U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 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, 1999

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

                      Commission file number: 333-17317

                       MICHIGAN HERITAGE BANCORP, INC.
            (Exact name of registrant as specified in its charter)

            Michigan                                  38-3318018
   (State or other jurisdiction          (I.R.S. employer identification no.)
 of incorporation or organization)

        28300 Orchard Lake Road, Suite 200, Farmington Hills, MI 48334
            (Address of principal executive offices with zip code)

                                 248-538-2525
             (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   Common Stock

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 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 is not contained in this form, and no disclosure will be
contained, to the best of the 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]

State issuer's revenues for its most recently completed fiscal year:
$10,496,000

The aggregate market value of the voting and no-voting common equity held by
non-affiliates, computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of
February 28, 2000, was $6,327,251.

As of February 28, 2000, there were 1,488,765 shares of Common Stock of the
Issuer issued and outstanding.

Traditional Small Business Disclosure Format (check one): Yes: [ ] No: [X]

Portions of the registrant's Proxy Statement for its 1999 Annual Meeting of
Shareholders to be held April 20, 2000, to the extent expressly so stated
herein, are incorporated by reference into Part III of this Report.



                              TABLE OF CONTENTS

PART I                                                                   Page

Item 1        Description of Business                                     2
Item 2        Description of Properties                                   6
Item 3        Legal Proceedings                                           6
Item 4        Submission of Matters to a Vote of Security Holders         6

PART II

Item 5        Market for Common Equity and Related Stockholder Matters    7
Item 6        Management's Discussion and Analysis                        7
Item 7        Financial Statements                                       14
Item 8        Changes in and Disagreements with Accountants
                         on Accounting and Financial Disclosure          14

PART III

Item 9        Directors, Executive Officers, Promoters and Control
                         Persons; Compliance With Section 16(a)          15
Item 10       Executive Compensation                                     15
Item 11       Security Ownership of Certain Beneficial
                         Owners and Management                           15
Item 12       Certain Relationships and Related Transactions             15
Item 13       Exhibits, List and Reports on Form 8-K                     15

Signatures                                                               41

Exhibit Index                                                            42

PRELIMINARY NOTE: The Company wishes to caution readers not to place undue
reliance on any "forward-looking statements" contained in the following
discussion, and advises readers that various factors, including regional and
national economic conditions, substantial changes in levels of market
interest rates, credit and other risks of lending and investment activities
and competitive and regulatory factors, could affect the Company's financial
performance and could cause the Company's actual results for future periods
to differ materially from those anticipated or projected. The Company does
not undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events of
circumstances after the date of such statements.

                                      1


                                    PART I

Item 1. Description of Business.

General

Michigan Heritage Bancorp, Inc. (the "Company") was incorporated in 1989 as a
Michigan corporation and was inactive from the time of its formation until
November 1996. Michigan Heritage Bank, the Company's wholly-owned subsidiary
(the "Bank"), is a Michigan banking corporation with depository accounts
insured by the Bank Insurance Fund of the Federal Deposit Insurance
Corporation. The Bank provides a range of commercial and consumer banking
services primarily in Oakland and western Wayne counties including Novi,
Farmington, Farmington Hills, Livonia, Northville, Northville Township, and
Troy.

The Bank's present lending activities are primarily focused on commercial
equipment financing and commercial term loans to businesses secured by the
assets of the borrower. The Bank originates loans primarily through third
party referral sources such as leasing companies and mortgage brokers, many
of whom are known to management. The bank's retail strategy focuses on
single-family mortgage loans, home equity loans, and, to a lesser extent,
other forms of consumer lending. The Bank offers ATM cards, competitive rates
on various deposit products and other attractive products and services. Those
services reflect the Bank's intended strategy of serving small- to
medium-sized businesses and individual customers in its market area.

The Bank's main office is currently located along the rapidly developing
Haggerty road corridor in the southeast corner of Novi, Michigan. The Bank
leases and has renovated a former bank branch building. The communities that
comprise the Bank's primary service area are Novi, Farmington, Farmington
Hills, Livonia, Northville, Northville Township, and Troy. Management
believes these communities have an expanding and diverse economic base, which
includes a wide range of small- to medium-sized businesses engaged in
manufacturing, high technology research and development, computer services
and retail. The Bank's secondary service area is the remaining portions of
Oakland County and Wayne County not included within the primary service area.

In January 1999, the Company opened its second branch location in Troy,
Michigan. The branch office is leased with leasehold improvements of
approximately $80,000. Furniture and equipment purchased for the new location
is approximately $50,000.

The headquarters for both the Company and the Bank was relocated to the
northeast area of Farmington Hills in December 1999. Leasehold improvements,
furniture and equipment for the new headquarters were approximately $400,000.
The Bank entered into a 15 year lease at approximately $220,000 annual rent
net of rental income.

In January 2000, the Company opened its third branch on the first floor of
the Bank's new headquarters in Farmington Hills, Michigan. The branch office
located in the new building is leased with minimal leasehold improvements.
Furniture and equipment purchased for the new location is approximately
$24,000.


Lending

The Bank's lending activities include commercial equipment leases, direct
financing leases, commercial loans, commercial real estate loans, residential
mortgage loans, home equity loans, and consumer installment loans. The Bank
considers a loan impaired when it is probable that all interest and principal
will not be collected. For the period ended December 31, 1999, impaired loans
were $113,000 resulting from two commercial loan customers. Specific
allowances for impaired loans were $63,000 at year-end 1999. Management
believes the total specific allowances for impaired loans will adequately
provide for expected charge-offs for the two customers. Management is not
aware of any other potential problem loans which could have a material effect
on the Bank's operating results, liquidity, or capital resources.
Furthermore, except for the two customers above, management is not aware of
any other factors that

                                      2

it believes would cause future net loan charge-offs, in total and by loan
category, to significantly differ from those experienced by institutions of
similar size.

The following sets forth outstanding loan balances at December 31, 1999 and
1998, by category of loan.

                                            ($ in thousands)
                                        Amount as of December 31,
Type of Loan                                 1999     1998
------------                                 ----     ----
Commercial, financial and agricultural     $74,005   $75,968
Real estate--construction                      417         0
Real estate--mortgage                        6,334     4,454
Installment loans to individuals               166       137
Lease financing                                948     1,042
                                           -------   -------
           Total loans                     $81,870   $81,601

The Bank has made only domestic loans.

Allowance for Loan Losses
The following table summarizes changes in the allowance for loan and lease
losses arising from additions to the allowance which have been charged to
expense, selected ratios, and the allocation of the allowance for loan
losses.

                                                        ($ in thousands)
                                                    Amount as of December 31,
                                                         1999     1998
                                                         ----     ----

Average loans outstanding                              $82,523    $53,368
Total loans at year end                                 81,870     81,601
Allowance for loan losses at beginning of period         1,816        467
Provision charged to expense                             1,072      1,349
Loan charge-offs during the period                         969          0
Loan recoveries during the period                           68          0
Allowance for loan losses at end of year                 1,987      1,816
Ratio of net charge-offs during the period to
           average loans outstanding                      1.09%      --
Allowance for loan losses as a percentage
           of loans at period end                         2.43%      2.23%

Specific allowance for impaired loans                       63        820
Unallocated allowance                                    1,924        996
           Total allowance for loan losses               1,987      1,816

In each accounting period, the allowance for loan and lease losses is
adjusted by management to the amount necessary to maintain the allowance at
adequate levels. Through its credit department, management attempts to
allocate specific portions of the allowance for loan losses based on
specifically identifiable problem loans. Management's evaluation of the
allowance is further based on consideration of actual loss experience, the
present and prospective financial condition of borrowers, industry
concentrations within the portfolio and general economic conditions.

                                      3




The primary risk element considered by management with respect to each
installment and residential real estate loan is lack of timely payment.
Management has a reporting system that monitors past due loans and has
adopted policies to pursue its creditor's rights in order to preserve the
Bank's position. The primary risk elements with respect to commercial loans
are the financial condition of the borrower, the sufficiency of collateral,
and lack of timely payment. Management has a policy of requesting and
reviewing periodic financial statements from its commercial loan customers.
There can be no assurance that the Bank will not sustain losses in any given
period which could be substantial in relation to the size of the allowance
for loan and lease losses.

Deposits

The following summarizes certain information regarding deposits with the
Bank.

                                                ($ in thousands)
                                           For the Year Ended December 31,
                                             1999                  1998
                                       ------------------  -------------------
                                       Average             Average
Type of Deposit                        Amount   Rate Paid  Amount    Rate Paid
---------------                        -------  ---------  -------   ---------

Noninterest bearing demand deposits    $ 1,670     0.00%   $   753     0.00%
Interest bearing checking
           and money market deposits     8,001     4.50      5,632     4.85
Savings deposits                            36     2.78         66     3.03
Time deposits                           82,041     5.63     57,040     5.94
                                       -------     ----    -------     ----
           Total deposits              $91,748     5.43%   $63,491     5.77%

The Bank has no foreign banking offices.

Company Selected Financial Information

The following table contains selected financial information for the Company:

<TABLE>
<CAPTION>
                                                ($ in 000s execpt per share data)
                                          -------------------------------------------
For the years ended December 31,            1999          1998     1997          1996
                                          -------------------------------------------
<S>                                       <C>        <C>         <C>         <C>
Net interest income                       $  3,403   $  2,440    $   896     $    1
Net income                                $    475   $   (113)   $  (602)    $  (68)
Net income per fully diluted
   share of common stock                  $   0.36   $  (0.09)   $ (0.57)
Cash dividends declared per
   common share of stock                      --         --         --         --
Dividend payout ratio                         --         --         --         --
Total assets at year-end                  $108,887   $100,267    $51,438     $  244
Total stockholders' equity at year-end    $ 11,718   $ 10,041    $10,145     $  (68)
Total average assets                      $102,935   $ 74,321    $26,220     $  122
Total average stockholders' equity        $ 10,566   $ 10,358    $ 8,591     $  (34)
Return on average total assets                0.46%     (0.15)%    (2.30)%
Return on average stockholders' equity        4.50%     (1.09)%    (7.01)%
Average equity to average assets             10.26%     13.94%     32.77%
</TABLE>

                                      4

Supervision and Regulation

The Company is registered as a bank holding company and, as such, is subject
to the supervision of and regulation by the Federal Reserve Board under the
Bank Holding Company Act of 1956, as amended ("BHCA"). Under the BHCA, the
Company is subject to periodic examination by the Federal Reserve Board and
is required to file periodic reports of its operations and such additional
information as the Federal Reserve Board may require. The company is also
required to file periodic reports with, and otherwise comply with the rules
and regulations of the Securities and Exchange Commission under the federal
securities laws.

In accordance with Federal Reserve Board policy, the Company acts as a source
of financial strength to the Bank and is expected to commit resources to
support the Bank in circumstances where the Company might not do so absent
such policy. In addition, in certain circumstances, a Michigan state bank
having impaired capital may be required by the Commissioner of the Financial
Institutions Bureau of the State of Michigan (the "Commissioner") either to
restore the bank's capital by a special assessment upon its shareholders or
to initiate the liquidation of the bank.

The Bank is a Michigan banking corporation and its deposit accounts are
insured up to applicable limits by the Federal Deposit Insurance Corporation
(the "FDIC") under the Bank Insurance Fund. As a FDIC-insured,
Michigan-chartered bank, and a member of the Federal Reserve System, the Bank
is subject to the examination, supervision, reporting and enforcement
requirements of the Commissioner, as the chartering authority for Michigan
banks, and the Federal Reserve Board, as the Bank's primary federal
regulator. These agencies and federal and state law extensively regulate
various aspects of the banking business including, among other things,
permissible types and amounts of loans, investments and other activities,
capital adequacy, branching, interest rates on loans and on deposits, the
maintenance of non-interest bearing reserves on deposit accounts and the
safety and soundness of banking practices.

Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the
scope of business, investments, reserves against deposits, capital levels
relative to operations, lending activities and practices, the nature and
amount of collateral for loans, the establishment of branches, mergers,
consolidations and dividends. The system of supervision and regulation
applicable to the Company and the Bank establishes a comprehensive framework
for their respective operations and is intended primarily for the protection
of the FDIC deposit insurance funds, the depositors of the Bank and the
public, rather than shareholders of the Bank or the Company.

Federal law and regulations, including provisions added by the Federal
Deposit Insurance Corporation Improvement Act of 1991 and regulations
promulgated thereunder, establish supervisory standards applicable to the
operation, management and lending activities of the Bank, including internal
controls, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation and loan-to-value ratios for loans secured by real
property.

Employees

At December 31, 1999, the Company employed 27 people on a full-time basis
including two customer service representatives for the Bank's new Farmington
Hills branch opened in January 2000. Over the next 12 months the Bank expects
to add five full-time people: one full-time loan administrator, one full-time
credit manager, two full-time loan credit analysts, and one full-time
commercial loan officer. The bank also expects to add one part-time teller
during the year 2000.

Competition

The Company and the Bank face strong competition for deposits, loans and
other financial services from numerous Michigan and out-of-state banks,
thrifts, credit unions and other financial institutions as well as other
entities which provide financial services, including consumer finance
companies, securities brokerage firms, mortgage brokers

                                      5


equipment leasing companies, insurance companies, mutual funds, and other
lending sources and investment alternatives. Some of the financial
institutions and financial service organizations with which the Bank will
compete are not subject to the same degree of regulation as the Bank. Many of
the financial institutions aggressively compete for business in the Bank's
market areas. Many of these competitors have been in business for many years,
have established customer bases, have substantially higher lending limits
than the Bank, are larger and will be able to offer certain services that the
Bank does not expect to provide in the foreseeable future, including trust
services, and international banking services. In addition, most of these
entities have greater capital resources than the Bank which, among other
things, may allow them to price their services at levels more favorable to
the customer and to provide larger credit facilities than could the Bank.
Additionally, federal legislation regarding interstate branching and banking
and legislation affecting the cost of deposit insurance premiums may act to
increase competition in the future from larger out-of-state banks and thrift
institutions.

Item 2. Description of Properties

The Bank leases a 3,000 square foot building at 21211 Haggerty Road, Novi,
Michigan 48375 for use as its main banking office. The Company also used the
same building as its headquarters for the first eleven months of 1999. The
lease term extends until June 30, 2002, at an annual rent of $45,000. The
building was originally built in 1988 to be a bank branch and has one
drive-up window and three drive-up bays. The building has substantial on-site
parking. There is one entrance/exit on Haggerty Road as well as a rear exit
to Orchard Hill Place. Access to the main office is available to Oakland and
Wayne County residents by using I-275, I-96, I-696, and Grand River Avenue.

During 1999, the Bank also leased 2,700 square feet of office and inventory
storage space on a monthly basis for the accounting, human resource, and
commercial direct lending departments at Hamilton Building, 33045 Hamilton
Court, Farmington Hills, MI 48334. The annualized rent was $36,000. The
accounting, human resource, and commercial direct lending departments were
relocated to the Bank's new headquarters building in December 1999 at which
time the Hamilton Building lease was terminated.

The Bank opened its first branch in January 1999, with 1,500 square feet of
office space within a strip mall at 1917 East Big Beaver Road, Troy, MI
48083. The lease extends until January 18, 2004, at an annual rent of
$32,000. The branch has two teller windows, two customer service desks, a
mutual funds room, and a conference room.

The Bank signed a 15 year lease for approximately 10,000 square feet for a
new headquarters in Farmington Hills, Michigan which was moved into during
December 1999. The lease extends until June 30, 2014. Additional costs for
furniture, equipment and leasehold improvements for the new headquarters were
approximately $400,000. The annual rent net of expected rental income is
$220,000.

The Bank opened its third branch in January 2000 with 1,200 square feet of
office space on the first floor of the new headquarters building. The lease
extends until June 30, 2014, at an annual rent of $28,000. The branch has two
teller windows, two customer service desks, a mutual funds room, and a
conference room. There were minimal leasehold improvements for the branch.
Additional equipment for the branch was approximately $24,000.


Item 3. Legal Proceedings.

None

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

Not applicable.


                                      6


                                   PART II

Item 5. Market for Common Stock and Related Stockholder Matters.

The Company's common stock is traded in the over-the-counter market and
quotations are reported on the OTC Bulletin Board under the symbol "MHBC."
There were approximately 66 holders of record as of December 31, 1999.
Included among the 66 holders of record are investment firms with an
undetermined number of clients owning the Company's common stock. The Company
paid a 10% common stock dividend on June 15, 1998. There were no cash
dividends paid during 1999, 1998 or 1997.

The Company completed a rights offering to existing shareholders in October
1999. Up to 500,000 shares of common stock were offered for sale in order to
contribute additional capital to Michigan Heritage Bank. The shares were
offered for a limited period of time exclusively to shareholders of Michigan
Heritage Bancorp, Inc. at $6.00 per share. Shareholders were entitled to
purchase one share for each three shares they owned on July 14, 1999. The
common stock offering to existing shareholders began on July 30, 1999 and
ended on October 1, 1999. A total of 223,765 shares of common stock were sold
resulting in $1,248,000 in additional capital after payment of offering
expenses. The number of shares of common stock now outstanding after the
rights offering is 1,488,765.

The following sets forth the quarterly high and low bid price per share
during each of the four quarters in 1999, 1998 and 1997 (since the date of
the Company's public offering). These quotations reflect inter-dealer prices
without retail mark-up, mark-down or commission, and may not represent actual
transactions.

                                                High/Low
                                                --------
            1999     4th Quarter           $ 6.00  /  $ 3.13
                     3rd Quarter           $ 7.00  /  $ 5.00
                     2nd Quarter           $ 7.75  /  $ 5.75
                     1st Quarter           $ 9.88  /  $ 6.75

            1998     4th Quarter           $10.50  /  $ 8.00
                     3rd Quarter           $12.00  /  $ 9.00
                     2nd Quarter           $13.18  /  $12.00
                     1st Quarter           $13.18  /  $ 9.77

            1997     4th Quarter           $11.82  /  $ 9.09
                     3rd Quarter           $12.05  /  $ 8.41
                     2nd Quarter           $ 9.77  /  $ 8.41
                     1st Quarter           $ 9.77  /  $ 8.86



Item 6. Management's Discussion and Analysis of Financial Condition and
        Results of Operation.

The following discussion addresses material factors affecting the financial
condition and results of the Company. This discussion should be read in
conjunction with the audited financial statements, footnotes and supplemental
financial data presented elsewhere in this report.

The Company was in the development stage during 1996 and the first two months
and nine days of 1997. The Company completed an initial public offering of
common stock during February and March 1997. On March 10, 1997, Michigan
Heritage Bank opened for business. As of December 31, 1999, the Bank had been
operational almost 34 months and had completed its second full fiscal year of
operations.


                                      7


Results of Operation

The Company earned $475,000 in net profits for 1999, a $588,000 improvement
over 1998. The $588,000 improvement resulted primarily from earning asset
growth which netted an additional $1,240,000 in net interest income after
provision for loan losses. Also, other income increased $1,523,000 mostly due
to operating lease income, gain on sale of operating lease equipment, and
gains on loans sold. These increases to income were offset partially by a
$1,622,000 increase in operating expense due mostly to growth. Provision for
federal income taxes applicable to operating income increased $653,000. Also
in 1998, there was an additional expense of $100,000 before tax due to a
change in accounting principle. Quarterly net profits for 1999 were $114,000,
$120,000, $111,000, and $130,000 for the first, second, third, and fourth
quarters, respectively.

The Company earned its first monthly profit in January 1998, which was only
its 10th full month of operation. This quick breakeven result is attributable
directly to controlled growth of both deposit and loan portfolios coupled
with lower than average overhead expense. Quarterly profits for the first
three quarters of 1998 were $73,000 for the first quarter, $78,000 for the
second quarter, and $106,000 for the third quarter. The fourth quarter of
1998 incurred a $370,000 net loss due primarily to a pretax adjustment of
$795,000 ($525,000 net of tax) in additional provision for possible loan
losses due to a single customer that filed for protection under the
bankruptcy laws, which is not indicative of the overall loan portfolio, and a
pretax charge of $100,000 ($66,000 net of tax) in organizational costs
expensed due to a change in an accounting principle. As a result, the Company
reported a loss of only $113,000 for 1998 compared to a $602,000 loss for
1997, a $489,000 improvement over 1997.

Quarterly losses for 1997 were $81,000 for the first quarter (only 16
business days of operation), $247,000 for the second quarter, $170,000 for
the third quarter, and $104,000 for the fourth quarter.

For 1999, the return on average equity was 4.50% compared to -1.09% for 1998
and -7.01% for 1997. The return for average assets for 1999 was 0.46%
compared to -0.15% for 1998 and -2.30% for 1997. While there have been no
cash dividends paid to date, the Board of Directors declared and distributed
a 10% common stock dividend during the second quarter of 1998.

As of December 31, 1999, the Bank had reserves for possible loan losses of
2.43% of total loans outstanding. This reserve is, in management's opinion, a
conservative loan reserve position relative to the overall quality of the
loan portfolio. Specific allowances of $63,000 were allocated for impaired
loans classified by management of $113,000. In addition to reserves for loans
outstanding and specific reserves for impaired loans, there was $250,000 in
loan loss reserves allocated to loan customer Y2K issues. To date, no
customer Y2K issues have become apparent. In 1999, there were $901,000 net
loan charge-offs primarily due to a single customer situation. There were no
loan charge-offs during 1998 or 1997.

The Company's total assets at the end of 1999 amounted to $108,887,000
compared to $100,267,000 at the end of 1998, an increase of $8,620,000 or
8.6%. At year end, most of this increase in total assets was comprised of
short-term earning assets. This increase was primarily due to a $6,943,000
net increase in deposits, borrowed funds and other liabilities and a
$1,677,000 net increase in stockholders' equity resulting primarily from an
additional $1,248,000 net proceeds from the Company's rights offering of
common stock during 1999. The Company intends to deploy these proceeds in
lending activities during 2000. Proceeds from loans sold during 1999
primarily funded new loan growth during the same year. Loans outstanding at
year end 1999 and 1998 were $81,870,000 and $81,601,000, respectively.

The Bank's loan portfolio at the end of 1999 consisted of approximately 71%
discounted loans compared to 78% at the end of 1998, 10% direct commercial
loans compared to 9% for 1998, 3% commercial real estate compared to 2% for
1998, 7% lines of credit compared to 5% for 1998, 8% residential mortgages
and home equity loans compared to 5% for 1998, and 1% in direct financing
leases compared to 1% for 1998. Loans were funded primarily by deposits
consisting mostly of time deposits which represented over 85% of total
deposits at 1999 year-end compared to 88% of total deposits at 1998 year-end.
Additional loan information can be found elsewhere in this report in the
Notes to Consolidated Financial Statements.

                                      8

<PAGE>
The largest source of the Company's revenues is net interest income. Net
interest income is the spread between interest income on loans and
investments and interest expense on deposits and borrowed funds. Two
statistics used to measure net interest income are (1) net interest spread
and (2) net interest margin. Net interest spread is the difference between
the average yield on interest-earning assets and the average rate incurred on
interest-bearing liabilities. Net interest margin is expressed as net
interest income divided by average interest-earning assets. Net interest
margin is greater than net interest spread due to the interest income earned
on interest-earning assets funded by non-interest-bearing liabilities such as
non-interest bearing demand deposits, escrow accounts and stockholders'
equity.

The below table presents the Company's average balance sheets, net interest
spread and net interest margin for the three years ended December 31, 1999,
1998, and 1997. Net interest income for 1999 increased $963,000 or over 39%
to $3,403,000 as compared to $2,440,000 for 1998. The $2,404,000 net interest
income for 1998 increased $1,544,000 or over 172% compared to $896,000 for
1997.

<TABLE>
<CAPTION>
 Michigan Heritage Bancorp, Inc.
 Consolidated Average Balance Sheets and Analysis of Net Interest Income
 For the Years Ended December 31 (Taxable Equivalent Basis)
 ($000s)
                                                                1999                                    1998
                                                 ------------------------------------     ----------------------------------
                                                 Average                    Average        Average                 Average
                                                 Balance      Interest     Yield/Rate      Balance    Interest    Yield/Rate
-------------------------------------------------------------------------------------     ----------------------------------
<S>                                            <C>           <C>              <C>         <C>          <C>           <C>
Assets
      Interest bearing balances
        in other banks                         $   3,574     $    182         5.09%       $  2,743     $   146       5.32%
      Federal funds sold                           8,156          409         5.01           4,198         224       5.34
      Investment securities                        5,872          322         5.48          12,231         685       5.60
      Loans                                       82,523        7,473         9.06          53,368       5,051       9.46
                                               ---------     --------         ----        --------     -------       ----
          Total earning assets                   100,125        8,386         8.38          72,540       6,106       8.42

      Cash and due from banks                        811                                       558
      Allowance for loan losses                   (1,682)                                     (694)
      Operating lease equipment, net               1,831                                       858
      Other assets                                 1,850                                     1,059
                                               ---------                                  --------
            Total assets                       $ 102,935                                  $ 74,321
                                               =========                                  ========

Liabilities and Stockholders' Equity
      Interest on checking and
         Money market deposit accounts         $   8,001     $    360         4.50%       $  5,632     $   273       4.85%
      Savings  deposits                               36            1         2.78              66           2       3.03
      Other time deposits less than $100,000      60,059        3,362         5.60          40,253       2,393       5.94
      Time deposits $100,000 and greater          21,982        1,259         5.73          16,787         998       5.95
      Borrowed funds                                  14            1         5.25               5           0       5.25
                                               ---------     --------         ----        --------     -------       ----

          Total interest bearing liabilities      90,092        4,983         5.53          62,743       3,666       5.84
                                                             --------         ----                     -------       ----

      Other deposits, non-interest bearing         1,670                                       753
      Other liabilities                              607                                       467
      Stockholders' equity                        10,566                                    10,358
                                               ---------                                  --------
          Total liabilities and
            stockholders' equity               $ 102,935                                  $ 74,321
                                               =========                                  ========

Net interest income                                          $  3,403                                  $ 2,440
                                                             ========                                  =======

Net interest rate spread                                                      2.85%                                  2.58%
                                                                              ====                                   ====

Cost of earning assets                                                        4.98%                                  5.05%
                                                                              ====                                   ====

Net interest margin                                                           3.40%                                  3.37%
                                                                              ====                                   ====

Net interest-earning assets to
      interest-bearing liabilities                   111%                                      116%
                                               =========                                  ========

Net income after taxes                         $     475                                  $   (113)
                                               =========                                  ========

Return on equity                                    4.50%                                    (1.09)%
                                               =========                                  ========

Return on assets                                    0.46%                                    (0.15)%
                                               =========                                  ========

Dividend payout ratio                                -- %                                      -- %
                                               =========                                  ========

Equity to assets ratio                             10.26%                                    13.94%
                                               =========                                  ========

<CAPTION>
                                                               1997
                                                 ---------------------------------
                                                 Average                  Average
                                                 Balance    Interest   Yield/ Rate
----------------------------------------------------------------------------------
<S>                                            <C>          <C>           <C>
Assets
      Interest bearing balances
        in other banks                         $  1,734     $    103       5.94%
      Federal funds sold                          3,868          211       5.46
      Investment securities                       8,278          474       5.73
      Loans                                      11,206        1,132      10.10
                                               --------     --------      -----

          Total earning assets                   25,086        1,920       7.65

      Cash and due from banks                       676
      Allowance for loan losses                    (131)
      Operating lease equipment, net               --
      Other assets                                  589
                                               --------
            Total assets                       $ 26,220
                                               ========

Liabilities and Stockholders' Equity
      Interest on checking and
         Money market deposit accounts         $  1,236     $     61       4.94%
      Savings  deposits                             157            9       5.73
      Other time deposits less than $100,000     10,134          615       6.07
      Time deposits $100,000 and greater          5,570          339       6.09
      Borrowed funds                               --           --          --
                                               --------     --------      -----

          Total interest bearing liabilities     17,097        1,024       5.99
                                                            --------      -----

      Other deposits, non-interest bearing          291
      Other liabilities                             241
      Stockholders' equity                        8,591
                                               --------
          Total liabilities and
            stockholders' equity               $ 26,220
                                               ========

Net interest income                                         $    896
                                                            ========

Net interest rate spread                                                   1.66%
                                                                          =====

Cost of earning assets                                                     4.08%
                                                                          =====

Net interest margin                                                        3.57%
                                                                          =====

Net interest-earning assets to
      interest-bearing liabilities                  147%
                                               ========

Net income after taxes                         $   (602)
                                               ========

Return on equity                                  (7.01)%
                                               ========

Return on assets                                  (2.30)%
                                               ========

Dividend payout ratio                               -- %
                                               ========

Equity to assets ratio                            32.77%
                                               ========
</TABLE>


                                     9


An analysis of the Company's change in net interest income is presented in
the following table. The $963,000 net interest income increase in 1999
resulted primarily from a $1,057,000 increase due to increases in average
balances partially offset by a $94,000 decrease due to changes in both
yield/rate and mix. The $1,544,000 net interest income increase in 1998
resulted from a $1,840,000 increase due to increases in average balances
offset by a $296,000 decrease due to changes in both yield/rate and mix. The
$895,000 change in net interest income for 1997, the year the Bank began
operations, came primarily from a mix of both volume and yield/rate changes
as indicated. Loan fee income included in loan interest income was $276,000,
$189,000 and $82,000 for 1999, 1998 and 1997, respectively. Nonaccrual loans
had an insignificant effect on net interest income due to the average amount
of nonaccrual loans being insignificant for 1999 and 1998. There were no
nonaccrual loans for 1997.

<TABLE>
<CAPTION>

 Michigan Heritage Bancorp, Inc.
 Analysis of Net Interest Income Changes (Taxable Equivalent Basis)
 ($000s)
                                                        1999 Compared to 1998                   1998 Compared to 1997
                                               ---------------------------------------  ----------------------------------------
                                                               Volume &                                 Volume &
                                                              Yield/Rate                               Yield/Rate
                                                 Volume    Yield/Rate   Mix     Total     Volume    Yield/Rate    Mix    Total
--------------------------------------------------------------------------------------  ----------------------------------------
<S>                                             <C>        <C>         <C>     <C>       <C>          <C>       <C>      <C>
Increase (Decrease) in Interest Income
       Interest bearing balances in
         other banks                            $    44    $    (6)    $  (2)  $   36    $    60      $ (11)    $   (6)  $   43
       Federal funds sold                           211        (13)      (13)     185         18         (5)      --         13
       Taxable investment securities               (356)       (14)        7     (363)       226        (10)        (5)     211
       Loans                                      2,759       (218)     (119)   2,422      4,259        (71)      (269)   3,919
                                                -------    -------     -----   ------    -------      -----      -----   ------

             Total interest income change         2,658       (251)     (127)   2,280      4,563        (97)      (280)   4,186

Increase (Decrease) in Interest Expense
       Interest on checking and
          Money market deposit accounts             115        (20)       (8)      87        217         (1)        (4)     212
       Savings deposits                              (1)      --        --         (1)        (5)        (4)         2       (7)
       Other time deposits less than $100,000     1,177       (140)      (68)     969      1,828        (13)       (37)   1,778
       Time deposits $100,000 and greater           309        (37)      (11)     261        683         (8)       (16)     659
       Borrowed funds                                 1       --        --          1       --         --         --       --
                                                -------    -------     -----   ------    -------      -----      -----   ------
             Total interest expense change        1,601       (197)      (87)   1,317      2,723        (26)       (55)   2,642
                                                -------    -------     -----   ------    -------      -----      -----   ------
             Net interest income change         $ 1,057    $   (54)    $ (40)  $  963    $ 1,840      $ (71)     $(225)  $1,544
                                                =======    =======     =====   ======    =======      =====      =====   ======

<CAPTION>

 Michigan Heritage Bancorp, Inc.
 Analysis of Net Interest Income Changes (Taxable Equivalent Basis)
 ($000s)
                                                             1997 Compared to 1996
                                                    -----------------------------------------
                                                             Volume &
                                                             Yield/Rate
                                                    Volume   Yield/Rate     Mix         Total
-----------------------------------------------     -----------------------------------------
<S>                                                 <C>         <C>       <C>         <C>
Increase (Decrease) in Interest Income
       Interest bearing balances in
         other banks                                $    68     $  --     $    34     $   102
       Federal funds sold                              --          --         211         211
       Taxable investment securities                   --          --         474         474
       Loans                                           --          --       1,132       1,132
                                                    -------     -----     -------     -------
             Total interest income change                68        --       1,851       1,919


Increase (Decrease) in Interest Expense
       Interest on checking and
          Money market deposit accounts                --          --          61          61
       Savings deposits                                --          --           9           9
       Other time deposits less than $100,000          --          --         615         615
       Time deposits $100,000 and greater              --          --         339         339
       Borrowed funds                                  --          --        --          --
                                                    -------     -----     -------     -------
             Total interest expense change             --          --       1,024       1,024
                                                    -------     -----     -------     -------
             Net interest income change             $    68     $  --     $   827     $   895
                                                    =======     =====     =======     =======
</TABLE>



The net interest spread for 1999 of 2.85% increased 0.27% or 27 basis points
("bps") over the 2.58% spread for 1998. The net interest spread for 1998 of
2.58% increased 92 bps over the 1.66% spread for 1997. The 1999 average yield
on earning assets of 8.38% decreased 4 bps from 1998 primarily due to the
change in mix of earning assets and lower loan yields. The 1998 average yield
on earning assets of 8.42% increased 77 bps over 1997 primarily due to the
change in mix of earning assets. In 1998, higher yielding loans were on
average over 73% of total earning assets with the remaining balance in lower
yielding investment securities (see table below) and short term funds. In
1997, higher yielding loans on average were less than 45% of total earning
assets since the Bank had only been open since March 1997. The 5.53% cost of
interest-bearing liabilities for 1999 decreased 31 bps from 5.84% in 1998 due
primarily to higher costing time deposits (see table below) being repriced at
lower rates in 1999 and new time deposits being acquired at rates lower than
existing time deposits. The 5.84% cost of interest-bearing liabilities for
1998 decreased 15 bps from 5.99% in 1997 due primarily to higher costing time
deposits being repriced at lower rates in 1998. The cost of interest-bearing
liabilities for 1999, 1998 and 1997 reflect slightly higher market rates
being paid on time deposits. These higher rates were paid to attract and
retain depositors since the Bank is relatively new. The Bank also does not
yet have an extensive branch network, with corresponding higher operating
expenses, to draw deposits which creates additional pressure to pay higher
rates to attract deposits.

The following table summarizes on a consolidated basis, investments as of
December 31, 1999 and 1998. While the total amortized cost of securities
increased only $780,000 ($8,763,000 for year end 1999 compared to $7,983,000
for year end 1998), the overall yield at year end increased 104 basis points
(6.47% for 1999 compared to 5.43% for 1998). This increase was primarily due
to a majority of the portfolio being reinvested into longer term investments
during December 1999.

                                     10

<TABLE>
<CAPTION>

 Michigan Heritage Bancorp, Inc.
 Consolidated  Investment Maturity  Analysis
 As of December 31, 1999 and 1998 (Taxable Equivalent Basis)
 ($000s)

                                                                1999
                                           -------------------------------------------
                                                       Available for Sale (a)
                                           -------------------------------------------
                                            U.S. Treasury and
                                             other government
                                          agencies, municipals,
                                            corporations, and         Federal Reserve
                                             commercial paper          Bank Stock (b)
                                          ----------------------    ------------------
                                          Amortized                 Amortized
                                            Cost       Yield          Cost      Yield
                                          ----------------------    ------------------
<S>                                        <C>          <C>         <C>          <C>
Due in one year or less                    $2,491       6.19%       $  294       6.00%
Due after one year through five years       4,720       6.58          --         --
Due after five years through ten years        552       6.91          --         --
Due after ten years                         1,000       6.38          --         --
                                           ------     ------        ------     ------

      Total                                $8,763       6.47%       $  294       6.00%
                                           ======     ======        ======     ======
<CAPTION>
                                                                1998
                                           -------------------------------------------
                                                       Available for Sale (a)
                                           -------------------------------------------
                                            U.S. Treasury and
                                             other government        Federal Reserve
                                         agencies and corporations   Bank Stock (b)
                                         -------------------------  ------------------
                                           Amortized                Amortized
                                             Cost       Yield         Cost      Yield
                                           ---------------------    ------------------
<S>                                        <C>          <C>         <C>          <C>
Due in one year or less                    $4,971       5.23%       $  236       6.00%
Due after one year through five years        --         --            --         --
Due after five years through ten years      2,011       5.76          --         --
Due after ten years                         1,001       5.75          --         --
                                           ------     ------        ------     ------

      Total                                $7,983       5.43%       $  236       6.00%
                                           ======     ======        ======     ======
</TABLE>


 (a) There were no securities Held to Maturity as of December 31, 1999 and
     1998. Expected maturities will differ from contractual maturities.
     Issuers may have the right to call or prepay obligations.

 (b) The dividend yield on Federal Reserve Bank Stock has historically been
     6.00 percent.



                                     11


The below table highlights consolidated time certificates of deposit
maturities as of year end 1999.


 Michigan Heritage Bancorp, Inc.
 Consolidated  Time Certificates of Deposit Maturity Analysis
 As of December 31, 1999
 ($000s)

                                               Under      $100,000
                                              $100,000    and over
                                              --------    --------
Due in three months or less                   $10,685     $ 1,594
Due over three months through six months        6,713       3,642
Due over six months through twelve months      19,154       6,643
Due over twelve months                         23,180      10,547
                                              -------     -------

       Total                                  $59,732     $22,426
                                              =======     =======

The 3.40% net interest margin for 1999 is a 3 bps increase from the 3.37% net
interest margin for 1998. The 3.37% net interest margin for 1998 is a 20 bps
decrease from the 3.57% net interest margin for 1997. While the yield on
earning assets went down 4 bps in 1999, the cost of earning assets also went
down 7 bps, 4.98% in 1999 compared to 5.05% in 1998 primarily due to lower
costs of interest bearing liabilities in 1999 compared to 1998 and, to a
lesser extent, additional capital from the rights offering completed in
October 1999. While the yield on earning assets went up 77 bps in 1998, the
cost of earning assets went up 97 bps, 5.05% in 1998 compared to 4.08% in
1997. The increase in this cost is due to more interest-bearing liabilities
being used to fund interest-earning assets in 1998 than in 1997, when
non-interest bearing capital supported a greater percentage of earning
assets. The ratio of net interest-bearing assets to interest-bearing
liabilities fell from 147% in 1997 to 116% in 1998, due to the growth in both
assets and liabilities and the relatively smaller portions of total assets
represented by stockholders' equity.

Other non-interest income of $2,110,000 for 1999 increased $1,523,000 over
1998, due primarily to three areas. There was a $721,000 increase in rental
income from an operating lease acquired during 1998. There was also a
$500,000 gain on the above operating lease disposed of in December 1999. In
addition, there was a $264,000 gain on loans sold in 1999--there were no
loans sold in 1998. The remaining $38,000 increase in non-interest income for
1999 principally consisted of loan servicing fees, service charges on deposit
accounts and float income from an outside vendor for cashiers checks sold.
Other non-interest income of $587,000 for 1998 increased $581,000 over 1997,
primarily due to $515,000 in rental income from the operating lease acquired
during 1998. The remaining $72,000 of non-interest income for 1998
principally consisted of loan servicing fees, service charges on deposit
accounts and float income from an outside vendor for cashiers checks sold.
Non-interest income for 1997 was only $6,000.

Non-interest expense for 1999 was $3,678,000 which represents a $1,522,000
increase over 1998. Salaries and employee benefits increased $463,000 due to
a net of nine additional paid staff members being added during 1999, accrued
bonuses, and 401(k) match. Depreciation on property for the Bank's operating
lease acquired during 1998 increased $531,000. Occupancy and other equipment
expense increased by $159,000 due to additional office rental and equipment
depreciation expense. Professional fees increased by $134,000 mostly due to
additional legal fees. Other assets provision for 1999 was $120,000 net of
asset recoveries due to equipment repossessed and adjusted to market. There
was no repossessed equipment in 1998 or 1997. Data processing fees and
marketing expense went up $15,000 and $30,000, respectively, due to
additional volume. Remaining other expenses increased a net of $180,000
primarily due to additional Michigan single business tax, telephone expense,
FDIC assessment, office supplies and printing. Non-interest expense for 1998
was $2,056,000 which represents a $1,019,000 increase over 1997. Salaries and
employee benefits increased $389,000 due to six additional paid staff members
being added during 1998, accrued bonuses, and the implementation of a 401(k)
match. Depreciation on property for the Bank's operating lease was


                                     12


$443,000. Remaining other expenses increased a net of $187,000 primarily due
to the Bank being operational for its first full fiscal year in 1998.

Financial Condition

The Company's current cash projections indicate adequate cash balances. The
Bank has credit facilities with national lending institutions to add funding
capacity through overnight borrowings. Management has also established a
network of banks that can be used to sell or participate a portion of its
loan portfolio. These techniques allow the Bank to service its business
relationships and generate fee and servicing revenue.

The Company's liquidity remained adequate throughout 1999. As of December 31,
1999, the Bank had $18,188,000 in cash and cash equivalents including
$12,800,000 in federal funds sold and $4,148,000 in interest-bearing balances
in other banks which are immediately available assets. In addition,
investment securities with a total book value of $8,707,000 are all available
for sale. The Bank has also proven its ability to attract deposits and build
a stable deposit base from which to fund loans.

The Bank is subject to various regulatory capital requirements and as a "de
novo" or start-up bank, the minimum for the Tier 1 leverage ratio is 9.0%.
Normally, to be considered "adequately-capitalized" or "well-capitalized,"
the Bank must maintain a capital leverage ratio of 4.0% or 5.0%,
respectively. The Bank's Tier 1 leverage ratios were 10.2% and 9.1% at
December 31, 1999 and 1998, respectively. The Bank plans on maintaining at
least a 9.0% Tier 1 leverage ratio throughout its de novo status and to
remain well-capitalized thereafter.

Additional information concerning capital is found in Note 16, "Regulatory
Matters" in the Notes to Consolidated Financial Statements.

Year 2000 Disclosures

The Bank, being a new business, did not have major issues concerning older
systems to update. The recently acquired new systems were already primarily
Year 2000 ("Y2K") compliant. All applicable components of both the Company
and the Bank have been identified and addressed as to being Y2K compliant.
The Company, which has not experienced any Y2K issues to date, has been
operating normally with expected deposit levels.

The cost to become fully Y2K compliant for both the Company and the Bank was
not material. In addition, prior to the year 2000, the Bank communicated at
various times with both vendors and appropriate customers concerning Y2K
compliance to help ensure their smooth transition into the next century. As
of December 31, 1999, the Bank had accrued $250,000 in loan loss reserves to
address Y2K issues. To date, no Y2K issues with either vendors or customers
have become apparent. The Bank is not aware of any future Y2K significant
contingencies involving either vendors or customers.

There were no capital expenditures postponed in preparing for Y2K.


                                     13


Item 7. Financial Statements.

The consolidated financial statements of the Company and its subsidiary,
together with the report thereon of Plante & Moran, LLP, included in this
report under this item are listed under Item 13 of this report. No
supplementary financial statement schedules are required to be filed with
this report.

Item 8. Changes in and Disagreements With Accountants on Accounting and
        Financial Disclosure.

Not applicable.



                                     14


                                   PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
        Compliance with Section 16(a) of the Exchange Act.

The information required by this Item is included in the Proxy Statement
under the captions "Information about Directors and Nominees as Directors"
and "Section 16(a) Beneficial Ownership Reporting Compliance" and is hereby
incorporated herein by reference.

Item 10. Executive Compensation.

The information required by this Item is included in the Proxy Statement
under the caption "Compensation of Executive Officers" and is hereby
incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The information required by this Item is included in the Proxy Statement
under the caption "Stock Ownership of Certain Beneficial Owners and
Management" and is hereby incorporated herein by reference.

Item 12. Certain Relationships and Related Transactions.

The information required by this Item is included in the Proxy Statement
under the caption "Related Party Transactions" and is hereby incorporated
herein by reference.


Item 13. Exhibits, List and Reports on Form 8-K

(a) The following financial statements and financial statement schedules are
filed with this report:

                                                                        Page
                                                                       Number
                                                                       ------
1.         Financial Statements:
           Report of Independent Auditors                                17


           Consolidated Balance Sheets at December 31,
             1999 and 1998                                               18
           Consolidated Statements of Changes in
             Stockholders' Equity for the Years ended
             December 31, 1999, 1998 and 1997                            19


           Consolidated Statements of Operations for
             the years ended December 31, 1999, 1998 and
             1997                                                        20


           Consolidated Statements of Cash Flows for
             the years ended December 31, 1999, 1998 and
             1997                                                        21


           Notes to Consolidated Financial Statements                    22

2.         Financial Statement Schedules: None

(b)        Reports on Form 8-K.

           No Current Reports on Form 8-K were filed during the
           quarter ended December 31, 1999.


                                  15


(c)        The Exhibits required to be filed as part of this Form
           10-K are the following:

Exhibit
   No.     Description
-------    -----------
3.1        Restated Articles of Incorporation, as amended to date
           (previously filed as Exhibit No. 3.1 to the Registrant's
           Form SB-2 Registration Statement, File No. 333-17317, and
           incorporated herein by reference)

3.2        Bylaws, as amended to date (previously filed as Exhibit No.
           3.2 to the Registrant's Form SB-2 Registration Statement,
           File No. 333-17317, and incorporated herein by reference)

10.1*      Michigan Heritage Bancorp, Inc. 1997 Non-Employee Director
           Stock Option Plan (previously filed as Exhibit No. 10.1 to
           the Registrant's Form SB-2 Registration Statement, File No.
           333-17317, and incorporated herein by reference)

10.2*      Michigan Heritage Bancorp, Inc. 1997 Employee Stock Option
           Plan (previously filed as Exhibit No. 10.2 to the
           Registrant's Form SB-2 Registration Statement, File No.
           333-17317, and incorporated herein by reference)

10.3       Office Building Lease between Rontal Investment Company as
           Landlord and Michigan Heritage Bancorp, Inc. as Tenant for
           headquarters floor space located at 28300 Orchard Lake
           Road, Suite 200, Farmington Hills, Michigan (filed
           herewith)

11         Computation of Per Share Earnings (filed herewith)

27         Financial Data Schedule (EDGAR filing only) (filed herewith)

 ----------------
* Management contract or compensatory plan or arrangement.




                                     16






                         Independent Auditor's Report



To the Board of Directors and Stockholders
Michigan Heritage Bancorp, Inc.


We have audited the consolidated balance sheet of Michigan Heritage Bancorp,
Inc. and subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of changes in stockholders' equity, operations and
cash flows for each year in the three-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these consolidated 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 audits 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 above
present fairly, in all material respects, the consolidated financial position
of Michigan Heritage Bancorp, Inc. and subsidiary as of December 31, 1999 and
1998 and the consolidated results of their operations and their cash flows
for each year in the three-year period ended December 31, 1999, in conformity
with generally accepted accounting principles.



                                                      /s/ Plante & Moran, LLP



Bloomfield Hills, Michigan
January 19, 2000




                                     17





Michigan Heritage Bancorp, Inc.
-----------------------------------------------------------------------------
                                                   Consolidated Balance Sheet
                                        (000s omitted, except per share data)

<TABLE>
<CAPTION>
                                                                  December 31
                                                            ----------------------
                                                               1999         1998
                                                               ----         ----
<S>                                                         <C>          <C>
                                    Assets

Cash and Cash Equivalents
  Cash and due from banks                                   $   1,240    $     277
  Interest-bearing deposits with other banks                    4,148        3,781
  Federal funds sold                                           12,800        4,200
                                                            ---------    ---------

        Total cash and cash equivalents                        18,188        8,258

Securities Available for Sale (Note 2)                          8,707        7,997

Federal Reserve Bank Stock - At cost                              294          236

Loans (Note 3)
  Commercial                                                   74,005       75,968
  Direct financing leases (Note 5)                                948        1,042
  Real estate                                                   5,094        3,444
  Installment                                                     166          137
  Home equity                                                   1,657        1,010
                                                            ---------    ---------
        Total loans                                            81,870       81,601

  Less allowance for loan losses (Note 4)                      (1,987)      (1,816)
                                                            ---------    ---------
        Net loans                                              79,883       79,785

Bank Premises and Equipment (Note 6)                              763          453
Property on Operating Lease (Note 7)                               --        2,332
Deferred Income Taxes (Note 9)                                    464          590
Interest Receivable and Other Assets                              588          616
                                                            ---------    ---------
        Total assets                                        $ 108,887    $ 100,267
                                                            =========    =========

                     Liabilities and Stockholders' Equity

Liabilities
  Deposits (Note 8):
    Interest-bearing                                        $  92,863    $  86,612
    Noninterest-bearing                                         3,091        1,042
                                                            ---------    ---------
        Total deposits                                         95,954       87,654

  Short-term borrowings                                            --        1,750
  Interest payable and other liabilities                        1,215          822
                                                            ---------    ---------
        Total liabilities                                      97,169       90,226

Stockholders' Equity
  Preferred stock - No par value:
    Authorized - 500,000 shares
    Issued and outstanding - None                                  --           --
  Common stock - No par value (Note 13):
    Authorized - 4,500,000 shares
    Issued and outstanding - 1,488,765 shares in 1999
      and 1,265,000 shares in 1998                             13,730       12,482
  Accumulated deficit                                          (1,975)      (2,450)
  Accumulated other comprehensive income (loss)                   (37)           9
                                                            ---------    ---------
        Total stockholders' equity                             11,718       10,041
                                                            ---------    ---------
        Total liabilities and stockholders' equity          $ 108,887    $ 100,267
                                                            =========    =========
<FN>
See Notes to Consolidated
     Financial Statements.
</TABLE>

                                     18





Michigan Heritage Bancorp, Inc.
-----------------------------------------------------------------------------
                    Consolidated Statement of Changes in Stockholders' Equity
                                        (000s omitted, except per share data)

<TABLE>
<CAPTION>
                                                                                 Accumulated
                                         Common                                      Other          Total
                                         Shares       Capital      Accumulated   Comprehensive   Stockholders'
                                      Outstanding      Stock         Deficit      Income(Loss)      Equity
                                      -----------     -------      -----------   --------------  -------------
<S>                                   <C>            <C>            <C>            <C>            <C>
Balance - January 1, 1997                      1     $       --     $      (68)    $       --     $      (68)
Public stock offering                  1,150,000         11,500             --             --         11,500
Retirement of initial share                   (1)            --             --             --             --
Stock offering costs                          --           (685)            --             --           (685)
Comprehensive loss - Net loss                 --             --           (602)            --           (602)
                                      ----------     ----------     ----------     ----------     ----------
Balance - December 31, 1997            1,150,000         10,815           (670)            --         10,145
Comprehensive loss:
  Net loss                                    --             --           (113)            --           (113)
  Change in net unrealized gain
    on securities available for
    sale, net of tax effect of $5             --             --             --              9              9
                                                                                                  ----------
        Total comprehensive loss                                                                        (104)

Stock dividend (Note 13)                 115,000          1,667         (1,667)            --             --
                                      ----------     ----------     ----------     ----------     ----------
Balance - December 31, 1998            1,265,000         12,482         (2,450)             9         10,041

Comprehensive income:
  Net income                                  --             --            475             --            475
  Change in net unrealized loss
    on securities available for
    sale, net of tax effect of $24            --             --             --            (46)           (46)
                                                                                                  ----------
Total comprehensive income                                                                               429

Issuance of common stock                 223,765          1,248             --             --          1,248
                                      ----------     ----------     ----------     ----------     ----------
Balance - December 31, 1999            1,488,765     $   13,730     $   (1,975)    $      (37)    $   11,718
                                      ==========     ==========     ==========     ==========     ==========
<FN>
See Notes to Consolidated
     Financial Statements.
</TABLE>

                                      19



Michigan Heritage Bancorp, Inc.
-----------------------------------------------------------------------------
                                         Consolidated Statement of Operations
                                        (000s omitted, except per share data)

<TABLE>
<CAPTION>
                                                                 Year Ended December 31
                                                            -------------------------------
                                                             1999        1998        1997
                                                             ----        ----        ----
<S>                                                          <C>        <C>         <C>
Interest Income
  Interest and fees on loans                                 $ 7,403    $ 5,051     $ 1,132
  Interest and dividends on investments - Taxable                321        685         474
  Interest on tax-exempt securities                                1         --          --
  Interest on federal funds sold                                 409        224         211
  Interest on deposits with other banks                          180        146         103
  Interest on direct financing leases                             72         --          --
                                                             -------    -------     -------
        Total interest income                                  8,386      6,106       1,920

Interest Expense - Interest on deposits                        4,983      3,666       1,024
                                                             -------    -------     -------
Interest Income - Before provision for loan losses             3,403      2,440         896

Provision for Loan Losses (Note 4)                             1,072      1,349         467
                                                             -------    -------     -------
Net Interest Income                                            2,331      1,091         429

Other Income
  Service charges on deposit accounts                            110         72           6
  Operating lease rental income (Note 7)                       1,236        515          --
  Gain on sale of loans                                          264         --          --
  Gain on sale of property on operating lease (Note 7)           500         --          --
                                                             -------    -------     -------

        Total other income                                     2,110        587           6

Other Expenses
  Salaries and employee benefits                               1,373        910         512
  Occupancy of bank premises (Note 10)                           182         82          73
  Processing                                                      60         45          26
  Marketing                                                      145        115         112
  Equipment expense                                              177        118          86
  Depreciation of property on operating lease                    974        443          --
  Professional fees                                              289        155          72
  Amortization                                                    --          4          78
  Other assets provision                                         120         --          --
  Other expenses                                                 358        184          78
                                                             -------    -------     -------
        Total other expenses                                   3,678      2,056       1,037
                                                             -------    -------     -------
Income (Loss) - Before income taxes and cumulative effect
  of change in accounting principle                              763       (378)       (602)

Income Tax Expense (Benefit) (Note 9)                            288       (331)         --
                                                             -------    -------     -------
Net Income (Loss) - Before cumulative effect of
  change in accounting principle                                 475        (47)       (602)
Cumulative Effect of Expensing Organizational Costs -
  Net of tax benefit of $34                                       --        (66)         --
                                                             -------    -------     -------
Net Income (Loss)                                            $   475    $  (113)    $  (602)
                                                             =======    =======     =======
Basic Earnings (Loss) per Share (Note 18)                    $  0.36    $ (0.09)    $ (0.57)
                                                             =======    =======     =======
Diluted Earnings (Loss) per Share (Note 18)                  $  0.36    $ (0.09)    $ (0.57)
                                                             =======    =======     =======
<FN>
See Notes to Consolidated
     Financial Statements.
</TABLE>

                                      20




Michigan Heritage Bancorp, Inc.
-----------------------------------------------------------------------------
                                         Consolidated Statement of Cash Flows
                                        (000s omitted, except per share data)

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31
                                                                               -----------------------------------
                                                                                  1999         1998         1997
                                                                                  ----         ----         ----
<S>                                                                           <C>          <C>          <C>
Cash Flows from Operating Activities
  Net income (loss)                                                           $    475     $   (113)    $   (602)
  Adjustments to reconcile net income (loss) to net cash from
    operating activities:
      Depreciation and amortization                                              1,139          545           73
      Provision for loan losses                                                  1,072        1,349          467
      Gain on sale of operating lease equipment                                   (500)          --           --
      Deferred income taxes                                                        150         (580)          --
      Cumulative effect of change in accounting principle                           --           66           --
      Amortization and accretion of securities                                    (139)         (83)        (253)
      Changes in assets and liabilities:
        (Increase) decrease in accrued interest receivable
          and other assets                                                          28         (229)        (324)
        Increase in accrued interest payable and other liabilities                 393          257          508
                                                                              --------     --------     --------
              Net cash provided by (used in) operating activities                2,618        1,212         (131)

Cash Flows from Investing Activities
  Proceeds from maturities of available-for-sale securities                     23,000       16,000           --
  Purchase of available-for-sale securities                                    (23,641)     (18,935)      (5,236)
  Proceeds from maturities of held-to-maturity securities                           --        8,600        7,600
  Purchase of held-to-maturity securities                                           --           --      (15,912)
  Purchase of federal reserve stock                                                (58)          --           --
  Increase in loans                                                             (1,170)     (48,996)     (32,605)
  Purchase of operating lease equipment                                             --       (2,775)          --
  Proceeds from sales of operating lease equipment                               1,858           --           --
  Premises and equipment expenditures                                             (475)        (171)        (424)
                                                                              --------     --------     --------
              Net cash used in investing activities                               (486)     (46,277)     (46,577)

Cash Flows from Financing Activities
  Net increase in interest-bearing and noninterest-bearing demand accounts       3,953        7,448        2,395
  Net increase in time certificates                                              4,347       39,478       38,333
  Proceeds from short-term borrowings                                               --        1,750           --
  Payments on short-term borrowings                                             (1,750)          --           --
  Proceeds from related party notes payable                                         --           --           10
  Payments on related party notes payable                                           --           --         (265)
  Proceeds from public stock offering                                            1,248           --       10,815
                                                                              --------     --------     --------
              Net cash provided by financing activities                          7,798       48,676       51,288
                                                                              --------     --------     --------
Net Increase in Cash and Cash Equivalents                                        9,930        3,611        4,580

Cash and Cash Equivalents - Beginning of year                                    8,258        4,647           67
                                                                              --------     --------     --------
Cash and Cash Equivalents - End of year                                       $ 18,188     $  8,258     $  4,647
                                                                              ========     ========     ========
Supplemental Cash Flow and Noncash Information
  Cash paid for:
    Interest                                                                  $  4,874     $  3,656     $    642
    Income taxes                                                                    90          230           --
  Stock dividend (Note 13)                                                          --        1,667           --
<FN>
See Notes to Consolidated
     Financial Statements.
</TABLE>


                                      21





Michigan Heritage Bancorp, Inc.
-----------------------------------------------------------------------------
                                   Notes to Consolidated Financial Statements
                                                   December 31, 1999 and 1998


Note 1 - Summary of Significant Accounting Policies

                 Organization - Michigan Heritage Bancorp, Inc. (the
                 "Corporation") was incorporated in 1989, but remained
                 dormant until 1996. The Corporation became active to operate
                 a new bank, Michigan Heritage Bank (the "Bank") in Novi,
                 Michigan. The Corporation raised funds through a public
                 stock offering in February 1997 and began operations in
                 March 1997.

                 Basis of Presentation - The accounting and reporting
                 policies of Michigan Heritage Bancorp, Inc. and its
                 subsidiary conform to generally accepted accounting
                 principles. Management is required to make estimates and
                 assumptions that affect the amounts reported in the
                 consolidated financial statements and accompanying notes.
                 Actual results could differ from those estimates and
                 assumptions. The 000s have been omitted in tabular
                 presentations.

                 Principles of Consolidation - The consolidated financial
                 statements include the accounts of Michigan Heritage
                 Bancorp, Inc. and its wholly owned subsidiary, Michigan
                 Heritage Bank. All significant intercompany accounts and
                 transactions have been eliminated upon consolidation.

                 Nature of Operations - Michigan Heritage Bank conducts
                 full-service commercial and consumer banking and provides
                 other financial products and services through its main
                 office to communities in Wayne and Oakland counties. The
                 Bank has a lending concentration to companies who operate
                 hospitals. Loans to these companies were 15 percent and 18
                 percent of total loans at December 31, 1999 and 1998,
                 respectively.

                 Cash Equivalents - Cash equivalents include cash on hand and
                 amounts due from banks.

                 Securities - Securities are classified as held to maturity
                 when management has the intent and ability to hold to
                 maturity. Held-to-maturity securities are reported at
                 amortized cost. All other securities are classified as
                 available-for-sale securities and are reported at fair
                 value, with unrealized gains and losses, net of related
                 deferred income taxes, included in other comprehensive
                 income in stockholders' equity.

                 Loan Interest and Fee Income - Loans are generally reported
                 at the principal amount outstanding. Interest on loans is
                 accrued and credited to income based on the principal amount
                 outstanding. The accrual of interest on loans is
                 discontinued when, in the opinion of management, there is an
                 indication that the borrower may be unable to meet payments
                 as they become due. Upon such discontinuance, all unpaid
                 interest accrued is reversed. Interest accruals are
                 generally resumed when all delinquent principal and/or
                 interest has been brought current or the loan becomes both
                 well-secured and in the process of collection.



                                      22




Note 1 - Summary of Significant Accounting Policies (Continued)

                 Lease Financing - The Bank uses the finance method of
                 accounting for direct lease contracts. Under this method of
                 accounting, a receivable is recorded for the present value
                 of lease payments due and estimated residual values. Lease
                 income, represented by the excess of the total contract
                 receivable plus estimated equipment residual value over the
                 cost of the equipment, is recorded over the terms of the
                 lease at a level rate of return on the unrecovered net
                 investment.

                 Operating Lease - Lease income is recognized straight-line
                 over the term of the lease as payments are due. Depreciation
                 on leased assets is computed using the straight-line method
                 over the lease term to the Bank's estimate of the residual
                 value of the property at the end of the lease.

                 Allowance for Possible Loan Losses - The allowance for
                 possible loan losses is maintained at a level considered by
                 management to be adequate to absorb losses inherent in
                 existing loans and loan commitments. The adequacy of the
                 allowance is based on evaluations that take into
                 consideration such factors as prior loss experience, changes
                 in the nature and volume of the portfolio, overall portfolio
                 quality, loan concentrations, specific impaired or problem
                 loans and commitments, and current economic conditions that
                 may affect the borrower's ability to pay.

                 Premises and Equipment - Premises and equipment are stated
                 at cost, less accumulated depreciation and amortization.
                 Depreciation, computed on the straight-line method, is
                 charged to operations over the useful lives of the
                 properties. Leasehold improvements are amortized over the
                 terms of their respective leases or the estimated useful
                 lives of the improvements, whichever is shorter.

                 Short-term Borrowings - The Bank includes federal funds
                 purchased in short-term borrowings. Federal funds purchased
                 generally mature in one to four days.

                 Earnings per Share - Earnings per share is based on the
                 weighted average number of shares outstanding in each period
                 and is retroactively adjusted for stock dividends. Fully
                 diluted earnings per share are based on weighted average
                 shares outstanding assuming the exercise of the dilutive
                 stock options. The effects of unexercised stock options in
                 1999, 1998 and 1997 are not dilutive and have not been
                 considered.


                                      23




Note 1 - Summary of Significant Accounting Policies (Continued)

                 Stock Options - The Corporation has two stock option plans
                 (see Note 11). Options granted are accounted for using the
                 intrinsic value method, under which compensation expense is
                 recorded at the amount by which the market price of the
                 underlying stock at the grant date exceeds the exercise
                 price of an option. Under the Corporation's plans, the
                 exercise price on all of the options granted equals or
                 exceeds the fair value of the stock at the grant date.
                 Accordingly, no compensation cost is recorded as a result of
                 stock options awarded under the plans.

                 Other Comprehensive Income (Loss) - Accounting principles
                 generally require that recognized revenue, expenses, gains
                 and losses be included in net income. Certain changes in
                 assets and liabilities, however, such as unrealized gains
                 and losses on available-for-sale securities, along with net
                 income, are reported as a direct adjustment to the equity
                 section of the balance sheet. Such items, along with net
                 income, are components of comprehensive income. Accumulated
                 other comprehensive income (loss) at December 31, 1999 and
                 1998 is comprised solely of unrealized gains (losses) on
                 available-for-sale securities, net of tax expense (benefit)
                 of ($24,000) and $5,000, respectively.

                 Accounting Change - In the fourth quarter of the year ended
                 December 31, 1998, the Corporation adopted Statement of
                 Position (SOP) 98-5, Reporting on the Costs of Start-up
                 Activities. This SOP requires that the costs of start-up
                 activities, including organization costs, should be expensed
                 as incurred. The adoption of this SOP resulted in the
                 Corporation recording a pretax charge of $100,000 and is
                 reflected as a reduction in other assets.

                 Reclassifications - Certain prior year amounts have been
                 reclassified to conform to the current year presentation.

                 Recent Accounting Pronouncements - In June 1998, Statement
                 of Financial Accounting Standards No. 133, Accounting for
                 Derivative Instruments and Hedging Activities ("SFAS 133"),
                 was issued. SFAS 133 requires all derivative instruments to
                 be recorded on the balance sheet at estimated fair value.
                 Changes in the fair value of derivative instruments are to
                 be recorded each period either in current earnings or other
                 comprehensive income, depending on whether a derivative is
                 designated as part of a hedge transaction and, if it is, on
                 the type of hedge transaction. SFAS 133 is effective for the
                 year 2000. The Corporation is currently evaluating the
                 impact of SFAS 133; at present, the Corporation does not
                 believe it will have a material effect on the consolidated
                 financial position or results of operations.


                                      24




Note 2 - Securities

                 The amortized cost and estimated market value of investment
                 securities are as follows:

<TABLE>
<CAPTION>
                                                        1999
                                   -------------------------------------------------
                                                   Gross        Gross      Estimated
                                   Amortized     Unrealized   Unrealized     Market
                                      Cost          Gains       Losses       Value
                                   ---------     ----------   ----------   ---------
<S>                                  <C>         <C>             <C>         <C>
Available-for-sale securities:
  U.S. Treasury securities and
    obligations of U.S.
    government corporations
    and agencies                     $6,229      $       --      $   52      $6,177

  Municipal notes                     1,032              --           3       1,029

  Corporate bonds                     1,502              --           1       1,501
                                     ------      ----------      ------      ------
        Total                        $8,763      $       --      $   56      $8,707
                                     ======      ==========      ======      ======
<CAPTION>
                                                          1998
                                    -------------------------------------------------
                                                    Gross        Gross      Estimated
                                    Amortized     Unrealized   Unrealized     Market
                                       Cost          Gains       Losses       Value
                                    ---------     ----------   ----------   ---------
<S>                                  <C>         <C>             <C>         <C>
Available-for-sale securities -
  U.S. Treasury securities and
    obligations of U.S.
    government corporations
    and agencies                     $7,983      $       22      $    8      $7,997
                                     ======      ==========      ======      ======
</TABLE>


                                     25





Note 2 - Securities (Continued)

                 The amortized cost and estimated market value of securities
                 at December 31, 1999, by contractual maturity, are shown
                 below. Expected maturities will differ from contractual
                 maturities. Issuers may have the right to call or prepay
                 obligations with or without call or prepayment penalties.


                                            Available-for-Sale
                                          -----------------------
                                          Amortized   Estimated
                                             Cost    Market Value
                                          ---------  ------------

Due in one year or less                     $2,491      $2,489
Due after one year through five years        4,720       4,714
Due after five years through ten years         552         549
Due after ten years                          1,000         955
                                            ------      ------
        Total                               $8,763      $8,707
                                            ======      ======

                 Securities having a carrying and market value of $2,937,000
                 and $2,937,000, respectively, were pledged at December 31,
                 1999 for purposes required by law.


Note 3 - Loans

                 No directors or executive officers of the Corporation were
                 loan customers of the subsidiary bank during 1999 and 1998.

                 Final loan maturities and rate sensitivity of the loan
                 portfolio at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                    Within One  One to Five   After Five
                                       Year         Years        Years        Total
                                    ----------  -----------   ----------      -----
<S>                                   <C>          <C>          <C>          <C>
Commercial                            $32,389      $41,616      $   --       $74,005
Direct financing lease                    102          846          --           948
Real estate                             2,476        2,618          --         5,094
Installment                                77           89          --           166
Home equity                             1,117          540          --         1,657
                                      -------      -------      ------       -------
        Total                         $36,161      $45,709      $   --       $81,870
                                      =======      =======      ======       =======

Loans at fixed interest rates         $26,221      $44,469      $   --       $70,690
Loans at variable interest rates        9,940        1,240          --        11,180
                                      -------      -------      ------       -------
        Total                         $36,161      $45,709      $   --       $81,870
                                      =======      =======      ======       =======
</TABLE>



                                     26



Note 4 - Allowance for Possible Loan Losses

                 A summary of the activity in the allowance for possible loan
                 losses (ALL) is as follows:

                                        1999            1998
                                      -------         -------

Balance - Beginning of year           $ 1,816         $   467

Provision charged to operations         1,072           1,349
Loan losses                              (969)             --
Loan loss recoveries                       68              --
                                      -------         -------
Balance - End of year                 $ 1,987         $ 1,816
                                      =======         =======
As a percent of total loans              2.43%           2.23%
                                      =======         =======

                 The Corporation considers a loan impaired when it is
                 probable that all interest and principal will not be
                 collected in accordance with the contractual terms of the
                 loan agreement. Consistent with this definition, all
                 nonaccrual and reduced rate loans (with the exception of
                 residential mortgages and consumer loans) are considered
                 impaired.

                 The recorded investment in impaired loans was $113,000 and
                 $2,096,000 at December 31, 1999 and 1998, respectively. The
                 average recorded investment in impaired loans during 1999
                 was $810,000. The average recorded investment in impaired
                 loans during 1998 was insignificant. Included in the
                 impaired loan total were $100,000 ($2,096,000 in 1998) of
                 impaired loans for which the specific allowance for possible
                 loan losses was $50,000 and $820,000 at December 31, 1999
                 and 1998, respectively.

Note 5 - Direct Financing Leases

                 The following lists the components of the net investment in
                 direct financing leases:


                                            1999           1998
                                          -------        -------

Minimum lease payments receivable         $   998        $ 1,164
Estimated residual values of leased
  property (unguaranteed)                     211            211
Less unearned income                         (261)          (333)
                                          -------        -------
        Net investment in direct
          financing leases                $   948        $ 1,042
                                          =======        =======


                                     27





Note 5 - Direct Financing Leases (Continued)

                 The following is a schedule by years of minimum future
                 rentals on direct financing leases as of December 31, 1999:

                 2000                              $ 166
                 2001                                166
                 2002                                166
                 2003                                166
                 2004                                166
               Thereafter                            168
                                                   -----
                     Total                         $ 998
                                                   =====

Note 6 - Bank Premises and Equipment

                 Bank premises and equipment at December 31, 1999 and 1998
                 consisted of the following:

                                     1999         1998
                                    ------       ------

Buildings and improvements          $  174       $   42
Furniture and equipment                929          586
                                    ------       ------
        Total                        1,103          628

Less accumulated depreciation          340          175
                                    ------       ------
        Net carrying amount         $  763       $  453
                                    ======       ======

Note 7 - Property on Operating Lease

                 The Bank leased equipment to a customer under an operating
                 lease in 1998. The lease was terminated in December 1999 and
                 the equipment was sold to the customer.


                                     28


Note 8 - Deposits

                 The following is a summary of the distribution of deposits
                 at December 31, 1999 and 1998:

                                       1999          1998
                                     -------       -------
Noninterest-bearing - Demand         $ 3,091       $ 1,042
                                     =======       =======
Interest-bearing:
  NOW accounts                       $ 4,884       $ 6,022
  Savings                                 12            10
  Money market demand                  5,809         2,769
  Time:
    $100,000 and over                 22,426        23,769
    Under $100,000                    59,732        54,042
                                     -------       -------
        Total interest-bearing       $92,863       $86,612
                                     =======       =======

                 The remaining maturities of time deposits at December 31,
                 1999 are as follows:

                     Under       $100,000
                   $100,000      and Over
                   --------      --------
2000                $36,552       $11,879
2001                 18,747         6,894
2002                  3,184         1,274
2003                     --         2,180
2004                  1,249           199
                    -------       -------
        Total       $59,732       $22,426
                    =======       =======


                                     29




Note 9 - Income Taxes

                 Michigan Heritage Bancorp, Inc. and its subsidiary file a
                 consolidated federal income tax return. The following is a
                 summary of the provision for income taxes for the years
                 ended December 31:

                                                  1999        1998       1997
                                                 -----       -----       ----

Current                                          $ 138       $ 230       $ --
Deferred (credit)                                  150        (595)        --
                                                 -----       -----       ----
        Total income tax expense (benefit)         288        (365)        --

Less amount allocated to cumulative effect          --          34         --
                                                 -----       -----       ----
        Net income tax expense (benefit)         $ 288       $(331)      $ --
                                                 =====       =====       ====

                 The following is a reconciliation of the statutory federal
                 income tax expense (benefit) to the effective tax expense
                 (benefit) for the years ended December 31:

                                               1999       1998        1997
                                              -----      -----       -----

Income tax at statutory rate                  $ 259      $(129)      $(204)
Change in the valuation allowance                --       (225)        204
Other                                            29         23          --
                                              -----      -----       -----
        Net income tax expense (benefit)      $ 288      $(331)      $  --
                                              =====      =====       =====

                 Deferred income taxes are provided for the temporary
                 differences between the financial reporting bases and the
                 tax bases of the Corporation's assets and liabilities. The
                 source of such temporary differences and the resulting net
                 tax expense (benefit) are as follows:

                                                  1999      1998       1997
                                                 -----     -----      -----

Net operating loss carryforward                  $  --     $  62      $ (62)
Provision for loan loss                             19      (444)      (145)
Start-up costs                                       8         8        (13)
Organization costs                                   8       (27)        --
Accretion                                            6        (3)        14
Lease financing                                     34        50         --
Depreciation                                        40        --         --
Other                                               35       (16)         2
Increase (decrease) in valuation allowance          --      (225)       204
                                                 -----     -----      -----
        Total deferred tax expense (benefit)     $ 150     $(595)     $  --
                                                 =====     =====      =====


                                     30



Note  9  - Income Taxes (Continued)

                 The temporary differences that comprise deferred tax assets
                 and liabilities at December 31, 1999 and 1998 are as
                 follows:

                                                 1999        1998
                                               -------     -------
Deferred tax assets:
  Provision for loan loss                      $   570     $   589
  Start-up costs                                    18          26
  Organizational costs                              19          27
  Unrealized loss on securities                     19          --
  Other                                             --          18
                                               -------     -------

        Total deferred tax assets                  626         660

Valuation allowance for deferred tax assets         --          --

Deferred tax liabilities:
  Accretion                                        (17)        (11)
  Lease financing                                  (84)        (50)
  Unrealized gain on securities                     --          (5)
  Depreciation                                     (40)         --
  Other                                            (21)         (4)
                                               -------     -------

        Total deferred tax liabilities            (162)        (70)
                                               -------     -------
        Net deferred tax asset                 $   464     $   590
                                               =======     =======

Note 10 - Operating Lease

                 The Corporation has entered into lease commitments for
                 office buildings. Rental expense charged to operations was
                 $89,000 and $45,000 for the years ended December 31, 1999
                 and 1998, respectively. The future minimum lease payments
                 are as follows:

                 2000                        $   326
                 2001                            326
                 2002                            304
                 2003                            281
                 2004                            281
                                             -------
                           Total             $ 1,518
                                             =======


                                     31




Note 11 - Stock Option Plans

                   The Corporation has two stock option plans. Options may be
                   granted to certain directors and employees at not less
                   than the market price of the Corporation's stock on the
                   date of the grant. The options granted are exercisable
                   immediately, or vest over one to three years. Under the
                   director plan, a maximum of 66,000 options to purchase
                   shares may be granted that expire in seven years, subject
                   to certain cancellation provisions related to service.
                   Under the employee plan, a maximum of 44,000 options to
                   purchase shares may be granted that expire in 10 years,
                   subject to certain cancellation provisions related to
                   employment. At December 31, 1999, 9,900 shares under the
                   director and 3,400 shares under the employee plan were
                   available for future option grants. The following table
                   summarizes stock option transactions and the related
                   average exercise prices for the last three years.

<TABLE>
<CAPTION>
                                       1999                    1998                   1997
                             ----------------------  ----------------------   ---------------------
                                           Weighted                Weighted                Weighted
                                           Average                 Average                 Average
                               Number      Exercise    Number      Exercise     Number     Exercise
                             of Shares      Price    of Shares      Price     of Shares     Price
                             ---------     --------  ---------     --------   ---------    --------
<S>                             <C>         <C>         <C>         <C>         <C>         <C>
Options outstanding at
  beginning of year             96,700      $ 9.14      93,500      $ 9.10          --      $   --
Options granted                     --          --       3,200       10.24      93,500        9.10
Options exercised                   --          --          --          --          --          --
Options forfeited                   --          --          --          --          --          --
                                ------                  ------                  ------
Options outstanding at end
  of year                       96,700        9.14      96,700        9.14      93,500        9.10

Exercisable at end of year      83,775        9.11      69,025        9.10      55,075        9.10

Weighted average estimated
  fair value of options
  granted during the year                     N/A                   $ 4.35                  $ 4.29
</TABLE>

                   The fair value of each option grant is estimated on the
                   date of grant using the Black-Scholes option pricing
                   model. The following weighted average assumptions were
                   used to estimate the fair value of the options granted for
                   the following:


                                   1999        1998         1997
                                   ----      ------       ------

Dividend yield                     N/A           --           --
Expected average life (years)      N/A         10.0          7.9
Volatility                         N/A           30%          28%
Risk-free interest rate            N/A          5.8%         6.0%


                                      32





Note 11 - Stock Option Plans (Continued)

                 At December 31, 1999, options outstanding have exercise
                 prices between $9.09 and $10.35 per share and a weighted
                 average remaining contractual life of 5.4 years.

                 The Corporation accounts for its option plans using the
                 intrinsic value method. The table below displays pro forma
                 amounts for net loss and net loss per common share assuming
                 the fair value method of accounting had been used, which
                 reflects additional compensation cost for option grants
                 based on the value of the options granted:

<TABLE>
<CAPTION>
                               1999                                   1998
                 --------------------------------        --------------------------------
                   Net        Basic       Diluted         Net         Basic       Diluted
                  Loss         EPS          EPS          Loss          EPS          EPS
                  ----        -----       -------        ----         -----       -------
<S>              <C>        <C>          <C>            <C>          <C>         <C>
As reported      $ 475      $0.36        $0.36          $(113)       $(0.09)     $(0.09)
Pro forma          432       0.33         0.33           (153)        (0.12)      (0.12)
</TABLE>

                 The effect of unexercised stock options is antidilutive and
                 has not been considered in the diluted EPS calculation.

Note 12 - Employee Benefit Plans

                 The Bank has a 401(k) plan that is a defined contribution
                 savings plan for employees. Employer contributions are
                 discretionary and are determined annually by the Board of
                 Directors. Employer contributions were $14,000 and $12,000
                 for the years ended December 31, 1999 and 1998,
                 respectively.

Note 13 - Common Stock

                 In April 1998, the Corporation declared a 10 percent stock
                 dividend. Accordingly, all applicable per share amounts for
                 periods presented have been retroactively adjusted to
                 reflect the transaction.


                                     33





Note 14 - Financial Instruments

                 Fair Values of Financial Instruments - The carrying amounts
                 and estimated fair values of financial instruments are
                 presented below. Certain assets, the most significant being
                 premises and equipment, do not meet the definition of a
                 financial instrument and are excluded from this disclosure.
                 Similarly, deposit base and other customer relationship
                 intangibles are not considered financial instruments and are
                 not discussed below. Accordingly, this fair value
                 information is not intended to, and does not, represent the
                 underlying value of the Corporation. Many of the assets and
                 liabilities subject to disclosure requirements are not
                 actively traded, requiring fair values to be estimated by
                 management. These estimates necessarily involve the use of
                 judgment about a wide variety of factors, including, but not
                 limited to, relevancy of market prices of comparable
                 instruments, expected future cash flows and appropriate
                 discount rates.

                                   1999                     1998
                           ----------------------   ----------------------

                           Carrying    Estimated    Carrying    Estimated
                            Amount     Fair Value    Amount     Fair Value
                           --------    ----------   --------    ----------
Assets:
  Cash and equivalents      $18,188     $18,188     $ 8,258     $ 8,258
  Securities                  9,001       9,001       8,233       8,233
  Loans                      79,883      78,179      79,785      80,302
  Other                         502         502         476         476

Liabilities:
  Deposits                   95,954      95,674      87,654      87,994
  Short-term borrowings          --          --       1,750       1,750
  Other                         360         360         393         393

                 The terms and short-term nature of certain assets and
                 liabilities result in their carrying amounts approximating
                 fair values. These include cash and due from banks,
                 interest-bearing deposits in banks, federal funds sold,
                 federal funds purchased and accrued interest receivable and
                 payable. The following methods and assumptions were used by
                 Michigan Heritage Bancorp, Inc. to estimate the fair values
                 of the remaining classes of financial instruments:

                 Securities are valued based on quoted market prices, where
                 available. If quoted market prices are not available, fair
                 values are based on quoted market prices of comparable
                 instruments.

                                     34






Note 14 - Financial Instruments (Continued)

                 For variable rate loans that reprice frequently, fair values
                 are based on carrying amounts, as adjusted for estimated
                 credit losses. The fair values for other loans are estimated
                 using discounted cash flow analyses and employ interest
                 rates currently being offered for loans with similar terms
                 to borrowers of similar credit quality.

                 The fair values of demand deposits, savings accounts and
                 money market deposits are, by definition, equal to the
                 amount payable on demand. The fair values of fixed rate time
                 deposits are estimated by discounting cash flows using
                 interest rates currently being offered on certificates with
                 similar maturities.

                 The fair values of loan commitments and standby letters of
                 credit, valued on the basis of fees currently charged for
                 commitments for similar loan terms to new borrowers with
                 similar credit profiles, are not considered material.

                 Off-balance-sheet Items - The Bank is party to financial
                 instruments in the normal course of business to meet the
                 financing needs of its customers and to reduce its own
                 exposure to fluctuations in interest rates. These financial
                 instruments include commitments to extend credit and
                 financial guarantees. These instruments involve, to varying
                 degrees, elements of credit and interest rate risk that are
                 not recognized in the consolidated balance sheet.

                 Commitments to extend credit are agreements to lend to a
                 customer as long as there are no violations of any condition
                 established in the contract. Commitments generally have
                 fixed expiration dates or other termination clauses and may
                 require payment of a fee. Fees from issuing these
                 commitments to extend credit are recognized over the period
                 to maturity. Since a portion of the commitments is expected
                 to expire without being drawn upon, the total commitments do
                 not necessarily represent future cash requirements.

                 The Bank evaluates each customer's creditworthiness on a
                 case-by-case basis. The amount of collateral obtained upon
                 extension of credit is based on management's credit
                 evaluation of the customer.

                 Exposure to credit loss in the event of nonperformance by
                 the other party to the financial instrument for commitments
                 to extend credit and financial guarantees written is
                 represented by the contractual notional amount of those
                 items. The Bank generally requires collateral to support
                 such

                 financial instruments in excess of the contractual notional
                 amount of those instruments.

                 The Bank had outstanding loan origination commitments and
                 guarantees written aggregating $17,300,000 and $49,200,000
                 at December 31, 1999 and 1998, respectively, on which
                 $10,300,000 and $22,700,000, respectively, were outstanding
                 at year end and were included in the consolidated balance
                 sheet.


                                     35





Note 15 - Restrictions on Dividends

                 Dividends paid by the Corporation would be provided by
                 dividends from its subsidiary bank. However, certain
                 restrictions exist regarding the ability of the Bank to
                 transfer funds to the Corporation in the form of cash
                 dividends, loans or advances. The approval of the Bank's
                 respective primary regulator is required for the
                 Corporation's subsidiary bank to pay dividends in excess of
                 regulatory limitations.

Note 16 - Regulatory Matters

                 The Bank is subject to various regulatory capital
                 requirements administered by federal banking agencies.
                 Failure to meet minimum capital requirements can initiate
                 certain mandatory and discretionary actions by regulators
                 that could have a direct material effect on the Bank's
                 financial statements. Under capital adequacy guidelines, the
                 Bank must meet specific capital guidelines that involve
                 quantitative measures of the Bank's assets, liabilities and
                 certain off-balance-sheet items as calculated under
                 regulatory accounting practices.

                 For 1999, 1998 and 1997, since the Bank is considered a de
                 novo or start-up bank, the minimum Tier 1 leverage ratio is
                 9.0 percent. Normally, to be considered adequately
                 capitalized, the Bank must maintain a total capital ratio of
                 4.0 percent. As of December 31, 1999, the most recent
                 notification from the Bank's regulators categorized the Bank
                 as well-capitalized under the regulatory framework. The
                 regulations define well-capitalized levels of total capital,
                 Tier 1 and Tier 1 leverage as 10.0 percent, 6.0 percent and
                 5.0 percent, respectively. There are no conditions or events
                 since that notification that management believes have
                 changed the Bank's capital category.

                 Capital and risk-based capital and leverage ratios for the
                 Bank are shown below:

                                                Amount       Ratio
                                                ------       -----
December 31, 1999:
  Total capital (to risk-weighted assets)      $11,670       13.4%
  Tier 1 capital (to risk-weighted assets)      10,576       12.2%
  Tier 1 capital (to average assets)            10,576       10.2%
December 31, 1998:
  Total capital (to risk-weighted assets)        9,400       10.9%
  Tier 1 capital (to risk-weighted assets)       8,321        9.6%
  Tier 1 capital (to average assets)             8,321        9.1%


                                     36





Note 17 - Parent-only Financial Statements

                 The following condensed financial information presents the
                 financial condition of Michigan Heritage Bancorp, Inc. (the
                 "Parent") only, along with the results of its operations and
                 its cash flows. The Parent has recorded its investment in
                 the Bank at cost, less the undistributed income (loss) of
                 the Bank since it was formed. The Parent recognizes
                 undistributed earnings (losses) of the Bank as a noninterest
                 income (expense). The Parent-only financial information
                 should be read in conjunction with the Corporation's
                 consolidated financial statements.

                 The condensed balance sheet at December 31 is as follows:

                                                         1999        1998
                                                       -------     -------

                    Assets

Cash and Cash Equivalents
  Cash and deposits at subsidiary bank                 $    13     $     1
  Interest-bearing deposits with other banks             1,040       1,073
                                                       -------     -------
        Total cash and cash equivalents                  1,053       1,074

Investment in Subsidiary                                10,625       8,701
Interest Receivable and Other Assets                        40         266
                                                       -------     -------
        Total assets                                   $11,718     $10,041
                                                       =======     =======

     Liabilities and Stockholders' Equity

Liabilities                                            $    --     $    --
Stockholders' Equity                                    11,718      10,041
                                                       -------     -------
        Total liabilities and stockholders' equity     $11,718     $10,041
                                                       =======     =======


                                     37






Note 17 - Parent-only Financial Statements (Continued)

                 The condensed statement of operations for the years ended
                 December 31, 1999 and 1998 is as follows:

                                                               1999      1998
                                                              -----     -----
Operating Income
  Interest and dividends on investments - Taxable             $  --     $ 106
  Interest on deposits with other banks                          35        25
                                                              -----     -----
        Total operating income                                   35       131

Operating Expense                                                33        39
                                                              -----     -----
Income - Before income taxes, equity in income (loss)
  of subsidiary and cumulative effect of change
  in accounting principle                                         2        92

Income Tax Expense                                                1        14
                                                              -----     -----
Income - Before equity in income (loss) of subsidiary and
  cumulative effect of change in accounting principle             1        78

Equity in Income (Loss) of Subsidiary                           474      (125)
                                                              -----     -----
Income (Loss) - Before cumulative effect of change in
  accounting principle                                          475       (47)

Cumulative Effect of Expensing Organization Costs -
  Net of tax effect of $34                                       --       (66)
                                                              -----     -----
Net Income (Loss)                                             $ 475     $(113)
                                                              =====     =====

                                     38






Note 17 - Parent-only Financial Statements (Continued)

                 The condensed statement of cash flows for the years ended
                 December 31, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                          1999         1998
                                                        -------      -------
<S>                                                     <C>          <C>
Cash Flows from Operating Activities
  Net income (loss)                                     $   475      $  (113)
  Adjustments to reconcile net income (loss) to net
    cash from operating activities:
      Equity in (income) loss of subsidiary                (474)         125
      Change in accounting principle                         --           66
      Amortization and accretion of securities               --          (21)
      Amortization of organizational costs                   --           20
      Net change in other assets                            226         (243)
                                                        -------      -------
        Net cash provided by (used in)
          operating activities                              227         (166)

Cash Flows from Investing Activities
  Investment in bank subsidiary                          (1,496)      (1,650)
  Proceeds from maturities of held-to-maturity
    securities                                               --        2,600
                                                        -------      -------
        Net cash provided by (used in)
          investing activities                           (1,496)         950

Cash Flows from Financing Activities - Proceeds
  from public stock offering                              1,248           --
                                                        -------      -------
Net Increase (Decrease) in Cash and Cash
  Equivalents                                               (21)         784

Cash and Cash Equivalents - Beginning of year             1,074          290
                                                        -------      -------
Cash and Cash Equivalents - End of year                 $ 1,053      $ 1,074
                                                        =======      =======
</TABLE>

                                     39





Note 18 - Earnings per Share

                 Basic earnings per share data is the amount of earnings for
                 the period available to each share of common stock
                 outstanding during the reporting period. Diluted earnings
                 per share reflects the earnings available to each share of
                 common stock outstanding during the reporting period
                 adjusted for dilutive potential common shares for stock
                 options outstanding. In 1999 and 1998, outstanding stock
                 options have not been included in the calculation of diluted
                 weighted average shares outstanding because they would be
                 antidilutive.

<TABLE>
<CAPTION>
                                                    1999              1998               1997
                                               -------------     -------------      -------------
<S>                                            <C>               <C>                <C>
Net income (loss) before cumulative effect
  of change in accounting principle            $         475     $         (47)     $        (602)

Cumulative effect of expensing
  organizational costs - Net of tax
  benefit of $34                                          --               (66)                --
                                               -------------     -------------      -------------
Net income (loss)                              $         475     $        (113)     $        (602)
                                               =============     =============      =============
Average common shares outstanding                  1,309,966         1,265,000          1,051,329

Income (loss) per share before cumulative
  effect of change in accounting
  principle:
    Basic                                      $        0.36     $       (0.04)     $       (0.57)
    Diluted                                             0.36             (0.04)             (0.57)
Cumulative effect per share of expensing
  organizational costs - Net of tax
  benefit of $34:
    Basic                                                 --             (0.05)                --
    Diluted                                               --             (0.05)                --
Income (loss) per share:
    Basic                                               0.36             (0.09)             (0.57)
    Diluted                                             0.36             (0.09)             (0.57)
</TABLE>

                                     40






SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 1, 2000.

                                       MICHIGAN HERITAGE BANCORP, INC.



                                       By: /s/ Anthony S. Albanese
                                           ------------------------------
                                           Anthony S. Albanese, President


In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities indicated on March 1, 2000.

<TABLE>
<CAPTION>
Signature                                 Capacity
---------                                 --------

<S>                                       <C>
/s/ Richard Zamojski                      Chairman and Director (principal executive officer)
----------------------------------
Richard Zamojski


/s/ Anthony S. Albanese                   President and Director (principal operating officer)
----------------------------------
Anthony S. Albanese


/s/ Darryle J. Parker                     Treasurer and Secretary (principal financial officer)
----------------------------------
Darryle J. Parker


/s/ H. Perry Driggs                       Vice-Chairman and Director
----------------------------------
H. Perry Driggs


/s/ Lewis N. George                       Director
----------------------------------
Lewis N. George


/s/ Phillip R. Harrison                   Director
----------------------------------
Phillip R. Harrison


/s/ Franck A. Scerbo                      Director
----------------------------------
Frank A. Scerbo


/s/ Philip Sotiroff                       Director
----------------------------------
Philip Sotiroff
</TABLE>

                                     41


                                EXHIBIT INDEX

Exhibit No.    Description
-----------    -----------

10.3           Office Building Lease between Rontal Investment Company as
               Landlord and Michigan Heritage Bancorp, Inc. as Tenant for
               headquarters floor space located at 28300 Orchard Lake Road,
               Suite 200, Farmington Hills, Michigan

11             Computation of Earnings Per Share

27             Financial Data Schedule (EDGAR filing only)










                                     42