  Voting power includes the power to vote
     or direct the voting of the security.  Dispositive power includes

                                      -60-
<PAGE>
     the power to dispose or direct the disposition of the security.
     A person is also considered the beneficial owner of a security if
     the person has a right to acquire beneficial ownership of the
     security within 60 days.

<F2> These numbers include shares over which the listed person is legally
     entitled to share voting or dispositive power by reason of joint
     ownership, trust, or other contract or property right, and shares
     held by spouses and children over whom the listed person may have
     influence by reason of relationship.

<F3> These numbers include shares that may be acquired by the exercise of
     stock options granted under the Stock Incentive Plan of 1998
     within 60 days.  The number of shares subject to stock options
     for each listed individual is shown below:

                    Mr. Arends                      308
                    Mr. Bull                        308
                    Mr. Finkbeiner                  308
                    Mr. Gust                        308
                    Mr. Humphreys                   308
                    Mr. Landheer                    308
                    Mr. Nelson                      308
                    Mr. Niederer                    308
                    Mr. Spoelman                    308
                    Mr. Swanson                     308
                    Mr. VanSingel                   308

                    All directors and executive
                       officers as a group        3,388

<F4>  Mr. Edgar may be considered to have voting and/or dispositive
     control over 39,264 shares of Valley Ridge Common Stock held
     by the Valley Ridge Bank Profit Sharing Plan Trust by reason of
     the capacities in which he serves at the Corporation and the
     Bank.  The number of shares reported as beneficially owned by Mr.
     Edgar excludes, and Mr. Edgar disclaims beneficial ownership of,
     20,518 shares of Valley Ridge Common Stock held by the Valley
     Ridge Bank Profit Sharing Plan Trust.  The number of shares
     reported includes 2,148 shares allocated to Mr. Edgar's
     account under the Valley Ridge Employee Stock Ownership Plan
     which are also included in the number of shares reported as
     beneficially owned by Mr. McHugh (as to which Mr. McHugh
     disclaims beneficial ownership).

<F5>  Mr. McHugh is the trustee of the Valley Ridge Employee Stock
     Ownership Plan.  As trustee, Mr. McHugh has nominal voting and
     dispositive power over shares held in trust, limited by the terms

                                      -61-
<PAGE>
     of the governing plan and trust agreements and his legal and
     fiduciary duties.  The number of shares reported as beneficially
     owned by Mr. McHugh includes 17,465 shares held by the Valley
     Ridge Employee Stock Ownership Plan of which Mr. McHugh disclaims
     beneficial ownership (including the 2,148 shares allocated to
     Mr. Edgar's account under that plan).
</FN>
</TABLE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Directors and officers of the Corporation and their associates
were customers of and had transactions with the Bank in the ordinary
course of business between January 1, 1998, and March 29, 1999.  It is
anticipated that such transactions will take place in the future in
the ordinary course of business.  All loans and commitments included
in such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and did not
involve more than the normal risk of collectibility or present other
unfavorable features.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     EXHIBITS.  The following exhibits are filed as part of this Form 10-KSB:

NUMBER                        EXHIBIT

3.1  RESTATED ARTICLES OF INCORPORATION.  Previously filed as
     Exhibit 3.1 to the Corporation's Quarterly Report on Form 10-QSB
     for the Quarter ended June 30, 1998.  Here incorporated by
     reference.

3.2  BYLAWS AND AMENDMENTS.  Previously filed as Exhibit 3(b) to
     the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

4.1  FORM OF STOCK CERTIFICATE.  Previously filed as Exhibit 4(a)
     to the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

4.2  LONG-TERM DEBT.  The Corporation is a party to several long-
     term debt agreements which at the time of this report do not
     exceed 10% of the Corporation's total consolidated assets.  The
     Corporation agrees to furnish copies of the agreements defining
     the rights of the other parties thereto to the Securities and
     Exchange Commission upon request.

                                      -62-
<PAGE>
10.1 DATA PROCESSING AGREEMENT.  Previously filed as Exhibit 10(a) to
     the Corporation's Form S-4 Registration Statement filed January
     30, 1996.  Here incorporated by reference.

10.2 VALLEY RIDGE EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST.<F*>
     Previously filed as Exhibit 10(b) to the Corporation's Form S-4
     Registration Statement filed January 30, 1996.  Here incorporated
     by reference.

10.3 KENT CITY STATE BANK PROFIT SHARING/401(K) PLAN.<F*> Previously
     filed as Exhibit 10(c) to the Corporation's Form S-4 Registration
     Statement filed January 30, 1996.  Here incorporated by
     reference.

10.4 DIRECTORS' DEFERRED COMPENSATION PLAN AND FORM OF DIRECTORS'
     DEFERRED COMPENSATION AGREEMENT.<F*> Previously filed as Exhibit
     10(d) to the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

10.5 EMPLOYMENT AGREEMENT WITH RONALD HANSEN.<F*> Previously filed as
     Exhibit 10.6 to the Corporation's Form 10-KSB filed March 31,
     1997.  Here incorporated by reference.

10.6 EMPLOYMENT AGREEMENT WITH MICHAEL MCHUGH.<F*> Previously filed as
     Exhibit 10.6 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.7 EMPLOYMENT AGREEMENT WITH RICHARD EDGAR.<F*> Previously filed as
     Exhibit 10.7 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.8 FORM OF SALARY CONTINUATION AGREEMENT.<F*> Previously filed as
     Exhibit 10.8 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.9 STOCK INCENTIVE PLAN OF 1998.<F*>  Previously filed as Exhibit 10.1
     to the Corporation's Quarterly Report on Form 10-QSB for the
     Quarter ended June 30, 1998.  Here incorporated by reference.

21   SUBSIDIARIES OF THE REGISTRANT.

24   POWERS OF ATTORNEY.

27   FINANCIAL DATA SCHEDULE.

___________________________

<F*>Management contract or compensatory plan or arrangement.

                                      -63-
<PAGE>
     The Corporation will furnish a copy of any exhibit listed above
to any shareholder of the Corporation without charge upon written
request to Michael E. McHugh, Secretary, Valley Ridge Financial Corp.,
430 West Muskegon Avenue, Kent City, Michigan 49330.

     REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during
the fourth quarter of 1998.










































                                      -64-
<PAGE>
                              SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                              VALLEY RIDGE FINANCIAL CORP.
                              (Registrant)


March 30, 1999                 By  /S/RICHARD L. EDGAR
                                   Richard L. Edgar
                                   President and Chief Executive
                                   Officer


     In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.


March 30, 1999                *
                              Jerome B. Arends
                              Director


March 30, 1999                *
                              K. Timothy Bull
                              Director


March 30, 1999                /S/RICHARD L. EDGAR
                              Richard L. Edgar
                              President, Chief Executive Officer and
                              Director (Principal Executive
                              Officer)


March 30, 1999                *
                              Fred J. Finkbeiner
                              Director


March 30, 1999                *
                              Gary Gust
                              Director


                                      -65-
<PAGE>
March 30, 1999                *
                              Ronald L. Hansen
                              Director and Vice President


March 30, 1999                *
                              Robert C. Humphreys
                              Chairman of the Board and Director


March 30, 1999                *
                              Ben J. Landheer
                              Director


March 30, 1999                /S/MICHAEL E. MCHUGH
                              Michael E. McHugh
                              Secretary and Treasurer and Director
                              (Principal Financial and Accounting Officer)

March 30, 1999                *
                              Dennis C. Nelson
                              Director


March 30, 1999                *
                              John J. Niederer
                              Director


March 30, 1999                *
                              Paul K. Spoelman
                              Director


March 30, 1999                *
                              Donald Swanson
                              Director


March 30, 1999                *
                              Donald VanSingel
                              Director


                              *By  /S/RICHARD L. EDGAR
                                   Richard L. Edgar
                                   Attorney-in-Fact

                                      -66-
<PAGE>
                            EXHIBIT INDEX

NUMBER                        EXHIBIT

3.1  ARTICLES OF INCORPORATION.  Previously filed as Exhibit 3.1
     to the Corporation's Quarterly Report on Form 10-QSB for the
     Quarter ended June 30, 1998.  Here incorporated by reference.

3.2  BYLAWS AND AMENDMENTS.  Previously filed as Exhibit 3(b) to
     the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

4.1  FORM OF STOCK CERTIFICATE.  Previously filed as Exhibit 4(a)
     to the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

4.2  LONG-TERM DEBT.  The Corporation is a party to several long-
     term debt agreements which at the time of this report do not
     exceed 10% of the Corporation's total consolidated assets.  The
     Corporation agrees to furnish copies of the agreements defining
     the rights of the other parties thereto to the Securities and
     Exchange Commission upon request.

10.1 DATA PROCESSING AGREEMENT.  Previously filed as Exhibit 10(a) to
     the Corporation's Form S-4 Registration Statement filed January
     30, 1996.  Here incorporated by reference.

10.2 VALLEY RIDGE EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST.<F*>
     Previously filed as Exhibit 10(b) to the Corporation's Form S-4
     Registration Statement filed January 30, 1996.  Here incorporated
     by reference.

10.3 KENT CITY STATE BANK PROFIT SHARING/401(K) PLAN.<F*> Previously
     filed as Exhibit 10(c) to the Corporation's Form S-4 Registration
     Statement filed January 30, 1996.  Here incorporated by
     reference.

10.4 DIRECTORS' DEFERRED COMPENSATION PLAN AND FORM OF DIRECTORS'
     DEFERRED COMPENSATION AGREEMENT.<F*> Previously filed as Exhibit
     10(d) to the Corporation's Form S-4 Registration Statement filed
     January 30, 1996.  Here incorporated by reference.

10.5 EMPLOYMENT AGREEMENT WITH RONALD HANSEN.<F*> Previously filed as
     Exhibit 10.6 to the Corporation's Form 10-KSB filed March 31,
     1997.  Here incorporated by reference.





<PAGE>
10.6 EMPLOYMENT AGREEMENT WITH MICHAEL MCHUGH.<F*> Previously filed as
     Exhibit 10.6 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.7 EMPLOYMENT AGREEMENT WITH RICHARD EDGAR.<F*> Previously filed as
     Exhibit 10.7 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.8 FORM OF SALARY CONTINUATION AGREEMENT.<F*> Previously filed as
     Exhibit 10.8 to the Corporation's Form 10-KSB filed March 31,
     1998.  Here incorporated by reference.

10.9 STOCK INCENTIVE PLAN OF 1998.<F*> Previously filed as Exhibit 10.1
     to the Corporation's Quarterly Report on Form 10-QSB for the
     Quarter ended June 30, 1998.  Here incorporated by reference.

21   SUBSIDIARIES OF THE REGISTRANT.

24   POWERS OF ATTORNEY.

27   FINANCIAL DATA SCHEDULE.

_________________________

<F*>Management contract or compensatory plan or arrangement.