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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 333-00724

VALLEY RIDGE FINANCIAL CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)

|Michigan
(State or Other Jurisdiction of
Incorporation or Organization)             | 38-2888214
(I.R.S. Employer Identification No.)                
|----------------------------------------------------------------------------------- | ---------------------------------------------------------------
|                                                                                    |                                                                
|450 W. Muskegon
Kent City, Michigan  49330
(Address of Principal Executive Offices) | (616) 678-5911
(Issuer's Telephone Number,
Including Area Code)

Check whether the issuer (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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X    No _____

There were 950,027 shares of Common Stock (no par value) outstanding as of March 31, 2002.

Transitional Small Business Disclosure Format (check one):  Yes    NoX

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VALLEY RIDGE FINANCIAL CORP.
INDEX

|PART I.    | FINANCIAL INFORMATION                                              | Page No.
|---------- | ------------------------------------------------------------------ | --------
|           |                                                                    |         
|           | Item 1.  Financial Statements                                      |         
|           |                                                                    |         
|           | Condensed Consolidated Balance Sheets -                            |         
|           | March 31, 2002 (Unaudited) and December 31, 2001                   | 3       
|           |                                                                    |         
|           | Condensed Consolidated Statements of Income and Comprehensive      |         
|           | Income - Three Months Ended March 31, 2002 (Unaudited)             |         
|           | and March 31, 2001 (Unaudited)                                     | 4       
|           |                                                                    |         
|           | Condensed Consolidated Statements of Cash Flows -                  |         
|           | Three Months Ended March 31, 2002 (Unaudited) and                  |         
|           | March 31, 2001 (Unaudited)                                         | 5       
|           |                                                                    |         
|           | Notes to Condensed Consolidated Financial Statements (Unaudited)   | 6       
|           |                                                                    |         
|           |                                                                    |         
|           | Item 2.  Management's Discussion and Analysis or Plan of Operation | 7       
|           |                                                                    |         
|           |                                                                    |         
|PART II.   | OTHER INFORMATION                                                  |         
|           |                                                                    |         
|           | Item 6.  Exhibits and Reports on Form 8-K                          | 12      
|           |                                                                    |         
|SIGNATURES | 13                                                                

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PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements

VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                      | March 31,
2002 |             | December 31,
2001 |  
|----------------------------------------------------- | -------------- | ----------- | ----------------- | -
|                                                      | (Unaudited)    |             |                   |  
|ASSETS                                                |                |             |                   |  
|Cash and due from banks                               | $              | 5,736,737   |                   | $
|Federal funds sold                                    |                | 4,400,000   |                   |  
|Cash and cash equivalents                             |                | 10,136,737  |                   |  
|                                                      |                |             |                   |  
|Securities available for sale                         |                | 29,989,558  |                   |  
|Other securities                                      |                | 1,502,368   |                   |  
|Loans held for sale                                   |                | 638,925     |                   |  
|                                                      |                |             |                   |  
|Loans                                                 |                | 121,942,004 |                   |  
|Allowance for loan losses                             |                | (1,364,355  | )                 |  
|                                                      |                | 120,577,649 |                   |  
|                                                      |                |             |                   |  
|Accrued interest receivable                           |                | 1,146,423   |                   |  
|Premises and equipment, net                           |                | 5,457,332   |                   |  
|Cash surrender value of life insurance policies       |                | 2,745,328   |                   |  
|Other assets                                          |                | 1,125,293   |                   |  
|                                                      |                |             |                   |  
|Total assets                                          | $              | 173,319,613 |                   | $
|                                                      |                |             |                   |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                  |                |             |                   |  
|Deposits                                              |                |             |                   |  
|Noninterest-bearing                                   | $              | 21,707,003  |                   | $
|Interest-bearing                                      |                | 106,281,919 |                   |  
|Total                                                 |                | 127,988,922 |                   |  
|                                                      |                |             |                   |  
|Federal funds purchased                               |                | 0           |                   |  
|Securities sold under agreement to repurchase         |                | 3,395,752   |                   |  
|Federal Home Loan Bank advances                       |                | 22,000,000  |                   |  
|Accrued expenses and other liabilities                |                | 2,226,530   |                   |  
|Total liabilities                                     |                | 155,611,204 |                   |  
|                                                      |                |             |                   |  
|Shareholders' equity                                  |                |             |                   |  
|Common stock, no par value: 2,000,000 shares          |                |             |                   |  
|authorized and 950,027 and 949,565 shares outstanding |                |             |                   |  
|at March 31, 2002 and December 31, 2001               |                | 8,043,580   |                   |  
|Retained earnings                                     |                | 9,588,845   |                   |  
|Unearned restricted stock                             |                | (145,062    | )                 |  
|Accumulated other comprehensive income                |                | 221,046     |                   |  
|Total shareholders' equity                            |                | 17,708,409  |                   |  
|                                                      |                |             |                   |  
|Total liabilities and shareholders' equity            | $              | 173,319,613 |                   | $

See accompanying notes to condensed consolidated financial statements.

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VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)

|                                                    | Three Months Ended |          
|--------------------------------------------------- | ------------------ | ---------
|                                                    | March 31,
2002     |          
|Interest income                                     |                    |          
|Loans, including fees                               | $                  | 2,486,069
|Federal funds sold                                  |                    | 22,601   
|Securities                                          |                    | 380,351  
|Total interest income                               |                    | 2,889,021
|                                                    |                    |          
|Interest expense                                    |                    |          
|Deposits                                            |                    | 684,208  
|Other                                               |                    | 270,155  
|Total interest expense                              |                    | 954,363  
|                                                    |                    |          
|Net interest income                                 |                    | 1,934,658
|                                                    |                    |          
|Provision for loan losses                           |                    | 45,000   
|                                                    |                    |          
|Net interest income after provision for loan losses |                    | 1,889,658
|                                                    |                    |          
|Noninterest income                                  |                    |          
|Service charges                                     |                    | 219,723  
|Net gain on sales of securities                     |                    | 34,147   
|Net gain (loss) on sales of loans                   |                    | 58,760   
|Income earned on life insurance policies            |                    | 39,900   
|Other income                                        |                    | 226,269  
|Total noninterest income                            |                    | 578,799  
|                                                    |                    |          
|Noninterest expense                                 |                    |          
|Salaries and benefits                               |                    | 960,481  
|Occupancy                                           |                    | 128,546  
|Furniture and fixtures                              |                    | 140,900  
|Other expense                                       |                    | 571,528  
|Total noninterest expense                           |                    | 1,801,455
|                                                    |                    |          
|Income before federal income tax                    |                    | 667,002  
|                                                    |                    |          
|Federal income tax expense                          |                    | 181,626  
|                                                    |                    |          
|Net income                                          | $                  | 485,376  
|Comprehensive income                                | $                  | 346,994  
|                                                    |                    |          
|Basic and diluted earnings per share                | $                  | .51      

See accompanying notes to condensed consolidated financial statements.

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VALLEY RIDGE FINANCIAL CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                           | Three Months Ended |           
|---------------------------------------------------------- | ------------------ | ----------
|                                                           | March 31,
2002     |           
|Cash flows from operating activities                       |                    |           
|Net income                                                 | $                  | 485,376   
|Adjustments to reconcile net income                        |                    |           
|to net cash from operating activities                      |                    |           
|Depreciation and amortization                              |                    | 140,715   
|Amortization of premiums and discounts on securities, net  |                    | 9,267     
|Provision for loan losses                                  |                    | 45,000    
|Net gain on sales of securities                            |                    | (34,147   
|Net (gain) loss on sales of loans                          |                    | (58,760   
|Loans originated for sale                                  |                    | (8,328,681
|Proceeds from loans sold                                   |                    | 8,681,666 
|Net change in:                                             |                    |           
|Accrued interest receivable and other assets               |                    | 16,890    
|Accrued interest payable and other liabilities             |                    | (32,063   
|Net cash from operating activities                         |                    | 925,263   
|                                                           |                    |           
|Cash flows from investing activities                       |                    |           
|Loan originations and payments, net                        |                    | 719,413   
|Proceeds from:                                             |                    |           
|Sales of securities available for sale                     |                    | 5,227,018 
|Repayments and maturities of securities available for sale |                    | 2,042,501 
|Purchase of:                                               |                    |           
|Securities available for sale                              |                    | (9,999,572
|Premises and equipment                                     |                    | (174,689  
|Net cash from investing activities                         |                    | (2,183,990
|                                                           |                    |           
|Cash flows from financing activities                       |                    |           
|Net increase in deposits                                   |                    | 4,403,679 
|Net increase in securities sold under agreements           |                    |           
|to repurchase                                              |                    | 43,122    
|Net decrease in federal funds purchased                    |                    | (1,000,000
|Advances from Federal Home Loan Bank                       |                    | 0         
|Repayments of Federal Home Loan Bank advances              |                    | 0         
|Stock options exercised                                    |                    | 8,590     
|Dividends paid                                             |                    | (190,005  
|Net cash from financing activities                         |                    | 3,265,386 
|                                                           |                    |           
|Net change in cash and cash equivalents                    |                    | 2,006,659 
|                                                           |                    |           
|Cash and cash equivalents at beginning of year             |                    | 8,130,078 
|                                                           |                    |           
|Cash and cash equivalents at end of period                 | $                  | 10,136,737

See accompanying notes to condensed consolidated financial statements.

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VALLEY RIDGE FINANCIAL CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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|1. | BASIS OF PRESENTATION:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The unaudited financial statements as of March 31, 2002 and for the three months ended March 31, 2002 and March 31, 2001 include the consolidated results of operations of Valley Ridge Financial Corp. (the "Corporation") and its wholly-owned subsidiary, Valley Ridge Bank (the "Bank") and its wholly-owned subsidiaries, Valley Ridge Realty, Inc., Valley Ridge Mortgage Company, Inc., and Valley Ridge Financial Services, Inc. These consolidated financial statements have been prepared in accordance with the Instructions for Form 10-QSB and Item 310(b) of Regulation S-B and do not include all disclosures required by accounting principles generally accepted in the United States of America for a complete presentation of the Corporation's financial condition and results of operations. In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary in order to make the financial statements not misleading and for a fair presentation of the results of operations for such periods. The results for the period ended March 31, 2002 should not be considered as indicative of results for a full year. For further information, refer to the consolidated financial statements and footnotes included in the Corporation's Annual Report on Form 10-KSB for the year ended December 31, 2001.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | EARNINGS PER COMMON SHARE:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Basic earnings per share is based on weighted-average common shares outstanding. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable under stock options. Earnings per share amounts are based on 949,919 and 945,496 shares outstanding for the three months ended March 31, 2002 and 2001, respectively. Earnings and dividends per share are restated for all stock splits and dividends through the date of issue of the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3. | NEW ACCOUNTING PRONOUNCEMENTS:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Effective January 1, 2002, the Corporation adopted a new standard issued by the FASB on impairment and disposal of long-lived assets. The effect of this on the financial position and results of operations of the Corporation was not material.

A new accounting standard dealing with asset retirement obligations will apply for 2003. The Corporation does not believe this standard will have a material effect on its financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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Item 2.  Management's Discussion and Analysis or Plan of Operation

The following discussion is designed to provide a review of the consolidated financial condition and results of operations of Valley Ridge Financial Corp. (the "Corporation"). This discussion should be read in conjunction with the consolidated financial statements and related notes.

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 the Corporation itself. Words such as "anticipates," "believes," "estimates," "judgment," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," variations of such words and similar expressions are intended to identify such forward-looking statements. 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.

Future Factors include, but are not limited to, 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 and issues; 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; and changes in the national economy. In addition, events relating to the terrorist attacks of September 11, 2001 and other terrorist activities have created significant global economic and political uncertainties that may have material and adverse effects on financial markets, the economy, and demand for financial services and products. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

Results of Operations



Net Income:The Corporation reported net income of $485,376 or $0.51 per share for the first quarter of 2002 compared to $424,917 or $0.45 per share for the first quarter of 2001. The change was primarily a result of an improved net interest margin compared to the first quarter of 2001. 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 the Corporation's future operating results.

---

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. For tax-exempt securities and loans, interest income and yield have been computed on a tax equivalent basis using a marginal tax rate of 34%.

|                          | Three-Month Periods ended March 31, |            
|------------------------- | ----------------------------------- | -----------
|                          | 2002                                |            
|                          | Average
Balance                     |            
|                          |                                     |            
|Securities                | $                                   | 18,838,613 
|Tax-exempt securities     |                                     | 10,706,065 
|Loans (1) (2)             |                                     | 121,440,904
|Federal funds sold        |                                     | 4,966,667  
|Total earning assets      |                                     | 155,952,249
|                          |                                     |            
|Nonaccrual loans          |                                     | 433,598    
|                          |                                     |            
|Less allowance for        |                                     |            
|loan losses               |                                     | (1,330,974 
|Cash and due from banks   |                                     | 4,639,269  
|Other nonearning assets   |                                     | 10,451,092 
|                          |                                     |            
|Total assets              | $                                   | 170,145,234
|                          |                                     |            
|Interest-bearing deposits | $                                   | 104,143,122
|Other borrowings          |                                     | 24,689,391 
|Total interest-bearing    |                                     |            
|liabilities               |                                     | 128,832,513
|                          |                                     |            
|Demand deposits           |                                     | 21,499,124 
|Other liabilities         |                                     | 2,181,631  
|Total liabilities         |                                     | 152,513,268
|Average equity            |                                     | 17,631,966 
|                          |                                     |            
|Total liabilities and     |                                     |            
|equity                    | $                                   | 170,145,234
|                          |                                     |            
|Net interest income       |                                     |            
|Rate spread               |                                     |            
|Net interest margin       |                                     |            

_____________________

|(1) | Average outstanding balances exclude non-accruing loans.
|--- | --------------------------------------------------------
|(2) | Includes loans held for sale.                           

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.

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|                                                   | For the Three Months ended March 31,
2002 over 2001 |         
|-------------------------------------------------- | --------------------------------------------------- | --------
|                                                   | Total                                               |         
|Increase (decrease) in interest income             |                                                     |         
|Taxable investment securities                      | $                                                   | 8,373   
|Tax-exempt securities                              |                                                     | (115,609
|Loans (including loans held for sale)              |                                                     | (205,977
|Federal funds sold                                 |                                                     | (27,716 
|Net change in tax-equivalent income                |                                                     | (340,929
|                                                   |                                                     |         
|Increase (decrease) in interest expense            |                                                     |         
|Interest-bearing deposits                          |                                                     | (461,957
|Other borrowings                                   |                                                     | (103,643
|Net change in interest expense                     |                                                     | (565,600
|                                                   |                                                     |         
|Net change in net interest income (tax-equivalent) | $                                                   | 224,671 

Net Interest Income: Net interest income increased $227,509 or 13.3% to $1,934,658 for the three-month period ended March 31, 2002 compared to the same period in 2001. The increase in net interest income is primarily attributable to decreases in rates over the past twelve months, which has favorably affected the Corporation's net interest income.

Provision for Loan Losses: 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 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. The provision remained consistent at $45,000 for the three months ended March 31, 2002 and 2001. Net recoveries were approximately $80,000 for the first quarter of 2002 compared to net charge-offs of approximately $34,000 for the first quarter of 2001. The Corporation has recovered approximately $100,000 in 2002 relating to a large commercial loan charged-off during the fourth quarter of 2001. Management will continue to monitor the allowance for loan losses and make additions to the allowance through the provision for loan losses as economic conditions dictate.

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|                                                             | As of and for the three-
month periods
ended March 31, |          
|------------------------------------------------------------ | ------------------------------------------------------ | ---------
|                                                             | 2002                                                   |          
|                                                             |                                                        |          
|Balance at beginning of period                               | $                                                      | 1,239,093
|Provision for loan losses                                    |                                                        | 45,000   
|                                                             |                                                        |          
|Recoveries on loans charged-off                              |                                                        | 113,355  
|Loans charged-off                                            |                                                        | (33,093  
|Net (charge-offs) recoveries                                 |                                                        | 80,262   
|                                                             |                                                        |          
|Balance at end of period                                     | $                                                      | 1,364,355
|                                                             |                                                        |          
|Allowance for loan losses as a percentage of                 |                                                        |          
|total loans at end of period                                 |                                                        | 1.1%     
|                                                             |                                                        |          
|Ratio of net (charge offs) recoveries to average total loans |                                                        |          
|outstanding during the period                                |                                                        | .0007    

Noninterest Income:Noninterest income for the three months ended March 31, 2002 was approximately $579,000 as compared to approximately $590,000 for the same period in 2001. Net gains on sales of securities has decreased by approximately $75,000 for the three months ended March 31, 2002 compared to the same period in 2001. Net gains on sales of loans has increased by approximately $60,000 for the three months ended March 31, 2002 compared to the same period in 2001. All other components of noninterest income remained consistent over prior year first quarter results.

Noninterest Expense: Noninterest expense increased by approximately $91,000 for the three months ended March 31, 2002 compared to the same period in 2001. Salaries and benefits, the largest component of noninterest expense, increased 11% to $960,481 for the three months ended March 31, 2002 compared to $867,649 for the same period in 2001. The increase in salaries and benefits reflects annual salary increases and additional employees. Occupancy and furniture and fixture expenses increased approximately $12,000 to $269,446, due to increases in repairs and maintenance expense. Other expenses have remained consistent for the three months ended March 31, 2002 compared to the same period in 2001.

Financial Condition, Liquidity, and Capital Resources

Total assets increased approximately 2.1% or by $3.5 million to $173.3 million at March 31, 2002 compared to $169.8 million at December 31, 2001. Total liabilities increased by 2.2% or by $3.3 million to $155.6 million at March 31, 2002 compared to $152.3 million at December 31, 2001. Total shareholders' equity increased by approximately $166,000 to $17.7 million at March 31, 2002. The increase in shareholders' equity is primarily related to the retention of earnings after dividend payouts offset by a decrease in the unrealized gain on securities available for sale.

Total loans remained relatively stable at $121.9 million. Deposits increased by approximately $4.4 million or 3.6% to $128.0 million. The net loan to deposit ratio has decreased slightly to 94.2% for the period ended March 31, 2002 from 98.2% for the period ended December 31, 2001. The allowance for loan losses has remained at a consistent level while maintaining a reserve of 1.1% of total loans.

---

The Corporation paid a dividend of $190,005 in the first quarter of 2002, compared to $170,456 in the first quarter of 2001.

Shareholders' equity as a percent of total assets was 10.2% at March 31, 2002 compared to 10.3% at December 31, 2001. The Corporation's capital ratios continue to exceed the minimum regulatory levels prescribed by the Federal Reserve Board.

Total cash, cash equivalents and investment securities totaled approximately $41.6 million at March 31, 2002 or approximately 24.0% 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 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.

Securities sold under agreements to repurchase generally mature within one to three days from the transaction date. The Corporation has pledged certain investment securities, which are held in safekeeping, as collateral against these borrowings. Repurchase agreements totaled approximately $3.4 million at March 31, 2002 and December 31, 2001.

The Corporation had $22,000,000 in advances from the Federal Home Loan Bank at March 31, 2001 and December 31, 2001. 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 specific qualifying securities within the securities portfolio.

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.

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PART II.  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)          Exhibits.  The following documents are filed as exhibits to this report on Form 10-QSB:

| | Exhibit No. |  | Document                                                                                                                                                                                       
| | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |             |  |                                                                                                                                                                                                
| | 3.1         |  | Restated Articles of Incorporation. Previously filed as an exhibit to the Corporation's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998. Here incorporated by reference.   
| |             |  |                                                                                                                                                                                                
| | 3.2         |  | Bylaws. Previously filed as Exhibit 3(b) to the Corporation's Registration Statement on Form S-4 (Registration Statement No. 333-00724) filed January 30, 1996. Here incorporated by reference.

(b)          Reports on Form 8-K.  No reports on Form 8-K were filed during the quarter covered by this Form 10-QSB.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|Date:  May 14, 2002 | VALLEY RIDGE FINANCIAL CORP.
(Registrant)
s/Richard L. Edgar
Richard L. Edgar, President and Chief
  Executive Officer (Principal Executive Officer)
|------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                     
|                    |                                                                                                                                                     
|Date:  May 14, 2002 | s/Michael McHugh
Michael McHugh, Secretary and Treasurer
  (Principal Financial and Accounting Officer)                                             

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EXHIBIT INDEX

| | Exhibit No. |  | Document                                                                                                                                                                                       
| | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |             |  |                                                                                                                                                                                                
| | 3.1         |  | Restated Articles of Incorporation. Previously filed as an exhibit to the Corporation's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998. Here incorporated by reference.   
| |             |  |                                                                                                                                                                                                
| | 3.2         |  | Bylaws. Previously filed as Exhibit 3(b) to the Corporation's Registration Statement on Form S-4 (Registration Statement No. 333-00724) filed January 30, 1996. Here incorporated by reference.